CHICAGO (Reuters) - Chicago’s public school system on Monday proposed a “balanced” $5.75 billion operating budget for fiscal 2017 that relies on rosy assumptions of union give-backs and added funding support from Illinois’ gridlocked state government.
Administrators in the nation’s fifth-largest school system insisted the plan does not rely on “gimmicks or operational borrowing” and would reduce overall operating expenditures by $232 million over fiscal 2016.
In addition, the cash-strapped district’s coffers would swell with a $250 million property tax increase sanctioned by the state to help foot the cost of rising teacher pensions.
“With this budget, we’ll move the district on to stronger footing and stand ready to partner with leaders in Springfield to advance long-term education funding reform and pension equity,” Chicago Public Schools CEO Forrest Claypool said in a statement.
The school district is banking on teachers agreeing to relinquish 7 percent of their earnings over two years to devote to pensions.
Claypool said the fact that Illinois and city taxpayers stepped up with additional money shows “good faith” that the union should replicate by having its members pay more toward their pensions.
Chicago Teachers Union President Karen Lewis tweeted that her members will strike over the elimination of the so-called pension pickup.
As part of a six-month Illinois budget deal finalized in June, Republican Governor Bruce Rauner and the Democratic-led legislature agreed to steer $215 million on a one-time basis to CPS for its pension costs on the condition that lawmakers finalize a statewide pension-reform package by January.
To date, there has been no tangible movement on a deal to improve the financial standing of Illinois’ pensions, which have a $111 billion unfunded liability and are the lowest-funded pension systems among states.
Claypool said CPS will continue to tap bank lines of credit for cash flow purposes, but declined to comment on the size of the credit line currently under negotiation. The district in June had to fully tap an $870 million credit line for its fiscal 2016 pension payment.
Claypool also said the “junk”-rated district plans more borrowing to finance capital improvements. Late last month, the district announced it sold $150 million of 30-year bonds to J.P. Morgan at a hefty 7.25 percent yield to finance capital projects.
The Chicago Board of Education, whose members, like Claypool, were appointed by Chicago Mayor Rahm Emanuel, is expected to vote on the budget later this month.
Reporting by Dave McKinney and Karen Pierog; Editing by Dan Grebler