CPS teacher deal passes muster with bond rating firm

The Chicago Public Schools got a positive review of its new teachers contract from one bond rating agency, which described the fiscal impact of the five-year agreement as “manageable.”

Kroll Bond Rating Agency called the contract “highly positive as it affords labor cost certainty and greater precision in financial planning.” Kroll has a BBB rating and a positive outlook on CPS bonds.

It said CPS has made “substantial progress toward structural balance” because of increases in state aid and the establishment of a dedicated property tax levy for pensions. It said required staffing increases to reduce class sizes and provide social workers and school nurses will be phased in, thus giving CPS budget flexibility.

The firm noted that CPS revenues have increased by nearly $900 million over the last two years and that the school system “maintains numerous options to address future budget deficits.” The new contract ended a strike that lasted 11 school days and provided a 16 percent wage hike over five years.

However, Crain’s Chicago Business reported that another bond-rating firm, S&P Global, panned the deal. Crain’s quoted S&P as saying the new contract “has increased expenditures beyond anticipated revenue growth and without corrective measures, and could potentially slow or reverse the [CPS’] recent financial progress.’’

S&P kept its credit rating assigned to CPS as BB-, which is below investment grade, Crain’s said. An S&P representative could not locate the report Thursday.

CPS spokeswoman Emily Bolton said, “Multiple rating agencies have evaluated the district’s tentative agreement, and all have said that the costs are manageable and determined that the district’s bond ratings should hold steady based on the agreement.”