July 19, 2012
The Civic Federation opposes the Chicago Public Schools (CPS) proposed $5.2 billion FY2013 operating budget which drains all General Fund reserves to help close a $665 million budget deficit and leaves the District with no identifiable plan to address a devastating financial reality. The Federation urges the Board of Education to reject the proposed budget in favor of a financially responsible plan that takes into account current and future liabilities.
Draining all the General Fund reserves is particularly alarming because of the $338.2 million pension contribution increase the District will see in FY2014 when the three-year partial pension contribution holiday expires. It is readily apparent the District may no longer be able to afford its existing pension system and the Civic Federation strongly urges CPS to develop pension reform that ensures a greater balance of employee, retiree and taxpayer interests.
The analysis found that CPS’ long-term debt increased by 28.3 percent or $1.1 billion between FY2007 and FY2012. The District is already projecting a $1.0 billion deficit for FY2014 due to its ongoing structural deficit and increased pension contributions. Moody’s Investors Service downgraded the District’s credit rating on July 10—likely to be just the first of many negative consequences CPS will experience if it fails to immediately address the key drivers of its financial crisis with significant structural changes.
The Federation offers support for several elements of the proposed budget and recommends that these elements be incorporated by the Board of Education as part of a more realistic financial plan. These include the implementation of $144.3 million in expenditure reductions, the production of a prioritized, publicly-available capital improvement plan and a painful but necessary increase in the District’s property tax levy by the maximum amount allowed by the tax cap law, generating $62.0 million in much-needed additional revenue.