August 25, 2017
Analysis details concerns, recommendations and alternative paths forward
(CHICAGO) In a report released today, the Civic Federation announced it opposes the Chicago Public Schools proposed FY2018 operating budget of $5.7 billion and total budget of $6.5 billion because it does not do enough to divert CPS from its dismal fiscal trajectory. Amid budget, liquidity, debt and pension funding crises, the FY2018 budget relies on nearly $570 million in still uncertain funding and on costly short- and long-term borrowing for operations. Further, the District does not detail adequate back-up or long-term plans. The full 104-page report is available at www.civicfed.org.
“Chicago Public Schools’ practice of budgeting for hundreds of millions of dollars in dubious resources has twice proven devastatingly unsuccessful,” said Civic Federation President Laurence Msall. “Relying this year on $269 million in mystery funding from the City of Chicago, coupled with a growing debt burden, does nothing to move the District forward financially or in a transparent manner.”
The Civic Federation joins all Illinoisans in the hope that a recently announced agreement in principle on school funding reform will finally put to rest the last, lingering piece of Illinois’ two-year budget stalemate. However, details of the agreement have not been publicly released, and the state’s impasse has demonstrated that even agreed-to deals can fail to materialize.
Among the Federation’s concerns is the volume at which CPS has been issuing long-term debt—nearly $2.1 billion in the last two years, of which $1.9 billion is new debt—and the correspondingly high interest costs due to its below-investment-grade credit rating. CPS’ FY2018 budget also relies on $1.55 billion in short-term borrowing and authorizes additional Grant Anticipation Notes to cover delayed state funding at an extraordinary projected interest cost of $100 million—money that ultimately cannot go to the classroom.
While the Civic Federation recognizes that Chicago’s public education funding is the joint responsibility of the State of Illinois, the City of Chicago and Chicago Public Schools, ultimate responsibility and control lies in the hands of CPS. Said Msall, “Financial uncertainty does not preclude transparency nor adherence to best practices.”
Despite major concerns, the Federation supports the District’s elimination of the teacher pension pick-up for new hires, ongoing pursuit of savings through management efficiencies and CPS’ continued advocacy for a more equitable school aid formula.
The Federation’s full analysis urges CPS to release details for parents, students and employees about what actions will need to be taken if relied-upon City or State funding does not materialize. The Federation also recommends that the Chicago Teachers’ Pension Fund merge with the downstate and suburban Teachers Retirement System, that CPS implement long-term financial planning and that the District provide a five-year Capital Improvement Plan, among other initiatives.
In the event that CPS finances continue to deteriorate, the Civic Federation highlights two possible paths forward: reinstatement of the School Finance Authority or Chicago Public Schools becoming a department of the City of Chicago.