Education
Johnson Presses CPS Board to Make $175M Pension Payment, Reach Agreement With CTU
Video: The WTTW News Spotlight Politics team on the $175 million pension payment and more of the day’s top stories. (Produced by Emily Soto)
Mayor Brandon Johnson turned up the pressure Tuesday on the Chicago Board of Education to cover a $175 million pension payment by refinancing some of the school district’s existing debt as the turmoil engulfing Chicago Public Schools threatens to boil over.
Johnson used a City Hall news conference to make his case to the new 21-member, partially elected CPS board, which is set to vote Thursday on whether to make that pension payment and how to pay for new contracts with the unions representing teachers and principals.
“We have to place the Board of Education on a path to solvency and independence,” Johnson said.
If the CPS board refuses to reimburse the city for making the required payment into the pension fund that includes 23,166 employees of CPS who are not teachers, the city could be forced to dip into its reserves to ensure that it can close the books on the 2024 fiscal year no later than March 30.
Fourteen of the 21 board members must vote to approve the budget amendment.
A board-commissioned report by Baker Tilly, a financial advisory firm, released Tuesday found that it “could be difficult without significant disruption to students” for CPS to make enough cuts to staunch the tide of red ink.
As many as “10 to 11 district-wide furlough days” would be required to cover the cost of the required pension payment, according to the Baker Tilly report.
“Such an extensive furlough would adversely impact students, and have broader implications with the board’s stakeholders, including the number of student attendance days,” according to the report.
Pressed repeatedly by reporters, Johnson declined to say what he would do if the CPS board refuses to make the pension payment Chicago officials say it is required to make by the state law that ended mayoral control of the school district.
“I’m going to remain optimistic and positive” that the Board of Education will act to secure the retirement of its employees, Johnson said.
Twenty-eight members of the Chicago City Council signed a letter warning the CPS board that if they balk at making the pension payment, city officials would have no choice but to reconsider spending $1.2 billion in city funds annually on CPS programs, including $319 million in school construction and rehabilitation projects.
The budget amendment set to be considered by the CPS board would allow it to spend an additional $139 million sent to CPS from the city’s tax-increment financing districts by Johnson. But that is not enough to make the pension payment or pay for new employee contracts, leaving the district approximately $240 million in the red, according to Chicago’s Chief Financial Officer Jill Jaworski.
The best solution to CPS’ cash crunch is for the district to essentially borrow $240 million by refinancing current debt, Jaworski said. The district already has $9.3 billion in debt, according to district records.
Jaworski outlined three scenarios for reporters that called for CPS to refinance $240 million and pay off that debt over three years, five years or 10 years.
That debt would cost CPS taxpayers $18 million if paid off in 2028, $30.3 million if paid off in 2030, or $64 million if paid off in 2034, assuming an interest rate of approximately 4.85%, according to WTTW News’ calculations.
Jaworski said CPS would be able to absorb those payments because it is set to see its property tax revenues rise significantly as nearly four dozen tax-increment financing districts are set to expire.
The Baker Tilly report does not recommend the board borrow to cover the shortfall, but warns the board to consider the cost of interest payments and debt service.
The budget crisis threatening to overwhelm the third largest school district burst into public view nearly six months ago when Chicago Public Schools CEO Pedro Martinez said he refused Mayor Brandon Johnson’s request to resign.
Johnson has consistently urged CPS to borrow to cover those costs, but Martinez called the proposal backed by the mayor “exorbitant” and fiscally irresponsible.
The final act of the CPS Board made up of members appointed by Johnson was to fire Martinez without cause, leaving him in office until June.
Despite the deep breach between the two men, both Johnson and Martinez have ruled out layoffs, cuts or furloughs to CPS operations. CPS cannot raise property taxes high enough or quickly enough to cover the gap, leaving borrowing or cuts the only options.
In October, Johnson declared $570 million in the city’s TIF districts to be in surplus for 2025, a record-breaking amount that is 31% bigger than 2024’s surplus, which set the previous record.
That sent $311 million to CPS, with the rest heading to other taxing agencies.
CPS’ budget already relies on $172 million from the city’s TIF surplus, and its 2025 budget earmarked those revenues to cover the cost of the recently ratified SEIU Local 73 contract and the district’s operations.
There is no mechanism for CPS to get additional surplus funds from the city’s TIF districts in time to solve its cash crunch, according to the Baker Tilly report.
Showdown Set Over CTU Contract
As Johnson ramped up pressure on the board to make the $175 million pension payment, leaders of the Chicago Teachers Union warned the board that Martinez’s failure to reach an agreement on a new contract would cause “more disruption and chaos for all district stakeholders.”
One of the major sticking points preventing a deal involves the amount of time elementary school teachers have to plan and prepare while on the clock.
The last offer from CPS leaders would give teachers 10 minutes of additional prep time, while the union is insisting on 20 more minutes of prep time, after reducing its initial demand of 30 more minutes.
Negotiators have also failed to reach an agreement on teacher evaluations and pay increases for tenured teachers.
Johnson, a former middle school teacher and organizer for the CTU, told reporters he supported the union’s call for more paid preparation time for teachers.
“There are costs to educating children that go beyond just raises,” Johnson said.
Contact Heather Cherone: @HeatherCherone | (773) 569-1863 | [email protected]
