Chicago Public Schools Teeter on Fiscal Precipice

The Chicago Public Schools instituted a sudden, early February, unpaid four-day teacher furlough to save $35 million, along with a $46 million spending freeze on school discretionary funds that pay for textbook purchases, after-school programs, field trips, and hourly aides. But, at the end of last week after massive protests, the school district restored $15 million, when it became apparent that the city’s poorest schools had experienced the deepest cuts.

Lauren Fitzpatrick of the Sun-Times reports: “Money was given back to 434 schools that qualify for federal Title I money for low income children….”  “The Sun-Times found that schools where three of four children are low-income generally had their discretionary funds cut at twice the rate as schools where one in four children were low-income. The newspaper also found that majority Hispanic schools saw freezes that were twice as large as majority white schools.”

Juan Perez of the Chicago Tribune explains why schools serving the poorest Hispanic and African American students were unfairly penalized by the budget freeze: “CPS originally determined the amount of money schools had to cut in the spending freeze by looking at the money each building held in three accounts: funds received from the district on a per-pupil basis; supplemental state aid meant to help educate low-income students; and federal grant funds. These state and federal dollars aren’t meant to be used on general operating costs, but are intended to keep class sizes low and support learning programs in schools that have a higher number of low-income and minority students…  If poorer schools or buildings with large numbers of English-language learners had not yet spent their state and federal aid, those schools had more money to cut and were then in many cases hit hardest by the spending freeze.”

The problem is that nobody knows where the money to cover the restoration of the funds is going to come from. Restoring $15 million to the poorest schools will add to the district’s projected budget gap, bringing the total shortfall to $129 million. The school district will struggle to borrow because its credit rating has fallen to junk status. For all these reasons, earlier this month the Chicago Public Schools sued the state of Illinois, “accusing the state of employing ‘separate and unequal systems of funding for public education in Illinois.’ Chicago Public Schools officials describe the legal move as the ‘last stand’ for a cash strapped district that’s ‘on the brink.’”

Yesterday afternoon, Forrest Claypool, the school district’s Chief Executive Officer, announced that unless the state of Illinois supports the district with additional funding, the school year for students will end on June 1st— nearly three weeks early. DNA Info quotes Claypool:  “This is the worst-case scenario… We have very few good options left.”

A big part of the problem is Illinois’ school funding, and a years’ long pension crisis. Perez notes that this year’s CPS budget was based on a promised $215 million from the state for teacher pensions. However, Governor Bruce Rauner vetoed the pension deal.  And  negotiations continue in Springfield to  get a state budget passed and to fix the state’s school funding.  John O’Connor of the Associated Press reminds us that, “Illinois has been without a budget since July 2015, two months after Rauner took office, the nation’s longest state budget stalemate in nearly a century.”  O’Connor adds: “Even without an annual spending plan, state government continues to operate largely because of court orders and intermittent appropriations by lawmakers.  But the picture is bleak.  Without action, Illinois will have a $5.3 billion deficit when the current fiscal year ends June 30. There is a backlog of $11 billion in overdue bills. State pension programs are $130 billion short of what they need to pay promised benefits to retired and current employees.”

In a new report for the Education Law Center and Rutgers Graduate School of Education, America’s Most Fiscally Disadvantaged School Districts, school funding expert Bruce Baker highlights the funding crisis for Chicago’s schools: “This report identifies the most fiscally disadvantaged school districts in the country—those with higher than average student needs in their labor-market location and lower than average resources when state and local revenues are combined… The city of Chicago is, year after year, one of the most fiscally disadvantaged large urban districts in the nation.  Illinois has a highly regressive school funding system.”

Pending Teachers’ Strike in Chicago Reflects Long and Convoluted Funding Crisis

The Chicago Teachers Union has voted to strike next Tuesday, October 11. The union has not had a contract for over a year, and in threatening to strike, teachers are not only expressing dissatisfaction with the contract offered by Chicago Public Schools but also with years of state funding cuts and financial mismanagement that culminated over the summer in worries that the school district faced bankruptcy. Over 90 percent of teachers participated in the vote that authorized the strike, and of those, 95.6 percent voted to strike.

