CHICAGO – The Chicago Public Schools announced on Friday a plan that relies in part on debt restructuring and capitalized interest bond proceeds to cover the $103 million price tag in fiscal 2013 for a new four-year teachers contract.
The amendments to the district’s budget approved in August will be submitted to the Chicago Board of Education for approval at its Oct. 24 meeting along with the contract that ended a seven-day Chicago Teachers Union strike last month.
The increased cost stem from salary increases in the contract, including a 3%, $59 million cost of living increase and $33 million for increases based on experience.
“We are maintaining our commitment to invest in, not cut from, our classrooms,” CPS’ chief executive officer Jean-Claude Brizard said in a statement. “The budget is an ongoing process, and we will continue to work throughout the year to identify ways we can capture additional savings and increase revenue to address the long-standing financial challenges facing the District.”
Capitalized interest from its bond sale this year will provide $13 million, debt restructuring pushing off near-term maturities will provide $42 million, and the sale of surplus properties will generate $15 million in new revenue. All are one-time, non-recurring revenues.
The district will also generate $11 million in savings from lunch room reductions to help pay for the contract, save $10 million from procurement changes, $8 million by delaying or cancelling non-teacher hires and $4 million from administrative initiatives.
Rating agency analysts had said they expected the district to rely heavily on one-shots to fund the package – a negative credit factor. Teachers overwhelmingly approved the contract that ended the district’s first strike in more than two decades but will further strain the already cash-strapped district.
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. 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.
Fitch Ratings assigns the board’s debt an A rating and negative outlook. Moody’s Investors Service rates it A2 with a negative outlook and Standard & Poor’s rates it A-plus with a stable outlook.