School & District Management

Financial Crisis in Chicago’s Schools Deepens Discord

By Denisa R. Superville — February 05, 2016 5 min read

The financial uncertainty that stalks the Chicago school system jumped into high gear this week when, in less than a day, the teachers’ union rejected a contract offer from the administration, the district announced $100 million in cuts, and Illinois Gov. Bruce Rauner pledged to move ahead with plans to take over the district and push it into bankruptcy.

All of this unfolded while Mayor Rahm Emanuel—who has authority over the city’s schools—reportedly traveled to New York City to convince financiers to back an $875 million bond sale that would raise cash to keep the schools running for the rest of the school year.

At stake is the education of the nearly 400,000 students who attend the nation’s third-largest school district.

“The state’s going to be ready to step in and take action.” Gov. Bruce Rauner, Springfield, Ill., Feb. 2, 2016.

“On the one hand, this is [like] Shakespeare,” said Timothy Knowles, the chairman of the University of Chicago’s Urban Education Institute.

“You’ve got power, politics, and self-interest that define the drama,” he said. “But when you strip away all the theatre, you’re left with a Greek tragedy, where the interests of children and the public are being trampled because the governor, the union, and the city are unwilling or unable to find common ground. It’s people playing to their base—whether it’s the governor, or labor, or the city—leveraging the self-interest of children in their rhetoric, but really playing to their political base.”

Roots of Crisis

The school district’s current situation should not come as a surprise, Knowles said.

The roots of the crisis could be traced back to 1995 when then-Mayor Richard Daley got control of the school system. Constant borrowing against the teachers’ pension fund along with annual 4 percent wage increases for union members without substantial concessions raised red flags, but those practices continued, Knowles said. State K-12 education funding, among the lowest in the nation, also contributed to the district’s cash-crunch, he said.

The district’s $5.69 billion budget for fiscal year 2016 has a $480 million gap, which school administrators had desperately hoped would be closed with state assistance. It also has an estimated $1 billion structural deficit.

Since the teachers’ union contract expired on June 30 last year, the district and the Chicago Teachers Union’s bargaining team have been trying to reach a new pact. In November, Forrest Claypool, the district’s CEO, forecasted teacher layoffs in February unless the state offered assistance. A month later, the union said that 88 percent of its eligible members voted to authorize a strike if no agreement was reached. As one stark cost-cutting measure, Claypool announced last month that more than 220 central office administrators would be laid off, though some would be eligible to reapply for other positions. And the administration has taken other belt-tightening and cost-cutting measures to reduce costs since Claypool was installed last July, the district has said.

A resolution between the two sides appeared imminent late last month when the union announced that it had received a “serious offer” from the district, but that optimism was short-lived. On Feb. 1, the union’s “big bargaining team“ shot down the district’s proposal.

Chicago Teachers Union President Karen Lewis said the deal was scuttled due to lack of trust: The union did not believe that the school district would deliver on its promises and abide by the terms of the agreement.

"The real problem is the lack of trust in CPS." Karen Lewis, president of the Chicago Teachers Union, on why a 40-member bargaining team rejected a contract offer from the school district. Chicago, Feb. 1, 2016.

Lewis, who led the union on a seven-day strike in 2012, said that she did not want to divide the union, a reference to part of the district’s proposal that would bring changes to members’ pension contributions. The deal the district sought would require new teachers to shoulder the entire cost of their pension contribution, while that portion of the proposal would have been phased in for current teachers.

Claypool said the rejection was “disheartening”, especially since the district’s offer contained much of what the teachers had asked for, including no layoffs during the four-year deal; a cap on charter schools; cost-of-living increases; and an increase in the number of community schools.

Pensions a Sticking Point

District officials said they intended to proceed with plans to require the union members to pick up a bigger portion of their pension contributions. In response, the union ramped up the rhetoric, saying the district’s actions were tantamount to an “act of war,” and labor leaders pledged to file a complaint against the district with the state education labor relations board to stop the pension changes. A strike is not off the table, although, even amid the heated rhetoric, the two sides said they will continue to negotiate.

Meanwhile, Gov. Rauner said he had directed the state board of education to find a new schools chief for Chicago while Republican legislators try to pass a bill that would create a separate entity to run the state’s largest school district.

Rauner’s plan to seize control of the school district appears to be a non-starter, and has been pilloried by the district, Emanuel, and Lewis. Illinois’ Democratic-controlled legislature is unlikely to pass any bill that would put Chicago schools under state control. But some see Rauner’s statements as a strategy to publicly tighten the screws on the city and the union, and force them into a deal.

By the middle of the week, the district had a $725 million bond sale to raise cash to run the system—less than it initially planned and with higher interest rates.

Union v. Mayor

With all the uncertainty, the teachers’ union appears to have more support in the city when it comes to education than Emanuel. A Chicago Tribune poll published this week showed that 60 percent of Chicagoans said they sided with the union on issues related to schools. Twenty percent of those who responded said they sided with Emanuel, 12 percent of respondents said they weren’t in favor of either side. Seven percent had no opinion, according to the poll.

Forrest Claypool, CEO, Chicago Public Schools

Knowles, at the Urban Education Institute, said the crisis could only be solved through a combination of union givebacks, austerity measures on the district’s part, a “hard look” at the state school funding formula, which many in Chicago believe shortchanges Chicago public schools, an overall reinvestment in public education on the state level, and possible tax increases.

“A combination of those things—and I don’t know what the right combination is—is the only way that you can solve such a big budget crisis,” he said.

Without compromise, he said, children will lose.

“It’s an absolute total distraction and tragedy for young people and for the parents and for educators,” he said of the situation. “It’s very difficult to focus on improving the quality of teaching and learning, which is presumably the fundamental responsibility of public schools.”

A version of this article appeared in the February 10, 2016 edition of Education Week as In Chicago District, Financial Crisis Deepens Divisions

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