New teachers contract to cost $1.5 billion over 5 years. Where will CPS get the money?

The five-year contract that ended the longest teachers strike in three decades carries $1.5 billion in new costs that will force a Chicago Public Schools system just a few years removed from the brink of bankruptcy to search for new sources of revenue.

The price tag of the deal — the most costly teachers contract in CPS history — will grow each year due to increased staffing and compounding expenses, reaching $500 million annually by its fifth year. That would mean with the new expenses, the overall costs of the contract, including all teacher pay, would ramp up to $3.1 billion annually by the end of its term.

Mayor Lori Lightfoot’s 2020 budget includes $163 million from a tax increment financing surplus to help bankroll the first year of the five-year agreement. By closing out five TIFs and scouring all of the others, Lightfoot managed to generate the money, which is $66 million more than the school system received last year.

“This is, in essence, scraping the mayonnaise jar. We went through and aggressively surplussed every single TIF,” a top mayoral aide told the Sun-Times, to be able to return money to CPS as it faces higher costs because of the new contract.

Former Mayor Rahm Emanuel endured a seven-day teachers strike in 2012 and used an $87.5 million TIF surplus to stave off a second teachers strike. It was a one-time revenue source that was neither ideal nor sustainable.

Lightfoot’s plan is also not a long-term solution.

“This surplus is one-time revenue. And importantly for CPS, they’re gonna need to find additional revenues going forward,” the mayoral aide said.

The $66 million “only gets us a very small [part] of the way,” the aide said, although it buys some time to find “long-term, structural revenue sources — to be able to fund the remainder of the contract in future years.”

And what might those revenue sources be?

“There’s annual property tax increases that CPS had employed. Some of that has already been baked into their obvious forecasting,” the top mayoral aide said.

Civic Federation President Laurence Msall said Friday he needs to see more details of the contract to understand how CPS will pay for it or how it might impact the district’s credit rating.

“How the district can afford this contract — we don’t know yet,” he said.

But he said the new costs come as the district is just recovering from near bankruptcy.

“There is concern that the district is just barely out of the woods. Not quite out of the woods,” he said. “It’s been improving as a result of some significant increases in property taxes approved by the General Assembly and the City Council.”

Msall agreed that CPS has “very limited options” to raise additional revenue beyond hiking property taxes.

Another top mayoral adviser said the city and school district’s steadfast position that a new CTU contract needs to run five years has to do with giving officials more time to find long-term budgeting solutions.

“This is a really expensive contract” the adviser said.

“We are projecting significant deficits in the out years. ... We’re going to have to figure out how to close them, just like the city had to figure out how to close its own deficits.”

Union sloughs off concerns

During a wide-ranging interview with the Chicago Sun-Times, Chicago Teachers Union President Jesse Sharkey and Vice President Stacy Davis Gates sloughed off concerns about how a school system that has borrowed to the hilt can afford such a generous contract.

“In comparison to the rest of the state, we still have less staff,” Davis Gates said.

“So to hear this discussion arise about, ‘Oh, my God. It’s gonna cost too much money.’ No. quite frankly, it should be costing a lot more money.”

Pressed on where the money should come from, Davis Gates said, “Rich people. Reinstate the corporate head tax. We are encouraged that the governor has put forth a fair [graduated income] tax to put that on the ballot. We’re gonna be working on that.”

The CTU is leading a “very powerful movement for equity and justice in this city” that Lightfoot has an opportunity to lead, Davis Gates said.

She likened it to President Franklin Delano Roosevelt’s New Deal and President Lyndon Baines Johnson’s Great Society.

“She ... has an opportunity to expand the tax base to include those who can pay more. She should do that,” Davis Gates said.

“A corporate head tax. A financial transaction tax. Things that will actually transform the way in which we fund public services in this city. She has a movement for justice and equity. Take that movement and put forth a bolder vision of government in this moment. The blueprint is what we just did. We couldn’t do that without her. She said yes to those things.”