Chicago's City Colleges still in recovery mode from state budget impasse

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City Colleges Chicago will raise its property tax and tap some proceeds from the sale of its downtown headquarters to make ends meet in fiscal 2020 as the fiscal hangover from a two-year state budget impact lingers.

The community college system's board signed off Aug. 1 on a $448 million budget — 2.6% more than the 2019 spending plan. It cuts several dozen non-faculty positions and relies on the use of nearly $13 million from the $32 million sale of its headquarters. The sale had been on hold but a new buyer was recently approved. Another one-time revenue source in the budget is the use of $4 million in tax increment financing surplus funds, although some level of surplus has been typically declared by the city for years.

The system is raising an additional $1.8 million from its property tax levy, mostly due to the decision to raise to the maximum its levy under state tax caps for the first time since 2009. Capital spending will rise by $12.4 million mostly due to the state’s passage of a multi-year $45 billion infrastructure plan in May.

State funding will rise in 2020 by $24.8 million to $87.4 million. While it’s the third year that the district is set to receive its full allotment of state dollars after the budget impasse, the amount remains less than fiscal 2015 levels. Tuition and fee revenue will fall by $10.2 million below fiscal 2019 budgeted levels.

A local government fiscal research organization endorsed the budget but it also voiced concerns over the district's long-term fiscal stability given its enrollment declines and reliance on one-shots to manage through the fiscal year.

“While the Civic Federation supports City Colleges’ budget for the upcoming year, we are disappointed that a significant portion of the proceeds from the sale of the downtown headquarters are being used to balance this year’s operating budget,” said Laurence Msall, president of the Chicago Civic Federation. “Additionally, the ongoing decline in student enrollment is troubling and bears close watch, as it significantly affects the district’s bottom line.”

The enrollment decline at the district which operates seven campuses throughout the city predated the budget impasse and has fallen at a clip that’s greater than the statewide figure for community colleges. That’s hurt tuition revenue at the same time the district has not implemented an across-the-board tuition hike in four years. Student enrollment dropped by 1,463, or 4.3%, to 32,646 between 2018 and 2019.

Some of the district’s struggles are due to the lingering effects of a two-year state budget impasse that ended in mid-2017 when the General Assembly’s majority Democrats with the help of a handful of Republicans passed a budget and income tax hike over then Gov. Bruce Rauner’s objections. During the impasse, CCC aid levels were cut and delayed as were grants for low income students, which took a toll on enrollment.

“The damage caused by the two-year state budget impasse along with the delay in selling the district’s downtown headquarters and a continued decline in student enrollment require a sound multi-year plan by the district to restore long-term financial and operational health,” the federation warned.

S&P Global Ratings cut the district to A-plus in 2016 and then four notches to BBB in 2017 during the impasse while Fitch Ratings downgraded the system to A-plus from AA-minus in 2017.

City Colleges was able to manage by dipping into its strong reserve levels and by freezing some spending and hiring and also delaying some capital spending. Some proceeds of the headquarters will go to replenish the reserve account, a move the Civic Federation called a “great step toward future stability” even though it’s not enough to ensure that stability over the long term.

“Unfortunately, the use of non-recurring revenue sources to balance the budget offsets some of the effects of the cost-containment strategies, and the district will eventually need to find additional cuts or revenues — or tap those same reserves — to help balance future budgets,” Msall said.

The federation also endorsed efforts to develop a new, long-term strategic plan under Chancellor Juan Salgado, who was named to the post by former Mayor Rahm Emanuel in 2017 and is being kept by new Mayor Lori Lightfoot.

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