America's third-biggest school system is in financial trouble

AP/Charles Rex ArbogastChicago Mayor Rahm Emanuel

Chicago Mayor Rahm Emanuel came to an 11th-hour decision last week on how to tackle the city’s looming pension payment, and his decision could arguably hurt an already beleaguered school system.

Emanuel paid the $US634 million necessary to make a one-time payment, but announced that it would come at a steep cost, with the elimination of 1,400 jobs at Chicago Public Schools and $US200 million in budgetary cuts.

The payment, and subsequent ramifications, will have a direct impact on a number of stakeholders within the state of Illinois — notably schoolchildren and teachers.

The school system had already been struggling with mounting financial difficulties and was downgraded by Moody’s and Fitch back in May.

Some of the downstream impacts are still hypothetical at this point, as solutions for tackling the $US200 million in cuts are still being discussed.


So far, the story from the Emanuel administration is that students will not suffer many negative impacts related to the pension payment. School will be in session in the fall and class sizes will not increase.

However, elementary school sports teams will have their funding cut. And, while the school day will not be shortened, high schools will open and close 45 minutes later in an effort to cut transportation costs, The Chicago Tribune reported.


Chicago teachers union strike protestScott Olson/Getty ImagesChicago Teachers Union went on strike in 2012

Teachers, perhaps, are the group that stands to lose the most from budgetary talks. Emanuel and Acting Superintendent Jesse Ruiz have said that of the 1,400 jobs being eliminated, there will be minimal impact on teaching positions. Still, there will be cuts to new teacher development programs and money for turnaround schools.

Of bigger concern to the Chicago Teachers Union, are proposals for teachers to assume more responsibility in paying for their pension. Emanuel’s plan includes requiring teachers to pay an additional 7% of their salary into the pension fund.

“What cuts have been specified would do real damage to our schools,” Chicago Teachers Union Vice President Jesse Sharkey said on Wednesday, according to the Tribune.

Taxpayers will also be affected

Emanuel also proposes increasing property taxes in Chicago to generate an additional $US175 million to $US200 million for the pension fund. Emanuel has said the tax increase would be contingent upon teachers and the state also contributing to the fund, so the final deal is a compromise of all involved parties.

To gte a sense of what a $US200 million property-tax increase would feel like for taxpayers, the average owner of a $US200,000 home would pay about an additional $US146 a year, according to Crain’s Chicago Business.

Looking forward

While Chicago Public Schools looks to finalise this year’s budget, larger questions about the financial status of the school district remain. In a meeting last Wednesday CPS chief administrator Tim Cawley signalled the need for help from the state of Illinois or from the teacher’s pension fund before next year.

He asked to defer $US500 million of next year’s $US700 million pension payment for another year.

“That $US500 million would mean layoffs of over 3,000 teachers, class sizes of 35 or more, furlough days, problems throughout the district, really devastating cuts to our schools,” Cawley said.

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