Budget Cuts Loom as CPS Fail to Pass a Balanced Budget

After numerous attempts to achieve legislative change to help them restructure or pay their pension obligation, which was due June 30, Chicago Public Schools paid the $634 million they owed to the Chicago Teacher Pension Fund. This gives the school district a few extra months, but it will not be long before it will be forced to make another difficult financial decision to prevent bankruptcy. Despite failed diplomatic efforts thus far, CPS passed a budget with a $500 million gap that depends on Springfield to eventually bail them out of their financial calamity.

Despite their budget concerns, CPS are attempting to keep spending-per-student close to the same level as last year. The district’s operating budget was $5.8 billion last year. To meet its pension obligations and funding goals, the district increased its tax levy, as usual, to raise an estimated additional $77 million. CPS also receive more money from the federal government through Title I and Title II grants. However, if the state fails to act, students will feel a $500 million cut the district will be forced to make at the end of the year to pay its pension fund.

Each year, the district pays into the Chicago Teacher Pension Fund a negotiated amount to cover its employees’ retirement expenses for their years of service. A completely funded pension means the assets within the fund are greater than its promises to retirees. Most pension funds are not fully funded, but almost all of them are in better shape than the Chicago Teacher Pension Fund. In 1997, CPS completely funded their pension liabilities, but years of not paying, exacerbated by the recession, devastated the fund to its current state, with only 33 percent of liabilities funded.

A 1995 Illinois law requires organizations with public pension obligations to be on pace to have 90 percent of their liabilities funded by 2045. In 2010, Illinois legislators reprieved the district of a looming crisis by changing the year CPS needed to fulfill their pension obligations to 2059. Despite the legislative help just five years ago, CPS once again find themselves unable to pay their pension obligations and maintain the quality of services for students.

There is more of a reprieve that is likely from Springfield. The Illinois House and Senate already passed legislation that extends the CPS timetable another 15 years. This temporarily saves the district $219 million over the next two years, but it still leaves the district with a substantial budget deficit that needs to be filled by December. Governor Rauner also proposed picking up some of the tab for CPS, but with the highly unlikely caveat that Chicago teachers take a 7 percent pay cut. The state or city will need to do more to prevent per-pupil costs from plummeting.

Many CPS students are deprived of resources their wealthier counterparts are guaranteed. With over 85 percent of CPS students qualifying for free or reduced price lunches, the last thing city and school officials want to do is take away supportive services. To avoid this, in the last few years, the district has closed schools, cut administrative costs, attempted to lower facility costs through its Aramark contracts, borrowed millions of dollars, and even changed its budgeting format to use a different fiscal year’s revenue towards expenditures. But the district appears to be down to its last few chips. Its only available move now is to go all in on Springfield just to remain in the game. While the odds may not be in their favor to achieve legislative change, at this point, it could be the only thing that allows CPS to keep playing.

Featured Photo: cc/(Chicago Man)