CHICAGO — Chicago Teachers Union members overwhelming approved the new four-year, $295 million contract that ended a seven-day strike last month but will further strain the already cash-strapped district.
The Chicago Board of Education will review the pact at its meeting Oct. 24. Officials have not yet identified how they will cover the $74 million fiscal 2013 cost of the contract which was not accounted for in the budget approved over the summer.
“I am pleased that the members of the CTU have ratified this contract, and we can now demonstrate to our students that even when two sides start far apart, they can find common ground and reach a resolution. It’s an incredibly important message to send,” board president David Vitale said in a statement. The contract runs for three years with an option to extend it a fourth year.
Hit with two downgrades prior to the announcement of the new contract, the board’s roughly $6 billion in general obligation debt was further lowered after the deal was reached.
Both sides have claimed victories. Chicago Mayor Rahm Emanuel was able to preserve a long school day and year, principals retained the power to hire staff, and test scores will play a greater role in teacher evaluations. The union won an average annual raise of 4.4% -- higher than initially proposed -- and limited the extent to which its members would be graded based on test scores. Members preserved their health care benefits and their contribution rates will be frozen while the board will also continue to fund 7 % of the 9 % employee pension contribution.
The district’s decision to nearly drain its reserves to help erase $665 million of red ink in the fiscal 2013 $5.2 billion and the district’s fiscal reckoning next year when pension payments will rise by $330 million drove the initial downgrades over the summer. The additional pressures from the new contract contributed to the more recent ones.
“Fitch cited the need for CPS to address a large, $770 million budgetary imbalance in fiscal 2014. The settlement makes that challenge even greater and, Fitch believes, narrows the options for achieving it as salary and wage increases are already built in,” analysts wrote.
The teachers’ strike also demonstrated the strength of unions here and Moody’s Investors Service said that highlights the difficulty the district may face to cut costs. “Significant budget adjustments will be necessary, but the demonstrated power of collective bargaining suggests that future budget controls may be difficult for the district to Implement,” Moody’s wrote.
Fitch Ratings assigns the board’s debt an A and negative outlook. Moody’s Investors Service rates it A2 with a negative outlook and Standard & Poor’s rates its A-plus with a stable outlook.
