Chicago Public Schools officials on Monday proposed a $5.7 billion operating budget for the upcoming school year that relies on $480 million in new funding from state government that might never come.
School leaders conceded the spending plan contains a mix of “unsustainable” borrowing and limited classroom cuts that they say they must begrudgingly make because of a $676 million payment for teacher pensions that’s due at the end of the school year.
There also are numerous fiscal wild cards in the mix, including budget adjustments that might ensue should CPS reach an agreement with the Chicago Teachers Union on a new contract. The teachers’ deal expired June 30, and talks on a one-year contract broke down last week.
Should the $480 million in aid from Springfield or another solution to the pension problem not materialize by Jan. 1, school officials say that classroom cuts would deepen — including thousands of teacher layoffs, huge class sizes and reorganized schedules that would cripple students’ progress.
For now, the schools’ budget includes 479 teacher layoffs based on drops in enrollment and budget cuts at various schools. Historically, though, 60 percent of laid-off teachers are rehired at other CPS schools, and CPS has 1,450 open teaching positions to fill before school starts.
The budget — down about 1 percent from the previous year’s — calls for city taxpayers to play a role in helping erase a $1.1 billion budget hole CPS is facing.
The school system plans to tax property owners at the maximum rate allowable, meaning the owner of a home worth $250,000 will pay $19 more. That, plus additional property tax collections from new buildings, are projected to give CPS a total of $80 million to ease the shortfall.
Another $137 million is set to come from tapping city tax-increment financing dollars and cash reserves. And $255 million is to be generated by so-called scoop-and-toss borrowing, which alleviates short-term cash-flow problems but will cost taxpayers more in future years.
CPS already had announced $200 million in spending cuts, including $1 million in cuts from schools CEO Forrest Claypool’s executive office.
But school officials also are counting on the $480 million in new “pension equity” money from state lawmakers in Springfield to help close the gap — dollars that are by no means assured.
Unlike suburban and downstate teachers, Chicago teachers are paid out of a separate pension fund. Mayor Rahm Emanuel and school officials argue this sets up a two-tiered system in which state government pays $2,266 per student for teacher pensions outside Chicago and just $31 per student for teacher pensions in the city.
Others say that Chicago isn’t being shortchanged because the city’s schools are entitled to state aid, special education and poverty-related dollars that other school districts can’t get.
Emanuel and lawmakers in Springfield have proposed various solutions to try to overcome CPS’ financial challenges, but none has to come to fruition amid state government’s own funding crisis.
Claypool is hoping the budget’s release will incite state lawmakers to provide more funding for the nation’s third-largest school system and the teachers’ union to make contract concessions.
“Our goal is to protect pensions and to protect the classroom,” Claypool said during a conference call Monday morning. “To do that, it means everybody’s got to pitch in.”
A key issue has been the school system’s longstanding practice of paying 7 percent of teachers’ 9 percent retirement contribution. Claypool is proposing gradually eliminating the pension “pick up;” CTU officials say that’s a non-starter.
CTU President Karen Lewis criticized school leaders for including in the budget “monies that they claim are there” that “aren’t really there” — a reference to the $480 million.
Asked during a news conference if she’d encourage teachers to strike for the second time in three years because of the pension pick-up issue, Lewis replied, “If they insist on a 7 percent all at once like a pay cut — a 7 percent pay cut — I don’t have to call for a strike. I think our members will do that themselves.”
Republican Gov. Bruce Rauner followed Lewis’ press conference with one of his own, characterizing CTU’s power as “dictatorial” and taking the opportunity to again make his case that public employee unions have become too powerful.
“The power of the Chicago Teachers Union is overwhelming,” Rauner said. “Chicago has given and given and given. It’s created the financial crisis that the Chicago schools face now.”
Rauner said he was headed to Springfield to discuss with Senate President John Cullerton, D-Chicago, and others an overhaul to the state’s school-funding formula. Rauner has repeatedly called for changes in state law that would give local governments more power over what issues they must collectively bargain.
“It’s a significant step in the process of acknowledging and accepting the fact that we need major, structural reform of our school districts and our governments in order to protect taxpayers,” the governor said. “I’m cautiously optimistic . . . that leaders here in Chicago are beginning to acknowledge the need for structural change and beginning to move in the direction that’s consistent with the reforms we’ve advocated for many, many months.”
Besides its pension problem, CPS continues to face the possibility of making huge payments stemming from risky interest rate “swap” deals engineered over the past decade. As of spring, those potential payments — triggered by downgrades in CPS’ credit rating — totaled $228 million, but banks have yet to demand any of that money.
Taxpayers will be able to weigh in on the proposed budget on Aug. 18 at three meetings citywide. The Chicago Board of Education is expected to vote on the spending plan Aug. 26.