Chicago Public School officials and union officials came together Tuesday to lay out options for solving CPS budget crisis for City Council members, including refinancing existing debt and cutting $126 million more in administrative costs outside of classrooms. But they did not offer a firm decision on whether the school district would make a $175 million municipal pension payment that has been a continued source of controversy.
Some City Council members said they were frustrated that CPS failed to present a specific plan for closing the district’s $734 million deficit. The district must unveil a fully baked budget by Wednesday so it can be approved before the end of August, a legal deadline.
One of the only firm details to emerge was that CPS leaders told City Council members that they have found $126 million more in cuts, on top of the $146 million previously announced, according to a picture of CPS presentation. That includes $50 million by reducing central office personnel and “streamlining” costs and a $10 million central office hiring freeze, as well as $30 million by repurposing grants.
In terms of coming up with $462 million more in savings, sources at City Hall say CPS leaders are considering rejecting the city’s demand that CPS pay the $175 million payment to help cover the employer contribution of the municipal pension fund, which covers non-teaching CPS staff.
The other options are: refinancing existing CPS debt, borrowing or banking on revenue from the state or city that is not yet allocated or guaranteed.
Ald. Andre Vasquez (40th) said he did not learn specifics about how CPS will close its budget gap but that there was mention of somewhere between $100 and $200 million in refinancing.
“They mentioned doing a TIF surplus, the need for state funding, and mentioned some level of refinancing or borrowing but they didn’t get into a lot of detail,” Vasquez said. “It did not feel like there was new information being shared but the fact that everyone is at the table and trying to find a solution is a step forward.”
CPS officials previously said they need to present their final proposal by Wednesday. That allows for budget hearings before a school board vote on Aug. 28, just days before the deadline to pass a budget, and after classes start on Aug. 18. The spending plan needs to win majority approval by the 21 partly-elected, partly-appointed board, which currently has one vacant position.
Mayor Brandon Johnson did not offer details at a City Hall news briefing Tuesday, but has been strongly opposed to any cuts.
In a press release Tuesday, the Chicago Teachers Union indicated that lobbying the state to provide more revenue is a key strategy.
CTU leaders stressed the state’s acknowledgement earlier this month that CPS is moving further away from being equipped to provide an “adequate” education, as defined by the state’s evidenced-based formula. CPS would need nearly $1.6 billion more in state funding each year to meet the student-to-staff ratios called for by the formula, according to the state’s calculation.
Unions band together
After a contentious year in which the former CPS leader battled with the CTU and that union was at odds with their sister union, SEIU, King stood with Davis Gates, Chicago Principals & Administrators Association President President Kia Banks and SEIU President Dian Palmer to make the case the case to lawmakers Tuesday.
The presence of SEIU leaders at the briefings was especially notable. SEIU leaders, who represent 11,000 support staff members, have borne the brunt of previously-announced layoffs, including 677 special education classroom assistants, 500 custodians and more than 100 crossing guards. SEIU officials announced that members from two of its units will protest outside CPS headquarters on Wednesday.
There’s also continued tension between SEIU, CTU and Mayor Johnson. SEIU strongly supported Johnson in his run for mayor, alongside the CTU, where he worked before being elected and which played a major role in his win. But SEIU was outraged when the CTU pursued, but didn’t ultimately win, a contract position that SEIU officials said would raid its members.
Getting the principals association to stand with the school district was a bit of a coup. The association has been in negotiations with CPS over its first contract for months. Just last week, it reached tentative agreements on several items, including pay, but is still finalizing a full deal.
Representatives from the principals association have spoken out about concerns that school leaders would be stuck implementing cuts as a result of passing this budget at the last minute or even after this school year begins. They said parents and staff often blame them for school-level cuts.
What’s behind the deficit
The deficit stems from several factors: the end of federal pandemic relief money after CPS used it for a hiring spree over several years; rising transportation, special education and building maintenance costs; and expensive annual debt and pension payments that are the legacy of state underfunding.
In her first days, King acknowledged that CPS had a $734 million deficit, which included the contested city pension payment. Up to that point, her fired predecessor, Pedro Martinez, had developed a budget based on an unrealistic “best case” scenario, assuming $300 million in additional city or state funding, which neither entity planned on providing. Martinez also refused to include the $175 million pension payment.
King’s decision to include the municipal pension payment in the CPS deficit projection was a signal to the mayor and city that she would explore ways to get them the money. The city is counting on it for the fiscal year that started in January. The city is solely responsible for the municipal pension payment, but about 60% of pensioners are former CPS staff who are not teachers or clinicians.
Several board members who are not aligned with the mayor remain steadfast against making the pension payment.
Sources with knowledge of internal CPS conversations tell WBEZ that there have been a lot of discussions in recent days about whether the school district can afford the pension payment.
But refusing to cover the pension payment could upset City Council members. The school district’s budget assumes it will get $300 million when Johnson again taps into surplus money from special taxing districts called TIFs, generating another record high of $600 million. Declaring surpluses reduces what can be spent on economic development projects in wards across the city.
By law, CPS gets 52% of TIF surpluses, the city gets 25% and other taxing bodies get the rest. If city officials can’t expect the $175 million from CPS for the pension payment, they may not think it’s worth it to surplus as much from TIFs. City Council members have threatened retaliation in the past for not making the pension payment.
Last fall, the chairman of the City Council’s Budget Committee demanded that then-Schools CEO Martinez explain the school district’s refusal to take on the $175 million pension payment that Johnson had counted on receiving from CPS.
On Tuesday, Ald. Jason Ervin (28th) Ervin softened his tone a bit when asked if a CPS decision to stiff the city on the pension payment would prompt the City Council to retaliate — either by failing to come through with another record TIF surplus or by not continuing to support school renovation and construction projects.
“I wouldn’t say `retaliate’ is the right word. I just think it makes it difficult to justify levels of spending to them when they won’t manage some of their responsibility,” Ervin told the Sun-Times.
“We definitely need some assistance from Springfield on giving them the ability to deal with their own revenue.”
The question of whether or not to declare another record TIF surplus will depend on how much money the city needs.
“We’ve got to deal with our own challenges and they just may be a beneficiary of our issues,” Ervin said. “I don’t think CPS will be top of mind when everybody’s doing their calculations.”
“We can’t cut off our nose to spite our face. At the end of the day, we’re really hurting kids. Nobody wants to hurt children.”