CHICAGO – After a failed stab at asking state lawmakers to extend a teacher pension payment holiday, Chicago Public Schools announced a new round of cuts Friday as the district carves away at a $1 billion deficit in its next budget.
The district -- which is shuttering nearly 50 schools in its effort to rein in costs and better distribute resources by eliminating empty desks – warned painful cuts or changes could still be forthcoming as it finalizes its fiscal 2014 budget over the next several weeks. The new fiscal year begins July 1.
CPS said Friday it had identified an additional $21 million in cuts that would impact its central office, operations and administration but not the classroom. About 100 central office positions would be eliminated. That brings to $52.3 million the level of cuts announced this year.
CPS also disclosure Friday that more than 800 teachers and other staffers were being laid off as part of its schools closing plan.
“Given the historic financial crisis facing our district, next year’s budget will not come without painful decisions,” CPS’ chief executive officer, Barbara Byrd-Bennett, said in a statement. “We will continue this work over the next several weeks to further identify reductions to central office spending to help close the district’s $1 billion deficit and make sure that every dollar helps protect precious classroom funding.”
The district is eyeing a series of one-shots to further reduce the deficits, according to published reports. They include relying on the early receipt of property tax revenues and the anticipation that the state’s chronically late aid payments will improve.
The district could seek the maximum allowable hike in its property tax levy. It used the maximum increase for the current budget, bringing in an extra $64 million. Some have also 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.
A good portion of the district’s deficit comes from a $400 million spike in its teacher pension payments because a three-year state approved pension holiday expires. With state pension reform efforts faltering in the waning day of the General Assembly’s spring session late last month, city and district officials pressed for a two-year partial extension of the holiday that would have staved off the full $400 million increase.
The measure failed in a House vote but Gov. Pat Quinn had threatened to veto the legislation anyway.
“I will not sign any extension of a pension holiday for Chicago Public Schools unless the General Assembly sends comprehensive public pension reform to my desk” for the state’s pension system, Quinn said in a statement.
The district is paying $200 million toward pension funding this year, which is now slated to rise to $600 million.
Under the failed legislation, the district’s payment next year would have been capped at $350 million in fiscal 2014 and $500 million the following year. 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 recently completed a refunding and a new money sale is on tap for later this year. About $329 million of projects may be funded with bonds. Another $100 million may be tacked on to the deal to finance projects in the next fiscal year’s budget.
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.
Ahead of the recent refunding, Moody’s Investors Service affirmed the A2 and negative outlook assigned to $6.3 billion of board and building commission debt issued for the schools. Standard & Poor’s affirmed its A-plus rating and stable outlook. Fitch Ratings, which did not rate the deal, assigns an A and negative outlook to the board.