No Stranger to Crisis, CPS Stares Down Another Budget Gap

File: State Board of Education seal
File: State Board of Education seal WBEZ
File: State Board of Education seal
File: State Board of Education seal WBEZ

No Stranger to Crisis, CPS Stares Down Another Budget Gap

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Gov. Bruce Rauner on Thursday vetoed a bill that would have set aside $215 million for the Chicago Public Schools, creating a budget hole that the school system must fill unless state lawmakers overturn Rauner’s veto

Here’s a quick explainer on how CPS’ latest fiscal problem could play out. 

What could the governor’s veto could mean for parents, students and school staff?

CPS officials are not currently planning any mid-year layoffs or new budget cuts, nor are they saying when or whether such cuts are on the horizon. 

CPS CEO Forrest Claypool appears to be holding out hope that the state will deliver the money. The Illinois Senate on Thursday voted to override the veto, but it is unclear whether the Illinois House has the votes to do the same. 

Despite the uncertainty, CPS has time. The $215 million was earmarked to pay part of the district’s contribution to the teachers pension fund. That payment is due on June 30.

CPS spokesman Michael Passman said the Chicago Board of Education plans to vote Wednesday on an amended $5.5 billion operating budget. The vote is required to account for the increased costs of a new teacher’s contract. Mayor Rahm Emanuel is freeing up money from special taxing district’s called TIFs to pay those costs. In addition, the board will vote on a supplemental capital budget. 

While there is some wiggle room, the loss of this $215 million could hurt classrooms more than cuts in the past. Over the past few years the district has provided schools less money but instructed principals to keep cuts away from the classrooms. Principals have, to some degree, found ways to limit staff layoffs but it is increasingly difficult to see how schools can keep cuts from classrooms.

What could the governor’s veto mean for taxpayers and Chicago Public Schools in the long term?

CPS officials wanted the $215 million to help them balance the district’s budget this year and because it would mark a significant increase in the amount the state contributes toward Chicago teacher pension costs. 

The state pays the employee contribution of the pension payment for all other teachers in Illinois, and Claypool insists the only way to be fair is for the state to do the same in Chicago. Without the state contribution, CPS will likely continue to have deficits as it spends an increasing amount of its revenues on pension and debt payments.

Investors also are increasingly wary of lending money to the district, said Bobby Otter, budget director for the Center for Tax and Budget Accountability. Moody’s Investors Service on Friday said in a statement that, if the veto holds, CPS’ deficit net cash position could be more than $1 billion by June. Just last month, Moody’s dropped the district’s credit rating deeper into junk status, which prompted the district to put off some bond sales. 

Limiting the district’s ability to borrow could be devastating. Since 2013, the district has been using lines of credit to cover payroll. The district also borrows to repair and build schools and to pay debt. 

“At what point does no one want to touch the district’s debt,” Otter asked. “Eventually the music stops and once that happens they will be in a load of trouble.The prospect of the third largest school district not being able to stay afloat is scary.”

Sarah Karp covers education for WBEZ. You can follow her at @WBEZeducation.