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Civic Federation analysis: CPS finances are a mess

BarbarByrd-Bennett speaks newly renovated Jones College Prep High School Tuesday.  |  Alex Wroblewski/Sun-Times

Barbara Byrd-Bennett speaks at the newly renovated Jones College Prep High School on Tuesday. | Alex Wroblewski/Sun-Times

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Updated: September 23, 2013 2:23PM

Once again Chicago Public Schools has failed to plan long-term for its finances, used up its onetime reserves, and needs to become more proactive in asking state legislators for specific pension fixes — or else it’ll find itself in the same boat next year, the Civic Federation said in an analysis released Thursday rejecting CPS’ current proposed budget.

Because despite “painful reductions including layoffs and school consolidations, the state’s inaction on pension reform has plunged the district into an even deeper financial crisis,” reads the 83-page analysis written by the non-partisan watchdog group.

“That’s the thing that gives you some sympathy for what they’re up against,” Civic Federation president Laurence Msall said of pensions.

“They need the legislature to act. We also point out that they have not led on pension reform. The Chicago Public School district has not articulated on what they want on pension reform or what would be reasonable,” he said.

Msall, who last year warned of escalating pension problems and worries how the district next year will close a similar projected deficit, said he’s calling on the district not just to wait for legislators to act but “to come up with their own plan.”

CPS’ $6.6 billion budget for the current fiscal year that started July 1 slashed total classroom spending by $68 million, cut another $112 million in spending, raised property taxes to the maximum allowed, and, for the second year in a row, tapped into another $700 million in one-time reserves to close a $977 million deficit, mostly from the pension obligations.

It also draws, the Civic Federation points out, on some restricted reserve funds “which are traditionally considered off-limits.”

That’s in addition to CPS closing 48 schools and laying off some 3,000 employees. The Board of Education is set to vote on the budget on Wednesday.

CPS faces an additional $404 million in pension obligations this year due to the end of a three-year partial pension deferment holiday, and has been in negotiations with the Chicago Teachers Union for the last year. The talks haven’t yet resulted in concrete action. Nor has Mayor Rahm Emanuel, who went to Springfield last year to lobby for pension reform, been able to get a deal passed.

The Civic Federation wants the district to get specific: “The Board of Education and CPS leadership should seek to reduce benefits for current employees and retirees. They should obtain actual projections and legal opinions on the size and type of benefit reductions (e.g. raising the retirement age, reducing automatic annuity increase or and/or reducing final average salary,” according to the report.

CPS spokeswoman Becky Carroll declined to specify on the record what kinds of reform the district wanted or efforts CEO Barbara Byrd-Bennett or other top administrators had made. Instead, she said in a statement that the financial crisis “forced us to make difficult decisions such as scraping the bottom of our reserve funds in order to keep cuts as far away from our classrooms as possible.

“We will continue to rigorously push for pension reform as we did last session and hope that union leadership will come to the table willing to support the kinds of reforms necessary to provide significant financial relief for our schools while keeping the pension system viable and sustainable for current and future retirees,” she wrote.

The teachers union said it will continue to negotiate with CPS for a “reasonable solution,” calling the pension crisis a “revenue issue.”

“While the Civic Federation wants to rest this issue on the shoulders of elderly teachers who collect a modest retirement — who don’t collect social security or qualify for Medicare — there are solutions to this issue that both the Civic Federation and the Mayor refuse to acknowledge or recognize such as TIF reform and closing corporate loopholes,” staff coordinator Jackson Potter wrote in an email. “We are actively working towards a solution to stabilize the district’s operating budget and the pension fund. Our concern is making sure a reasonable plan exists so that children will have fully functioning schools next week and the entire school year and for years to come.

The Civic Federation analysis also dinged the district for giving the public an “inadequate” six business days between the release of “a complex budget document” and the first public hearings, asking for a minimum of 10 working days.

“As an educational institution CPS’ failure to all for sufficient time for public input on the proposed budget is a missed opportunity to help educate, inform and build support for their proposed $6.6 billion expenditure of tax dollars,” the report read.


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