Strike deadline near, dire finances
complicate Chicago school talks
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[October 10, 2016]
By Dave McKinney and Karen Pierog
CHICAGO, Oct 10 (Reuters) - Chicago's
public schools and its teachers' union make the final push to avert a
looming strike on Tuesday with its success hanging on each side's
willingness to accept unappetizing concessions.
The teachers are asked to ramp up contributions to their pension fund, a
demand the union has already once rejected. Unions want extra money for
teachers from special economic development districts - a controversial
proposal given their uneven, hard to predict revenue.
The need for hard-to-swallow tradeoffs stems from the dire state of the
nation's third largest school district and a broader fiscal distress
confronting Illinois and Chicago.
The state, the city and the school district have all had their credit
ratings cut to junk, or just above it, and a political stalemate in the
state capital, Springfield, means Chicago Mayor Rahm Emanuel and the
teachers cannot expect any help from outside.
The impasse and the threat of the strike that would affect nearly
400,000 students come at a tough time for Emanuel, whose second term has
been marred by deteriorating finances and a spate of street violence.
Karen Lewis, president of the Chicago Teachers Union, in 2012 handed
Emanuel his first major defeat as mayor, leading teachers into the first
strike in a generation and wringing concessions from the school board.
The union is seeking an additional $200 million in new revenue, but the
Chicago schools have no apparent resources to offer. The school system,
which is independent of the city, had a $7 million deficit in its
operating funds on June 30, according to a school financial report that
has not previously been reported.
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Chicago Public Schools has increased its cash flow borrowing but
resources remain tight. Pension contributions have tripled in recent
years and the state legislature authorized the school district to
collect an additional $250 million from property owners to pay pensions.
The Chicago Board of Education, appointed by Emanuel, wants teachers to
increase their pension contributions. Right now, they contribute 2
percent, with the school board chipping in an additional 7 percent. But
when Lewis floated the idea in January, her negotiating team rejected
it.
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With few other options, the teachers are pushing for Emanuel to
allocate most of the surplus revenues generated by nearly 150
special taxing areas, called tax-increment financing districts,
throughout Chicago. Emanuel already allocates just over half of
surplus revenues from the districts to the school system and has
resisted calls to allocate more.
Chicago Teachers Union Vice President Jesse Sharkey, a lead player
in Lewis' negotiating team, said the union was seeking $200 million
more in annual revenue to prevent new staff or program cuts. "That
question of using TIF funds to ward off cuts and achieve a contract,
to me, becomes the central issue of whether or not we can avoid a
strike," Sharkey told Reuters.
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Chicago and other cities establish tax-increment financing districts
in economically blighted areas; then as tax revenues grow due to
investment, they distribute the increased revenues to
infrastructure, redevelopment, schools and other purposes.
Yet revenues from such districts vary widely in Chicago districts
vary widely, making them an unreliable financing tool for the
schools, according to a prominent fiscal watchdog.
"No financially responsible government would be using TIFs to pay
for its operational expenses," said Laurence Msall, president of the
Civic Federation, a tax policy and government research organization.
The city's TIF districts pumped out $113.6 million in surpluses so
far this year, but in 2011 produced only $40,000 in surpluses,
according to the city.
The strike threat is a big gamble for the union given the school
system's dismal finances, said Jean-Claude Brizard, who was Chicago
schools' CEO during the 2012 and now is a partner at at educational
consulting firm Cross & Joftus.
"I don't see what the CTU will gain with a strike. The system is
broke," he said.
(Reporting By Karen Pierog and Dave McKinney in Chicago, editing by
David Greising and Tomasz Janowski)
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