Sign up for Chalkbeat Chicago’s free daily newsletter to keep up with the latest news on Chicago Public Schools.
A highly anticipated report from a consultant hired by the Chicago school board confirmed what its members already knew: There are no great options to secure more funding as the district tries to pay for a new teachers contract and weighs a pension reimbursement to the city.
The five-page memo from consulting firm Baker Tilly outlines three options: cuts, including staff furloughs, debt refinancing, and more city money from special taxing districts. All of these potential solutions have already been floated by either Chicago Public Schools or Mayor Brandon Johnson’s administration.
Baker Tilly’s analysis also revealed another challenge facing CPS: The school district must find $200 million in savings before June 30, when the current fiscal year ends. That’s because the district is expecting less tax revenue and spent more than planned on special education, transportation, and its buildings, according to the memo.
It’s the latest twist in the task facing the Chicago Board of Education just three months after its members were sworn in. Addressing CPS’ immediate financial challenges will be one of the first significant decisions the 21-member board, which is half elected and half appointed, makes as it shifts away from mayoral control.
School Board President Sean Harden, who was appointed by the mayor, hired Baker Tilly in February for a cost not to exceed $35,000 as tensions grew about how to solve CPS’s ongoing financial troubles, which include paying the City of Chicago $175 million toward a pension fund that includes CPS staffers who aren’t teachers.
In an interview with Chalkbeat, Harden said the district has been working for several months to close that $200 million gap. He said CPS is looking at options that don’t involve cutting staff or furlough days — the latter of which could have direct consequences for students who would miss out on learning and could violate state laws around the minimum number of school days each year.
CPS did not immediately return a request for comment.
“The reality is we have constraints in terms of what we can actually do and what will meet our timetable,” Harden said. “We just have to do the work; there is no shortcut to this.”
Harden said he’s been working “intimately” with district staffers, who have been combing through every option. The complex idea of restructuring or refinancing debt must also be done within the constraints of the law, Harden said.
The Baker Tilly report comes two days before the Chicago Board of Education is set to vote to add $139 million in city funds to its budget and commit that money toward paying pension obligations the city has been demanding before the city must close its books on March 30. The vote would also commit the new dollars to paying for new labor contracts with the unions representing teachers and principals.
But the new revenue will not cover the pension payment and the new labor contracts. Johnson told reporters Tuesday that the Board of Education “has options” that have ”not been articulated from” CPS CEO Pedro Martinez.
“We are working hand in glove with the Board of Education as they have to wean off the dependency of city government and prepare to be an independent body,” Johnson said. “This transition is going to take a lot of work, and we’re putting that work in.”
As a candidate and union organizer, Johnson opposed having CPS pick up a portion of the city’s payment to its municipal pension fund, which covers CPS staff who are not teachers. But as mayor, he has held firm that CPS cannot cut staff and must both reimburse the city $175 million for the pension payment and pay for new collective bargaining agreements with teachers and principals, which are still in negotiations. He reiterated that stance Tuesday.
However, Martinez has resisted the mayor’s demands for months, insisting the district does not have the money for both the pension reimbursement and added labor costs. That refusal has, in part, cost him his job.
The risks of cutting costs
The memo, authored by Baker Tilly principal Brock Bowsher, said cuts are a risky choice. Shaving the district’s budget now to meet the pension and contract obligations — such as by cutting staff or reducing vendors — “could be highly challenging, at best” because doing so could significantly impact students and school operations and could damage the board’s reputation. For example, CPS would have to institute 10 to 11 districtwide furlough days to cover the $175 million pension payment, Bowsher wrote, based on the firm’s conversations with the board.
He wrote that staff layoffs could also impact ongoing labor negotiations. Contract talks with the Chicago Teachers Union have reached their most tense point as the deal boils down to a handful of key issues, including preparation time for teachers.
In a letter to Martinez Monday night, CTU President Stacy Davis Gates pushed CPS to reach a tentative deal on a contract before the board’s Thursday meeting “instead of choosing a path to protracted confrontation.”
The union gave the school board its “last, best, and final offer” on March 4. The two sides continue to meet and say publicly that a deal is near. The union wants an agreement before the budget amendment is voted on Thursday. Historically, the school board waits until the contract is settled before doing a budget amendment.
CTU invited members to a webinar Wednesday night to discuss next steps. The union has been petitioning at schools in recent weeks and the next step would be a strike vote. Once a vote is taken, the union must give 10 days notice of its intent to strike. A strike would also have immediate consequences for students, staff, and families.
Refinancing is an option, but with unclear consequences
As City Hall recently suggested, Bowsher said another option in front of CPS is to refinance its debt, which would require “a more in-depth analysis” that is outside Baker Tilly’s scope.
The different types of borrowing all come with some uncertainties, such as the state of the financial market, interest rates, and if these options can come to fruition in time for this fiscal year, Bowsher wrote. It’s also unclear if CPS can legally use those options with its current financial situation.
“Bond issuances can generate immediate cash flow or savings; however, this may result in additional interest costs and also increased future debt service payments, and thus potential future budget shortfalls,” he wrote.
Justin Marlowe, a municipal finance expert at the University of Chicago, echoed the report’s words of caution: All of the debt refinancing options in the memo carry risk and possible higher interest costs for the district in the long-term, in return for what’s likely a modest amount of dollars freed up in the short term. That’s especially the case after the past few weeks of market volatility caused by uncertainty over the Trump administration’s tariff policy — and particularly for a junk borrower such as CPS.
“All of these options have been explored, and none of them are desirable,” Marlowe said. “I get that it’s a tradeoff they might have to make, but it’s very bad financial management, and it saddles taxpayers with higher long-term costs.”
Joe Ferguson, president of the nonpartisan watchdog The Civic Federation, said board members should vote only after they publicize any legal opinions from their attorneys about the options presented by the city, including borrowing and refinancing their debt.
New school board remains divided on solving money troubles
Elected school board member Che “Rhymefest” Smith, who represents south side neighborhoods along the lakefront, told Chalkbeat Tuesday that he hadn’t carefully reviewed the Baker Tilly memo yet, but the takeaway is clear: There are no good ways for CPS to secure additional dollars this spring.
“At the end of the day, we’ve got to stop wasting taxpayer money to get information that we already know,” he said.
He said the board should have instead listened to district officials and experts, such as those at the Civic Federation, when they cautioned against CPS taking on more debt. He says he remains unwilling to vote for an amendment that commits CPS to reimbursing the pension payment — “not if it puts our children and our schools and administrators at risk, and not if it means going deeper into debt.”
Board member Jennifer Custer, who represents the northwest pocket of the city, said the report outlined options that have already been shared with the board. Custer, who has expressed concerns about having to cover the pension obligation this year, said she will also vote no on the budget amendment as it’s written.
For Custer, the report confirmed that each option “would have future repercussions.”
“I just don’t think that’s the best practice for the district or any municipal body when thinking about how they want to manage their finances,” Custer said.
Asked if the district and the board can find solutions in time to potentially pay the pension payment and settle the union contract, board President Harden said he and staff are working “every day without any real pause.”
“We are aware of the board meeting being Thursday, so we’re working with those fixed times in mind,” Harden said. “But no one is panicking.”
Reema Amin is a reporter covering Chicago Public Schools. Contact Reema at ramin@chalkbeat.org.
Mila Koumpilova is Chalkbeat Chicago’s senior reporter covering Chicago Public Schools. Contact Mila at mkoumpilova@chalkbeat.org.
