Chicago Schools OK Budget

The Chicago Board of Education last week adopted a $5.4 billion fiscal 2010 budget that eliminated a $475 million deficit by dipping into reserves, boosting property taxes, cutting jobs, requiring nonunion employees to take unpaid furlough days and using $190 million of federal stimulus funds.

The district included a 1.5% increase in its property tax rate to raise $43 million. It could have sought up to a 4.1% increase under state tax caps. It will also eliminate 1,000 positions, including 536 previously announced cuts. It will require non-union employees to take six unpaid furlough holiday days and will dip into its fund balance of $432 million for $61 million.

Chicago Public Schools chief executive officer Ron Huberman warned that the use of one-time fixes won't address longer-term problems like rising pension and health care costs. Pension contributions in the fiscal 2010 budget rise by $130 million to $300 million, teacher salaries by $125 million, and health care by $30 million.

Officials warned that another $229 million will be needed in fiscal 2011 for pensions, leaving CPS with an estimated $900 million gap. It is required under Illinois law to fully fund the pensions by 2045.

Earlier this year, all three rating agencies affirmed the district's ratings on $4.3 billion of outstanding debt. Fitch Ratings rates the credit A-plus with a positive outlook, Moody's Investors Service rates it A1, and Standard & Poor's rates it AA-minus. The Board of Education has a new-money sale coming up later this month.

The Civic Federation of Chicago, a local watchdog group, endorsed the plan but expressed grave concerns over CPS' financial future. It said the district identified its looming deficit early and acted to reduce it by cutting administrative personnel and inefficient or ineffective programs for a total estimated savings of $100 million before turning to property taxes.

"The Civic Federation commends Chicago Public Schools for showing praiseworthy restraint by implementing expenditure cuts before raising taxes," said Lise Valentine, vice president of the group.

The federation warned that the district must address its pension funding issues to shore up its fiscal future given the looming $900 deficit next year. The group recommended that the General Assembly and CPS work together to enact a moratorium on pension enhancements and limit annual pension increases for new hires.

It said the state also should increase its contribution to teachers' pensions to bring the state's funding in line with what it provides for downstate districts.

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