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Editorial: CPS must get serious about budget cuts

Chicago Public Schools teachers march first day strike last month.  |  Rich Hein~Sun-Times

Chicago Public Schools teachers march on the first day of the strike last month. | Rich Hein~Sun-Times

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Updated: November 9, 2012 6:07AM



Tomorrow has arrived for the Chicago Public Schools.

For more than a year, the new schools leadership has put off a set of excruciating decisions about its precarious financial future.

Inking a deal with the teachers took precedence. As we now know, getting that resolved took every last bit of energy and focus.

But time is now up. The era of one-time tricks, limping along and wishful thinking must end.

Next year’s estimated deficit is $1 billion, swamping this year’s $665 million hole. Fiscal year 2014 will bring an estimated $1.3 billion deficit. This is against an operating budget of only $5.2 billion.

A series of sober rating agencies are on the warpath. Since last summer, when CPS balanced this year’s budget by draining its reserves, three separate agencies have downgraded its credit rating. Since last October, Moody’s Investors Service has downgraded CPS on three occasions.

The agencies cited the draining of reserves, increasing pension costs, the district’s above-average debt burden, and, in two downgrades in the last two weeks, the expense of the new teachers contract.

On Friday, CPS revealed how it will cover $103 million in new costs this year tied to the contract — and it doesn’t signal a new day. No cuts are supposed to touch the classroom, a positive, but CPS will pull this off by continuing its practice of pushing off debts into the future. CPS will get the bulk of the savings, $55 million, by extending certain debt payments over a longer period of time and borrowing to make other debt payments. Not only does this delay the inevitable, but it almost certainly increases CPS’ total debt, even if it’s refinanced at a lower rate.

CPS also will keep trimming administrative costs to find $103 million in savings. The deeper and longer they dig, they say, the more they find.

That cost-cutting work must be CPS’ singular focus going forward.

In the last few years, the board has managed to pull several rabbits out of a hat, most notably by deferring hundreds of millions in pension payments and scoring extra cash from the federal government.

There are no rabbits left. Schools officials are expected to lay out a long-term financial plan in the near future. It must be both brutally honest and, while covering all aspects of the budget, home in on two top priorities:

† Cutting pension costs: For years, CPS diverted money from the teachers pension fund to pay operating costs. When that pension bill finally came due, CPS had no way to pay for it. In 2010, as the economic downturn droned on, CPS won a three-year pension holiday from the state. That ends next year, resulting in a $338 million spike in pension costs.

CPS cannot, and never could, afford the pensions it has promised. The city has the same problem, and Mayor Rahm Emanuel is aggressively seeking a solution. Last May, he pitched an unpopular but desperately needed plan for cutting pension costs to the state Legislature, which by law sets pension terms. As the Civic Federation recommends, the board of education should do the same, laying out possible changes for current employees and retirees — including a higher retirement age, greater contributions and a lower cost-of-living adjustment in retirement.

† Closing schools: CPS says 50 percent of its schools are underused.

As we’ve said repeatedly, CPS, in concert with Chicago’s neighborhoods, must craft a long-term plan to reduce costs by consolidating and closing schools. Rich public disclosure of details is a must — how much might be saved, how the schools will be chosen — before any decisions are made.



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