Sign up for Chalkbeat Chicago’s free daily newsletter to keep up with the latest news on Chicago Public Schools.
A divide started to emerge Thursday in the Chicago school board’s meatiest discussion so far this year over a city pension fund payment that has pitted CPS leaders against the mayor’s office.
Some board members appointed by Mayor Brandon Johnson or elected with Chicago Teachers Union endorsement urged the district to pay the city $175 million to cover a portion of an annual payment to fund the retirements of non-teaching school staff.
That payment has caused a major rift between district leaders — who note that the city, not the budget deficit-plagued district, is on the hook for the cost under state law — and Johnson, who insists the district must chip in as it becomes more independent from the city.
But other elected board members appeared to signal more support for CPS’s stance that it’s the city’s responsibility to cover the pension cost. They want to use the money to cover the cost of new contracts with their teachers and principals unions — both still under negotiation.
Next week, the school board is expected to vote on an amendment to the district’s budget for the current school year. It will revise the $9.9 billion budget to add in an additional $139 million in tax revenue CPS received from the city.
But it leaves a lot of ambiguity about how CPS will pay for more than $300 million in added costs.
On Thursday, at the first of two public hearings on the amendment, district officials told the board the amendment’s open-ended phrasing gives members the leeway to decide how to spend the extra dollars. But they stressed repeatedly, as they have in the past, that unless the city comes through with additional funding, the district will need mid-school year budget cuts to cover both the cost of the two contracts and the pension payment.
Board members puzzle over the way forward
Some board members made it clear they want the district to find a way to pay for the teachers contract, a principals union agreement, and the pension payment. They argued that failing to fork over the pension payment would anger city leaders and could make them withhold tax revenue from the district in coming years as punishment.
“We recognize that all three are obligations that the district has, and we are doing everything in our power to meet them,” said board President Sean Harden.
But other board members said that at a time of mounting fiscal pressures and uncertainty for CPS, the city shouldn’t pass on costs it has historically covered to the district. Across the board, members voiced some uncertainty and even confusion about their options and way forward. Harden said an upcoming report from Baker Tilly, the financial consultants the board hired to review the budget, will be “a major component to determining what our next steps are.”
Board member Jitu Brown said he spoke with some aldermen who signaled that they won’t look kindly on a CPS refusal to kick in on the pension payment — and that might affect their willingness to pass on surplus tax revenue down the road.
“They won’t be supportive of those resources coming to CPS for our long-term health,” he said.
But Carlos Rivas, one of the board’s elected members representing Humboldt Park, Hermosa, and Logan Square, voiced skepticism, noting the city is legally obligated to pass on a portion of surplus dollars from special tax-increment-financing, or TIF, districts to CPS and cannot just choose to cut off the district.
Another elected school board member Jennifer Custer, who represents neighborhoods on the far Northwest side of the city, noted that the extra TIF money the district received from the city recently isn’t even enough to cover the pension payment.
Some mayoral appointees stressed that CPS’s budget reflects a record influx of cash from TIF surplus — a total $298 million. Besides the new $139 million in revenue from the TIF surplus in the amendment, the budget already included $159 million from that source.
Debby Pope, another Johnson appointee, insisted that CPS should strive to make that payment, perhaps by “rearranging things” in its budget. The district has chipped in for the pension fund in recent years, she noted; that fund, which she said has been “outrageously underfunded” over the years, covers many CPS employees.
Some board members repeatedly invoked an option the mayor’s office has floated in recent days — refinancing the district’s debt to eke out more dollars for this year’s budget — even as district officials insisted CPS did all the refinancing it could possibly do at the start of the school year.
City officials argue for debt refinancing
Senior mayoral aides on Tuesday said CPS could refinance existing debt to free up about $250 million in order to pay for both the pension reimbursement and increased contract costs.
In an interview with Chalkbeat, Justin Marlowe, director of the Center for Municipal Finance at the University of Chicago, said CPS would be “hard-pressed in the current interest rate environment” to refinance in a way that would free up $200 million.
Marlowe added that the district could try to do “an extreme scoop and toss” where they make zero principal payments for several years and then face ballooning payments in 15 or 20 years.
“It seems like a trade off they’re just not willing to make,” he said.
To better understand those and other financial options, some board members, such as Johnson appointee Michilla Blaise, called for a chance to question outside experts and city leaders, perhaps as early as the second public hearing on the amendment on Friday.
Meanwhile, other board members, such as Karen Zaccor, another Johnson appointee, called on the district to settle its contract with teachers so the board would know exactly how much money it needed to steer to that this year.
“It would be really important to get it done as soon as possible,” she said. “We can have actual numbers and not those theoretical numbers we can offer.”
Chicago Teachers Union leaders, organizers, and members packed the available public hearing slots Thursday, asking the board to press district officials to give in on a number of CTU contract negotiation priorities: more preparation time for elementary teachers, less frequent teacher evaluations, smaller class sizes, and additional staffing. And they urged the district to settle its four-year contract with teachers — with negotiations almost a year in the works — before passing the amendment.
Two-thirds of the 21-member school board need to vote yes for the amendment to pass. Some members have told Chalkbeat they plan to oppose the amendment because they believe the district cannot and should not have to handle the pension payment. When former Mayor Lori Lightfoot passed on some of that pension fund’s costs to CPS, the teachers union sharply criticized her for balancing the city’s budget on the backs of students.
CTU leaders did not directly address the pension payment on Thursday. But Stacia Scott Kennedy of SEIU Local 73, which represents support staff in CPS, cautioned the board about covering the pension payment at any cost, including by cutting staff or further indebting the district.
“Those chickens come home to roost years from now,” she said. “It’s the children and the workers who come to suffer from these decisions.”
At Thursday’s meeting, district leaders and board members seemed to agree on one thing: The district and the city must work out a clear way to handle financial obligations each has struggled to cover in the longer run. Brown said he wants a comprehensive plan from district leaders on addressing CPS’s budget challenges.
“It’s almost like we’re in a boat, and we have duct tape on the bottom of it, and we’re just hoping a leak doesn’t spring,” he said.
The next public hearing is 10:30 a.m. Friday, March 14 at the district headquarters, at 42 W Madison St.
Becky Vevea contributed to this report.
Mila Koumpilova is Chalkbeat Chicago’s senior reporter covering Chicago Public Schools. Contact Mila at mkoumpilova@chalkbeat.org.
