Chicago Mayor Rahm Emanuel is proposing “a grand bargain” to fix the financial woes of Chicago Public Schools.
The proposal cuts $200 million from schools, raises property taxes, asks teachers to pay more into their pensions, and pushes Springfield to increase overall school funding.
“Everybody would have to give up something, and nobody would have to give up everything,” Emanuel said.
The mayor’s proposal came as state lawmakers were entertaining a bill from Illinois Senate President John Cullerton that would freeze property taxes and eliminate grants currently promised to CPS in exchange for picking up about $200 million of the cash-strapped school district’s “normal” pension costs over the next two years.
The Chicago Teachers Union doesn’t support Emanuel’s plan and also scoffed at his longstanding push to consolidate the Chicago Teachers Pension Fund with the Teachers Retirement System, which includes all suburban and downstate teachers, and is equally underfunded. Currently, Chicago taxpayers pay into both CTPF and TRS, something Emanuel calls “inequitable.”
Cuts will hit classrooms, special education and start times
Emanuel and CPS officials said schools will start on time this fall, but not without deep cuts.
District officials are still in the process of developing the budget for next school year, but CPS Interim CEO Jesse Ruiz outlined the following cuts they’ve already determined they’ll make:
- Eliminate 5,300 coaching stipends for elementary school sports. ($3.2 million);
- Change magnet school transportation by having students report to local attendance area school to be picked up. ($2.3 million);
- Shift start times for some high schools back 45 minutes. ($9.2 million);
- Eliminate 200 vacant special education positions. ($14 million);
- Cut startup funding for charters and alternative schools. ($15.8 million);
- Reduce professional development in turnaround schools run by AUSL ($11.6 million).
“In my view, they’re intolerable, they’re unacceptable and they’re totally unconscionable,” Emanuel said of the cuts. “They’re a result of a political system that sprung a leak and now it’s a geyser.”
The cuts do not solve the district’s pension problems. Late Tuesday, just before the deadline, the school district paid its full pension payment, a hefty sum of $634 million, for 2015. But that payment was only to close out last year’s budget. The Emanuel administration has already asked the Chicago Teachers Pension Fund to push $500 million of the required 2016 payment to 2017.
Where will the revenue come from?
Chicago Public Schools officials and Emanuel find themselves in the middle of a delicate dance with Springfield: They take every opportunity to blame Springfield for the financial mess the district is in, but at the same time look for lawmakers to bail them out.
If Springfield doesn’t go along with Emanuel’s idea to merge all teacher pensions into a single fund, he wants them to contribute the “normal” pension cost, which amounts to about $200 million annually.
This portion of his plan coincides with a bill that’s currently floating around Springfield. Senate President John Cullerton sponsored an amendment that would kick in that annual “normal cost,” and also freezes property taxes for two years. Cullerton says it’s his attempt to compromise with Republican Gov. Bruce Rauner, who’s advocated freezing property taxes. The bill would also require the state to create a task force to overhaul Illinois’ school funding formula.
Cullerton’s bill made it through its first legislative hurdle with only Democratic support, but Cullerton said he’d continue working with Republicans to get bipartisan support.
And then there’s that thing Chicagoans have been waiting to hear details about: A property tax hike. Emanuel said without Springfield’s help on teacher pension funding, he will restore the CPS pension levy to the pre-1995 tax rate of .26 percent. Emanuel estimates that would bring in around $175 million.
“I don’t easily go to taxpayers, but part of a solution is you’re willing to give up things you don’t support, in an effort to get other things you think are essential to a solution,” Emanuel said.
Emanuel said he will also ask teachers to contribute the full 9 percent to cover their own pension costs. He said he will also put the city’s block grants on the table, in exchange for the state to increase education funding by up to 25 percent.
How we got here
These pension problems stem from 15 years of neglect and mismanagement at CPS and the city.
From 1995 to 2004, CPS did not make a single payment to the Chicago Teachers Pension Fund, and instead used revenues to pay for operations. From 2011 to 2013, the school district got a “pension holiday” that temporarily shrunk payments, but didn’t make a dent in the unfunded liabilities.
Ralph Martire, executive director of the Center for Tax and Budget Accountability, said the district should be “front and center taking blame” for “using the pension system very much like a credit card, running up debt and deferring payment of it until now.”
“The City of Chicago has known that more money was going to have to go into the pension systems in 2015,” he said. “They had four and a half years to plan for it and they did nothing.”
Emanuel disputes that he’s been putting the pension problem off, telling reporters Wednesday that over the past few years, “we negotiated with the laborers and municipal fund, we negotiated with police and fire and we negotiated with park district employees and reached pension agreements and passed a number of them...so I would slightly beg to differ the characterization that we were passive.”
Martire didn’t place all of the blame at the mayor’s feet. He said state lawmakers are equally at fault for not contributing to Chicago teachers’ pensions, like they once promised and by generally underfunding public schools.
“When you have such significant underfunding from the state, the mayoral administrations and the administrations of the CPS are going to look to beg, borrow and steal,” he said. “And just simply write an IOU into the system saying, ‘We’ll pay you back someday at compounded interest.’ And someday has arrived.”
WBEZ’s Tony Arnold contributed to this story from Springfield.
A timeline of CPS pension problems
1981 – Chicago Board of Education starts picking up 7 percent of the 9 percent employee pension contribution, in exchange for no salary raises.
1995 – Illinois General Assembly gives control of the city’s public schools to Chicago’s mayor and agrees to let CPS manage the Chicago Teachers Pension Fund. The dedicated pension levy is eliminated and for 10 years, CPS doesn’t pay anything into the Fund, instead using revenue that should have been earmarked for pensions on other things, like operations, new school expansion and staff raises.
2005 – Chicago Teachers Pension Fund “funded ratio” drops to 79 percent.
2006 – Board starts making payments into CTPF again.
2008 – Stock market crashes, dropping the Fund’s “funded ratio” even further.
2010 – CPS CEO Ron Huberman gets a pension holiday from Springfield. From 2011-2013, CPS is only required to pay $200 million year – instead of $600 million – pushing ballooning payments to 2014.
2012 – The “funded ratio” drops to 53.9 percent.
2014 - $612.7 million payment
2015 - $634 million payment