Fitch believes a strike by the Chicago Teachers' Union (CTU) could make it difficult for Chicago Public Schools (CPS) to balance its need to manage expenses with its goal of improving educational standards. Contract talks between CPS and CTU are scheduled through Friday, Sept. 7 and a strike is scheduled to begin on Monday, Sept. 10

if an agreement is not reached. CPS is the third largest school district in the U.S. The district has reportedly allocated $25 million for a strike contingency fund. Fitch's concern is that the resolution of the strike could be costly and leave management with even less flexibility to reduce spending to a level in line with revenue expectations.

The fiscal 2013 CPS budget channels $46 million that had been slated for a 2% teacher salary increase to the hiring of 500 new teachers to lengthen the school day. The budget does not assume reinstatement of a 4% teacher salary increase that was suspended in fiscal 2012. Even with these assumptions, most available general fund reserves are projected to be spent on operations. Fitch therefore believes CPS's options for accommodating a strike settlement that results in increased funding to CTU are highly constrained. These include completely depleting operating reserves or imposing additional layoffs that would appear to be in opposition to desired improved educational outcomes with potential consequences for enrollment.

The lasting impact on the district will depend on the outcome of the negotiations and the duration of the strike, if there is one. We will continue to monitor this situation closely and report back soon.

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.