Here are some of the issues teachers are protesting in the contract itself.  First, during negotiations in years past, teachers agreed to give up salary increases when the District agreed to pay a higher percentage of their pension contributions. But in this contract, reports Sarah Karp for WBEZ News, the salary increases proposed by the district are contingent on teachers giving up what they negotiated in previous years and “paying 7 percent more of the employee contribution into the pension fund.”  Karp explains further: “That… offer would give teachers an 8.73 percent raise over four years, but teachers would pay 7 percent more into their pension fund and between 1.5 percent and 3 percent more for health insurance. Teachers would also get salary increases based on experience and education, called steps and lanes.  Considering the increase into the pension fund and payments to health insurance, steps and lanes would be the mechanism by which most teachers would see an increase in compensation.”  “One of the biggest sticking points for the union is that the offer Chicago Public Schools has made could result in some teachers getting less pay at the end of the contract compared to the beginning.”

But salary and benefits are only part of what teachers are protesting in Chicago. The Sun Times quotes a union spokesperson who explains that the vote “should come as no surprise to the Board, the mayor or parents because educators have been angry about the school-based cuts that have hurt special education students, reduced librarians, counselors, social workers and teachers’ aides, and eliminated thousands of teaching positions.” Significant staff cuts were made over the summer, and then just this week—mid-school-year in early October—the school district laid off another 249 staffers, based on the annual count of students in each building that takes place several weeks after the beginning of school each autumn. While district administrators say teachers can be rearranged across buildings to maintain reasonable class sizes and staffing arrangements, the union charges: “Today’s cuts are the latest round of attacks on children… School budgets are down more than 6 percent this year—a loss of $184 million—on top of years of sacrifice by our students, educators and schools….”

What gets lost in the recent coverage of the pending teachers’ strike is the long-running financial crisis of the Chicago Public Schools. The state went without a budget all of last year, due to Illinois Governor Bruce Rauner’s inflexible commitment to austerity. And there is more:

  • Illinois ranks third from the bottom of the 50 states in the category of school funding fairness in the most recent annual rating of states’ school funding formulas by the Education Law Center. “School Funding Fairness” is defined by the Education Law Center: “This measures the distribution of funding across local districts within a state, relative to student poverty.  The measure shows whether a state provides more or less funding to schools based on their poverty concentration….”  Chicago has a high percentage of students living in deep and concentrated poverty, but the state funding formula does not sufficiently enable the district to support these students.
  • The school district has depended on borrowing for years, most notoriously from its teachers’ pension fund. The teachers’ pension fund has been in crisis, and it is clear that the pension crisis is not the fault of the teachers, who have paid their individual contributions. A year ago, Maureen Kelleher, writing for Catalyst Chicago, explained that it stems from 1995, when the state created mayoral control that included sweeping financial changes: “The biggest revenue shift came from combining several property tax levies—including one earmarked to pay for teacher pensions—into one fund that could be used to pay current operating expenses. That year, $62.2 million was diverted from pension payments to operating expenses.”  And the school district has persistently failed to pay its full contribution to the fund and diverted pension funds for school operating expenses—basically borrowing out of the teachers’ pensions to run the district. In the summer of 2015, Kelleher concluded that unfunded liabilities in the pension fund totaled $10 billion.
  • The school district has encouraged the rapid expansion of charter schools since 2003 when then Superintendent Arne Duncan launched Renaissance 2010 to introduce competition by rapidly expanding charter schools and closing so-called “failing” schools.  Since that time, the opening of new charters has contributed to the public school district’s declining enrollment.
  • Over this past summer Governor Bruce Rauner helped undermine investors’ confidence in the school district when he demanded to take over the district and declare it bankrupt.  Bond ratings declined to junk status, and even though bankruptcy was avoided, the interest the school district must pay on its bonds increased from 6 percent to 7.25 percent.

Sarah Karp reports for WBEZ that the district’s overall financial crisis is a major part of the contract negotiations going on through this last week before the pending strike. One issue seems to be Tax Increment Financing.  Tax Increment Financing deals in many cities allow the increased property tax revenue from a new development to be distributed specifically to fund public infrastructure improvements related to that new development. But apparently in Chicago, Tax Increment Finance funds are “special taxing districts that are used for economic development.”  During current contract negotiations, “The union has argued that some of that money could be used for teacher salaries and also to restore some positions closed due to budget cuts… This year, CPS is slated to get $34 million in TIF money—$50 million less than last year…. The timing of the strike might… be related to the TIF funds.”

While it is difficult to tease out all the threads of crisis braided together in the current contract negotiations, what is clear is that the teachers feel like pawns in a game they cannot possibly win.

Politicians Shift Blame to Chicago Teachers for a School Funding and Pension Crisis

It is really, really hard to parse out the problems in the Chicago Public Schools less than a month from the beginning of the school year. What is clear is that all the years of financial shenanigans in the school district’s management including long-running borrowing from the teachers’ pension fund to pay for the district’s operating expenses, and the budget crisis in Illinois as Governor Bruce Rauner made the state go through last fiscal year without a budget, and the rapid expansion of a charter school sector that has sucked even more students (and state aid) out of neighborhood schools in a school district with an already declining population—all this—is falling on the backs of school teachers. They have been working without a contract for a year and they want a reasonable raise.  And 500 of them just got laid off because school budgets have been cut across the board.

