Chicago Public School leaders on Wednesday presented a budget proposal, wiping away a $734 million deficit by a combination of mechanisms: cuts to operations and central office, refinancing debt, using $65 million from a reserve fund, counting a philanthropic donation in the budget and expecting $379 million from the city from a TIF surplus.
“We have reviewed every line to come up with a plan that is student-centered and equitable,” said CPS Budget Director Mike Sitkowski, noting that the school district did what it could to protect school-level budgets.
The most contentious part of the plan is a proposal to make a $175 million municipal pension payment contingent on CPS getting additional revenue from the state or even more money from a TIF surplus. TIFs are special taxing districts in the city.
Jitu Brown said he and other school board members will not vote for a budget in which the pension payment is not guaranteed. Brown, an elected member, is part of the majority of the board that is aligned with Mayor Brandon Johnson, who appointed 11 of the 21.
Brown said it is politically unrealistic to think that the City Council will provide the $379 million TIF surplus without a commitment that the pension payment will be made.
In their budget proposal, school district officials avoided the thorny issue of borrowing, which had been floated last year to eliminate the budget deficit and make the pension payment. Financial watchdogs blasted the idea because CPS is already deep in debt and the money to pay it back comes out of future budgets.
Considering the budget already relies on getting money through debt refinancing, Sitkowski told board members on Wednesday, borrowing may not be an option, even if that’s what they want. “A market for debt for budgetary relief may not exist,” he said, reading off a powerpoint.
Some school board members said they see the budget as a “draft” that could change before they vote on the plan on Aug. 28. CPS will hold two budget hearings Tuesday, at 1 p.m. and at 4:30 p.m.
Many of the board members aligned with the mayor questioned the strategy of putting the pension payment in the budget, but not guaranteeing that it will be paid. The city needs the $175 million in order to end the current fiscal year in the black.
Michilla Blaise was the first member to bring up that the plan includes big risky assumptions, including counting on $379 million in TIF surplus. Without a guarantee that the school district will make the municipal pension payment, the city will have less of a reason to provide the big surplus amount.
“This, for me, comes down to being a good partner,” she said. “This feels like bizarroland to me. These are our employees, this is their pension payment.”
Another board member Emma Lozano said she also thinks City Council members will balk at giving CPS the big TIF surplus without the pension payment. “I think that we’re dreaming here,” she said. “That’s not the way things work.”
With the mayor holding the balance of power on the partially elected board, board members could demand the budget be altered before the final vote in two weeks. And, by including the pension payment in the budget, the board would not have to pass a budget amendment to pay it. A budget amendment requires two-thirds to pass; but the budget that includes the payment only requires a simple majority.
Two independent school board members spoke against making the pension payment.
“I’m hearing a lot about politics here and not a lot about children,” said Che “Rhymefest” Smith.
Board member Jessica Biggs pointed out that Mayor Brandon Johnson’s transition committee said as he came into office that CPS should not be making this pension payment.
Though the payment to the municipal pension fund is solely the responsibility of the city, more than half of the pensioners are former CPS employees who are not teachers.
On the TIF money, CPS’ Sitkowski said the district received $379 million last year from TIF surplus, which is why he felt comfortable including that much this year.
The size of the surplus is up to the mayor, but the City Council must approve it. Ald. Andre Vasquez (40th) said he supports CPS refusing to make the payment.
“I think the city should be the one making the pension payment. I think statutorily we’re the ones that do it. We also have more ability to raise revenue than the Board of Education … we’re saddling them with more of a problem that they can’t solve their way out of,” said Vasquez, referring to the fact that CPS has a cap on how much it can increase property taxes per year.
The proposed budget zeroes out the deficit, which was down to $569 million after cuts this summer, through these steps: saving another $126 million, mostly through central office cutbacks; identifying an extra $149 million in revenue, including by increasing what CPS is expected from a city TIF surplus; accelerating debt refinancing to get $29 million savings this year rather than next year; tapping into $90 million in one-time funding sources, including from a debt service stabilization fund; only making the $175 million municipal pension payment if CPS gets extra state TIF surplus revenue or other local resources.
Sarah Karp covers education for WBEZ. Follow her on X @WBEZeducation and @sskedreporter.
Contributing: Mariah Woelfel