CPS’ $175M pension payment narrowly approved by Board of Ed as City Hall ripped for saddling district with debt

For the third consecutive year, Mayor Lori Lightfoot is filling the city’s budget gap in part by drawing on tens of millions of dollars from Chicago Public Schools in the form of pension payments historically made by the city rather than the school district.

First revealed in Lightfoot’s budget proposal last fall for the current year, this year’s $175 million payment from CPS to the city was approved by the Board of Education at its monthly meeting Wednesday — but was the subject of intense scrutiny by board members who criticized City Hall.

The board passed with a 3-2 vote an amendment to the district’s agreement with the city that greatly increases CPS’ obligation from $100 million last year and $60 million in 2020 as payments to the underfunded pension ramp up — with additional significant increases expected over the next few years.

The payments in question cover the benefits of non-teaching CPS staff — who make up less than half of the district’s 40,000 employees — in the Municipal Employees’ Annuity and Benefit Fund. Those include cafeteria workers, bus aides, special education classroom assistants and other support staff. Teachers have a separate pension fund. The MEABF also covers elected officials, the Chicago Housing Authority and Public Building Commission, among others.

As of the end of 2020, about 56% of active MEABF participants — 17,469 of 31,327 — were CPS employees, district officials said Wednesday. Of the $266 million pricetag for those CPS workers’ benefits, $175 million is being passed on to the district.

But under state statute, the pension payments are the city’s obligation, and the city has covered those costs for decades.

When City Hall first used these payments as a way to fill the city’s budget gap in 2020, city officials the same year had forwarded $163 million to CPS after declaring the largest tax-increment-financing, or TIF, surplus in Chicago history. That was a one-time payment, however, and hasn’t been repeated in the two years since.

Board member Elizabeth Todd-Breland, who voted against the measure, said City Hall has shifted several costs to CPS under Lightfoot, including for school police officers, crossing guards, Safe Passage workers and these pension payments.

“I’m not comfortable with having City Hall balance anymore of their budget on CPS’ budget,” Todd-Breland said. “We’ll likely have to use our federal COVID funds at some point to pay for this.

“It’s a choice to prioritize this expense and this debt that we’re not currently legally required to pay over making necessary investments in the classroom this year.”

Todd-Breland said it doesn’t make sense for the Board of Education to approve the additional costs when there’s no new longterm local, state or federal funding coming to the district. In effect, this takes money out of schools and puts it toward pension debt.

“This is not in the best interest of the children of CPS,” she said.

Board member Luisiana Melendez, the other “no” vote, concurred the $75 million increase is “not justified” when CPS is already failing to adequately support students.

“This vote will make a commitment that we don’t know how we’re going to meet, not only this year but in years to come,” Melendez said, pointing out the costs are rising at an “alarming rate.”

The payments are “absolutely” expected to increase moving forward as the city’s MEABF costs go up, though exact figures aren’t yet known, CPS Chief Financial Officer Miroslava Krug said. Preliminary estimates are CPS could be on the hook for $226 million in 2023 and up to $300 million in 2026, Krug said.

“The contributions will be increasing steadily because the demographics and the market change,” she said.

Board President Miguel del Valle voted in favor of the measure and strongly argued CPS would need to financially disentangle from the city as the new district’s elected school board comes into place in 2025, this being one step in that process.

Lightfoot began shifting the pension costs to CPS in her first budget proposal in the fall of 2019. The Illinois Legislature passed the Chicago elected school board bill in June 2021.

“Those are our employees, we need to make sure their pension fund is in good shape,” he said. He said it’s smart to ramp up now rather than create a larger financial cliff a few years on.

He urged advocates to lobby the General Assembly for more state funding to cover the pension costs. The elected school board, when it’s seated in 2025, shouldn’t be left with a “structural deficit that’s going to be so humongous once these federal [pandemic relief] dollars run out ... that we basically set up an elected school board for failure and put them in a position where they’re going to have to make some decisions that I don’t even want to talk about right now.”