CHICAGO — Chicago Public Schools unveiled a proposed $5.9 billion fiscal 2012 budget on Friday that closes a $712 million deficit through a mix of administrative and program cuts, a property tax increase, and with $241 million in reserves.
The operating budget totals about $5.11 billion, up from $4.94 billion in fiscal 2011. Another $391 million will go to fund capital projects and $410 million is earmarked for debt service. The budget is the first under Jean-Claude Brizard Brizard who was picked by Mayor Rahm Emanuel to serve as chief executive officer of the district soon after the mayoral election earlier this year.
The district is grappling with growing personnel, healthcare, and debt service costs amid chronic delays in state aid and the end to about $400 million in federal stimulus funds. At the same time, the district wants to expand kindergarten, magnet school programs, and increase security systems at some schools. The state was $176 million behind in aid at the end of July, a district spokeswoman said.
CPS officials said the use of reserves and the tax increase were needed to stave off deep academic program cuts. “We had to make some very difficult, but necessary choices in order to keep cuts as far away from the classroom as possible to ensure we are protecting investments we are making in our students to help make them college and career ready,” Brizard said in a statement.
Since taking over the district, Brizard’s administration has cut administrative costs and scaled back borrowing plans to save $75 million. The remaining deficit would be eliminated by slicing another $107 million in administrative costs and making $87 million in program reductions.
The budget does not provide the $100 million in funding needed to cover a 4% teachers’ pay raise under the districts’ union contracts. It does include $35.5 million in step increases for teachers. The budget raises the district’s property tax levy by the maximum allowed under caps to generate an additional $150 million in revenue. Operating efficiencies will save another $27 million narrowing the budget hole to $241 million that would be closed through the use of reserves.
CPS officials said that its fund balance would be rebuilt during the fiscal year so that it closes fiscal 2012 with a $289 million fund balance, representing 5.6% of expenses. The district strives to meet a 5% goal. “This is the first time in two years that CPS has been able to maintain the Board of Education required reserve fund balance,” the district’s news release read.
CPS will hold public hearings this month ahead of a vote on the budget by the Chicago Board of Education at its meeting Aug. 24.
The system in June said it planned to scale back its planned borrowing in fiscal 2012 to save $44 million. The district typically sells between $200 million to $400 million annually to support its $5 billion capital program. The district faced a similar sized deficit last year that was closed through spending and staffing level cuts, some use of reserves, and the restructuring of $240 million in debt.
Fitch Ratings last year downgraded the district’s $5 billion of debt to A-plus due to mounting fiscal challenges and a reliance on one-shots to balance its 2011 budget. CPS has ratings of AA-minus from Standard & Poor’s and Aa2 from Moody’s Investors Service. Both assign negative outlooks to the credit.