Chicago mayor buys peace with teachers, fiscal impact uncertain

[October 12, 2016]  By Karen Pierog and Dave McKinney

CHICAGO (Reuters) - A tentative deal reached late on Monday between the Chicago Public Schools (CPS) and its teachers union averted a strike that had been scheduled for Tuesday but the impact on the district's already shaky finances was uncertain.

Chicago Mayor Rahm Emanuel, who controls the nation's third-largest public school system, agreed to initially pour more surplus revenue from city development districts into school coffers. But it was not clear if the increase to $88 million from the $32.5 million the district already folded into its current budget would be sufficient to fund new contract terms.

The second-term mayor said the agreement will make CPS finances stronger.

But Laurence Msall, president of local government finance watchdog the Civic Federation, said the surplus tax increment financing dollars were a one-time revenue source and would not solve the schools' deep fiscal problems.

"It’s not enough in terms of the deficit the Chicago Public Schools face," Msall told reporters on Tuesday.

Even Emanuel’s city council floor leader had questions about earmarking unobligated money from the economic development districts in the city.

“Those TIF dollars build up over time, and when you empty that account, that money is gone,” said Alderman Patrick O’Connor, referring to tax increment financing. “So clearly, to rely on a settlement that relies on TIF surplus is not something you are going to be able to guarantee every year.”

CPS has received about 52 percent of annual surplus revenue from Chicago's tax increment financing districts. But that revenue stream has fluctuated greatly over the years, making it unreliable.

The proposed deal was enough to stop the Chicago Teachers Union (CTU) from going forward with its planned Tuesday strike, which would have been the third since 2012.

Chicago schools are grappling with escalating pension payments that will jump to $720.2 million this fiscal year from $676 million in fiscal 2016, as well as credit ratings that have fallen to junk level. The district, which has nearly 400,000 students, ended fiscal 2016 on June 30 with a $7 million operating deficit, according to a school financial report.

Chicago Teachers Union President Karen Lewis (L) and Vice President Jesse Sharkey listen to a question during a news conference on the seventh day of their strike in Chicago, Illinois, U.S.September 16, 2012. REUTERS/John Gress/File Photo

The proposed four-year contract, which has a retroactive start of July 1, 2015, was posted on CTU's website on Tuesday. It commits CPS to continue to cover all but 2 percentage points of the current teachers' pension contributions of 9 percent, a payment the cash-strapped district had tried to phase out. The so-called 7 percent pension pickup will apply only to educators hired before Jan. 1, 2017.

Base salaries for teachers hired after Jan. 1 of next year would be increased by 3.5 percent in January and 3.5 percent in July.

Current teacher salaries would remain flat until a 2 percent increase in fiscal 2018 and a 2.5 percent hike in fiscal 2019.

The deal creates early retirement programs if a sufficient number of eligible educators participate. The programs include nonpensionable lump sum payments CPS would have to make to teachers and others covered under the contract by Dec. 31, 2017.

The union late on Monday also persuaded CPS to agree to put teacher assistants in kindergarten through second grade classrooms with 32 or more students.

The tentative agreement must be voted on by the CTU’s house of delegates, followed by a vote by the CTU's members.

(Additional reporting by Renita Young and Timothy McLaughlin in Chicago; Editing by Matthew Lewis)

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