Deficit Looming, Chicago Schools Start Firing Teachers

CHICAGO— Chicago Public Schools began notifying more than 1,000 teachers of layoffs Friday as the district chips away at a $1 billion deficit it faces because of the end of a pension payment holiday, rising costs including a new teachers’ contract, and a reliance on one-time revenues to balance recent budgets.

CPS puts much of the blame for its deficit on the looming $400 million increase in pension payments owed in its next budget which it attributes to state inaction on pension reform. The district had enjoyed a partial payment holiday for the last three years.

“Since 2011, CPS has made reductions to central office, operations, and administrative spending of nearly $600 million in order to avoid cuts to our classrooms” and an additional $52 million in cuts have been proposed, read a statement from the district. “However, given the magnitude of the District’s $1 billion deficit this year and despite all the steps taken to mitigate impacts to our classrooms, the lack of pension reform in Springfield has brought this crisis to our schools’ doorsteps.”

In addition to the 1,036 teachers, layoff notices were also handed out to more than 1,000 support staff. The district did not provide figures on how much the layoffs would save. The district had total faculty of more than 23,000 last year, according to published reports. The layoffs follow a previous round of more than 800 staffing cuts made after the district announced its plans to close nearly 50 schools this year.

The district sought in the waning days of the General Assembly’s spring session in late May to extend the partial holiday but it was shot down. Gov. Pat Quinn had vowed to veto it if it passed without lawmakers acting on a state pension reform package.

The district is eyeing a series of one-shots to further reduce the deficits. They include counting the early receipt of property tax revenues and the anticipation that the state’s chronically late aid payments will improve. The district is seeking the maximum allowable hike in its property tax levy. Some have speculated that the district could ask the state to lift the cap. The cap limits increases to the lessor of 5% or the rate of inflation.

The district is paying $200 million toward pension funding this year, which is slated to rise to $600 million in the next budget. CPS’ teachers’ fund has $6.8 billion of unfunded liabilities for a funded ratio of 59.9%.

The district also faces higher costs under the $300 million, four-year contract reached with the Chicago Teachers’ Union last September to end a strike. With the state struggling with its own pension and liquidity woes, most believe the district can’t expect much help on its aid levels and CPS nearly drained its once healthy reserves to close its budget deficit last year.

The district’s structural budget woes and past reliance on non-recurring revenues from debt restructurings and reserves drove several rounds of rating downgrades over the last two years. Moody’s Investors Service rates the Board of Education’s debt  A2 with a negative outlook. Standard & Poor’s rates it A-plus rating and stable outlook. Fitch Ratings assigns an A and negative. The district has more than $6 billion in outstanding debt.

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Illinois
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