Chicago Public Schools is in the final year of a three-year pension “holiday.” This “holiday” allowed CPS to reduce its pension contributions to the Chicago teachers’ pension fund by $1.2 Billion from 2011 to 2013. This pension “holiday” was enacted in 2010 when it was included in as part of SB1946, the pension reform legislation that created the new-hire (2Tier) pension system. Senate Republicans tried to get the Chicago pension “holiday” taken out of the legislation, but it was left in at the insistence of the ruling party. The fear many of us had at that time was that the CPS would take the one-time savings (from not making pension payments) and use it for baseline spending; thus creating a financial cliff in FY14 which, in fact, has now happened.
Under this pension “holiday,” this budget year (FY13), CPS is paying the teachers’ pension fund $196 Million. However, in FY14 the projected pension payment increases to $534 Million; a $338 Million dollar increase over this year’s payment.
CPS is saying in the media that it is not sure how it will fund the $75 Million per year increase in cost for its new teacher contract ($300 Million total increase over four years). However, the problem facing CPS is much greater than that. The CPS has already drained its reserves and is facing a projected budget shortfall of $1 Billion in FY14 (including the pension payment). A $1 Billion shortfall, when you have a current budget of $5.1 Billion, is a 20% problem even before you talk about addressing how to fund the negotiated pay increases.
With the school district’s property taxes being tax capped, it leaves the burning question that should be on every taxpayer’s mind, “Where is CPS going to turn to get help in funding this massive $1 Billion-plus annual budget shortfall?”