Despite what it may look like on paper, CPS does not have a “rainy day” fund of reserves to draw on and must look for other ways to pay for any increased expenses associated with a new CTU contract.
As contract negotiations continue between Chicago Public Schools and the Chicago Teachers Union, one question persists: how will CPS pay for the contract demands, including increases in salary? In this follow-up to the Financial Landscape Analysis report released earlier this month, the Civic Federation provides clarification to a common misconception that the District’s general fund balance is available to pay for new and increased costs. This in-depth explanation of CPS’ reported fund balance reveals why these funds are not readily available. The report is available here: https://civicfed.org/blog/chicago-public-schools-reserves-and-cash-flow-issues-explained.
CPS’ general operating fund balance reported at the end of each fiscal year—commonly referred to as reserves—does not reflect the amount of cash the District has on hand. The CPS stated general fund balance was $1.3 billion as of June 30, 2024. That has understandably, but incorrectly, been construed to mean CPS has cash on hand in that amount. It does not. In fact, CPS only had $66 million in cash on hand on that date, which is barely enough to cover three days of operating expenses. This discrepancy is due to an accounting practice that allows the District to record anticipated property tax revenue in its year-end statements. When the District does actually receive property tax revenue, it is immediately used to pay back short-term borrowing the District utilizes to support regular, budgeted operating expenses, such as payroll.
In short, CPS has no pool of money to fall back on in an emergency, let alone to fund an increase in labor costs arising from a new collective bargaining agreement.
“The bottom line is that reserves are off the table as a solution for covering any new CTU contract costs simply because those reserves do not exist,” said Joe Ferguson, President of the Civic Federation. “CPS will need to look elsewhere to pay for the anticipated four-year teacher contract, whether through cutting expenses, identifying new revenue, or a combination of both.