Here is Chicago Sun-Times’ reporter Andy Grimm summarizing the problem: “The financial woes of the Chicago Public schools ha(ve) provided the city’s principals with a deep pool of experienced applicants for teaching jobs.  CPS last week sent layoff notices to 500 teachers as principals across the cash-strapped district cut their budgets for the (2016-2017) school year. Another 500-plus non-teaching staff were also laid off. Social studies teacher Robert DiPrima carried a sheaf of resumes—and a heavy heart—to a CPS job fair…. His talks with principals were encouraging, but DiPrima still was shocked at being cut from the faculty at Jane Addams Elementary after 16 years at the South Side school… District officials have said they expect many of the teachers who lost jobs at one school will find new spots among the 1,000 teacher vacancies expected across the district… The budget crunch in CPS makes DiPrima wonder if, despite his master’s degree and National Board certification, his experience wouldn’t be a liability when budget-conscious principals are weighing him against younger candidates who are lower on the CPS pay scale.”

Part of all this, of course, is a threat to make the Chicago Teachers Union agree to a contract with teachers’ accepting a major sacrifice to keep the district afloat. The union and the district are in the midst of contract negotiations. Juan Perez, writing for the Chicago Tribune, explained the implicit threat last week: “Chicago Public Schools CEO Forrest Claypool on Tuesday warned that cuts to the classroom would be necessary if teachers don’t agree to concessions in a new contract. Claypool ratcheted up pressure on the Chicago Teachers Union a day after the district unveiled a budget that assumes teachers will accept contract terms similar to those that were rejected in February by a union bargaining team. ‘The alternative is cuts to the classroom,’ Claypool said during a meeting with the Tribune Editorial Board. ‘We don’t believe its the right thing to do, and we’re hopeful that upon reflection the teachers union will understand that’s not the right thing to do either.’ Claypool said classroom budgets would be cut if state lawmakers don’t come through with $215 million to prop up the district’s budget. That money hinges on agreement on pension reforms in Springfield.”

The Chicago Teachers Union turned down a contract last winter that would have provided a raise for teachers and at the same time seized back much of that raise to increase the teachers’ contributions to their own pensions. The district is now again presenting to teachers the same terms they have previously rejected. The union has threatened to strike. Added to all this is a real financial crisis, according to Perez: “The district said its proposed operating budget is $232 million smaller than last year’s and covers a $300 million shortfall that still existed after the state passed education funding measures in June.”

The teachers’ pension fund has been in crisis for years, and it is clear that the pension crisis is not the fault of the teachers, who have paid their individual contributions. Last summer, Maureen Kelleher, writing for Catalyst Chicago, explained that it stems from 1995, when the state created mayoral control that included sweeping financial changes: “The biggest revenue shift came from combining several property tax levies—including one earmarked to pay for teacher pensions—into one fund that could be used to pay current operating expenses. That year, $62.2 million was diverted from pension payments to operating expenses.”  And the school district has persistently failed to pay its full contribution to the fund and diverted pension funds for school operating expenses—basically borrowing out of the teachers’ pensions to run the district.  Last summer Kelleher concluded that unfunded liabilities in the pension fund totaled $10 billion.

There is no doubt that the state—which is known for an inequitable school funding formula that fails adequately to fund the school districts serving many children in poverty—is at fault.  There is no doubt that there are massive problems in the pension fund.  There is no doubt that the school district has been further undermined by children carrying funding to charter schools while the traditional public schools are left to provide expensive services for English learners, children experiencing deep poverty, and students with serious disabilities.

Salaries in any school district make up 80 percent or more of the budget.  What is very sad is that politicians in Springfield and the Chicago mayor and his appointed school district manager find it convenient once again to blame teachers, lay off teachers, and threaten not to pay for the teachers’ services to Chicago’s children. Layoffs in August leave almost no time for those who have been riffed to find new jobs. Widespread layoffs undermine relationships and weaken school climate. Even if laid-off staff are picked up by other principals, the churn within the teaching staff will make it difficult for principals to create a collaborative and supportive school culture. All of this destabilizes relationships between teachers and students and families.

The narrative of financial crisis in the Chicago schools has been turned by everyone into an attack on the school teachers who have chosen to support themselves and their families by teaching Chicago’s children.