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This story was updated to include a comment from Chicago Board of Education President Sean Harden.
Chicago Public Schools is proposing a budget amendment to the school board that would increase the district’s operating budget by $139 million to address looming expenses for the district — but could open the door to other solutions, such as budget cuts or “other entities” taking on debt for CPS.
The increase to the current $9.9 billion spending plan represents a historically large influx of cash from the City of Chicago, which declared a surplus from Tax Increment Financing, or TIFs, which are special taxing districts designed to spur development. The district’s budget already includes $159 million in previously allocated TIF funds.
The proposed budget increase falls short of the $175 million city officials expect CPS to contribute to the pensions of non-teaching staff. It also may not be enough to cover looming costs related to a teachers contract, which is still being negotiated.
The amendment will likely cause fault lines among the 21-member board, which has disagreed on how to solve the district’s money problems. One board member who spoke to Chalkbeat Wednesday already committed to a no vote.
The amendment — which requires a two-thirds approval vote to pass — calls for the additional $139 million in TIF funds to be used for paying for new labor contracts with the two unions representing Chicago’s teachers and principals as well as the pension payment to the city.
But that money alone will not cover both of the costs, which the amendment said are still being negotiated. Acknowledging this, the amendment also says CPS will find other ways to pay for any additional costs — including through more TIF surplus funds, other local revenue, “other entities incurring debt on CPS’s behalf,” or budget cuts “beyond those needed to keep the initial approved … budget in balance.” It’s unclear who the “other entities” are. A spokesperson for City Hall said the city “will not be borrowing on behalf of CPS.”
After this story was published, Board President Sean Harden told Chalkbeat he was unaware that the final draft would include a reference to other entities incurring debt for CPS. Harden said he and district leadership “spent a lot of time making sure we’re capturing everything we need” in the amendment, but he has not spoken to anyone about incurring debt for CPS. CPS did not immediately respond to a request for comment.
“That language was not approved by me,” Harden said.
Still, Mayor Brandon Johnson’s office praised the amendment.
“Mayor Johnson has maintained that Chicago Public Schools (CPS) has an obligation to its workforce and its retirees and this proposed budget amendment is in line with that obligation,” said Cassio Mendoza, a spokesperson for the mayor’s office, in a statement. “Mayor Johnson is supportive of any tools that the school district can utilize on its behalf to balance its budget without cutting teachers or resources for students.”
The district will hold hearings over the budget amendment at 10:30 a.m. on March 13 and March 14 at the board office, located at 42 W. Madison St. in the Loop.
Looming financial problems have roiled the district for months and fueled a major leadership shakeup, including the resignation of Johnson’s first, seven-member appointed board and the firing of CPS CEO Pedro Martinez. CPS leadership — which did not budget for union or pension costs — has resisted borrowing money to pay for labor negotiations or pensions, and has repeatedly said it faces at least a $500 million budget deficit next fiscal year.
In recent weeks, City Hall has turned up the pressure on CPS as it tries to balance its own books by the end of this month. Last month, city officials emailed school board members a presentation about the pension payment and included suggestions for issuing bonds to garner $242 million, according to the presentation obtained by Chalkbeat and first reported by the Chicago Tribune.
Chicago Teachers Union leaders questioned why the district and school board are discussing a budget amendment before reaching an agreement on the teachers union contract.
“We want to make sure their budget amendment is the right amendment to land a transformative contract,” said CTU President Stacy Davis Gates. “If they settle the contract before they do the budget amendment, then our math will be correct.”
School board members continue search for funding solutions
Board member Jitu Brown, who represents the city’s West Side and is an ally of the mayor’s, said he had not yet studied the amendment. Generally, he wants a solution to make both the pension payment and settle labor negotiations, but doesn’t want to “balance the budget on the backs of Black and brown children.”
“That’s looming over all of us right now,” Brown said. “One thing we don’t want is a teacher strike, so we are trying to get that settled.”
Brown said he’s open to borrowing but said he would want a relatively low interest rate, more TIF surplus funds and more state funding.
Another board member, who requested anonymity to share thoughts candidly and not undermine the public hearing, said they will vote no on the amendment because they are against being on the hook for the pension payment at a time of financial duress, as well as borrowing and cuts. Even if another entity took on debt for CPS, the district would still be on the hook to pay them back, this board member said.
“To use that money in any capacity to pay the city is making a choice to give to the city — to make them whole —over our own organization and the people who directly impact and work in the classroom and the students themselves,” the board member said.
Another board member, who requested anonymity to speak candidly, said she was taken aback by the mayor’s office’s PowerPoint presentation on how to solve the pension issue. On Tuesday, she said she is torn on how to solve the district’s budget issues and is trying to get “as much information as I can.” The district has argued that it cannot generate revenue like other districts, but at the same time, the city wants its money. She could not be immediately reached for her thoughts on the budget amendment posted Wednesday.
“It seems like the mayor’s office is trying to push a certain way for CPS to pick up the tab, while CEO Martinez and some other individuals on the board feel it’s not the board’s responsibility,” she said. “So it’s a lot of back and forth: one for the short term, but in a few months we’re gonna start talking about the budget for next year.”
Several board members are also waiting to see what outside consulting firm Baker Tilly — hired last month by school board president Harden — is suggesting the district should do.
Harden turned to the consultant amid rising tensions with City Hall and pressing questions about CPS’s financial challenges. He signed a contract on Feb. 18 to spend up to $35,000 to get an opinion from Baker Tilly on funding options to alleviate CPS’s looming deficit and to assess the risk associated with those options, according to records obtained by Chalkbeat through a Freedom of Information Act. The Chicago Tribune first reported the existence of the contract.
Chalkbeat filed a FOIA request for Baker Tilly’s analysis or any recommendations, but CPS’s FOIA office said on Tuesday that no such records exist. Multiple board members said that to their knowledge, the analysis is close to completion.
A fourth school board member, who spoke on condition of anonymity to discuss private conversations, said Harden told board members this week that Baker Tilly had come up with “various potential financing scenarios” but did not provide further details.
That board member and another said Harden expressed that he did not want the analysis or, separately, potential financing solutions for CPS, in writing because it would be subject to open records laws, or FOIA.
“He literally said, ‘I am FOIA’ed every single week; I don’t want this stuff out of context and open for interpretation,’” one of the board members said.
Harden said Wednesday he wants to be “very thoughtful about what gets shared” and said he would share the Baker Tilly report with board members once it’s complete. Earlier Wednesday, the board office said it expects to make the final report available to the public.
“For me it’s important that we have all our ducks in a row, we know exactly what direction we’re going in so we can speak to it intelligently without any issues related to it,” Harden said.
Reema Amin is a reporter covering Chicago Public Schools. Contact Reema at ramin@chalkbeat.org.
Becky Vevea is the bureau chief for Chalkbeat Chicago. Contact Becky at bvevea@chalkbeat.org.
