Teaching Profession

Chicago District Makes $634 Million Pension Payment, But at a Cost: 1,400 Jobs

By Denisa R. Superville — July 01, 2015 3 min read
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The Chicago school system met Tuesday’s deadline to make its full $634 million pension payment, but the payment came with another cost: 1,400 jobs.

Interim Schools CEO Jesse Ruiz announced Tuesday night that the district borrowed money to make the payment by that day’s deadline, but that because it had borrowed money, the district would now have to make approximately $200 million in cuts and 1,400 positions would be “impacted,” starting Wednesday.

Ruiz’s statement came after legislators in the state capitol, Springfield, failed to agree on a compromise the district sought to defer the full payment until Aug.10.

Ruiz and Chicago Mayor Rahm Emanuel had sought to delay the full payment to the teachers’ retirement fund, arguing that the district would be unable to make the full contribution on time without impacting the classrooms.

Efforts to extend the deadline collapsed in the House last week. At the time, a spokesman for Gov. Bruce Rauner, a Republican, who had brokered an extension deal with Emanuel, blamed the Democrats. Democrats blamed the governor for not providing enough details.

Ruiz and Mayor Emanuel are expected to hold a press conference Wednesday morning to discuss how the payment would affect classroom work. According to the mayor’s office, the two men will announce “a comprehensive, long-term plan to address the pension and funding inequities for Illinois’ schools.”

“Springfield has failed to address Chicago Public Schools’ financial crisis, so today CPS made its 2015 pension payment by borrowing money,” Ruiz said in the brief statement Tuesday, which did not specify what portion of the $634 million was borrowed.

“As an immediate consequence of driving the district further into debt and our need to address the existing structural deficit—which is also driven by decades of pension neglect—CPS will make $200 million in cuts. As we have said, CPS could not make the payment and keep cuts away from the classroom, so while school will start on time, our classrooms will be impacted.”

At a press conference earlier in the day on Tuesday, Emanuel told reporters that school would start on time, but that the impact would be felt in the classroom.

“School will start, but our ability to hold the impact of finances away from the classroom, that’s going to change,” the mayor said, according to the Chicago Tribune.

If the district did not make the full payment, it faced the possibility of a lawsuit from the Chicago Teachers’ Pension Fund and another possible hit to its credit rating.

Ruiz said that 1,400 employees would be “impacted,” without explaining exactly what that meant. The Chicago Sun-Times is reporting that the employees would be laid off.

The paper quoted the Chicago Teacher’s Union as being “blindsided” and “outraged” by the news. (The teachers’ union contract also expired at midnight on Tuesday. Talks between the union and the district broke down last week over evaluations, according to a report in the Chicago Tribune.)

From the Sun-Times:

“We are blindsided by reports that the district intends to lay off 1,400 public school educators, given that we just met with them yesterday and there was no mention of this action,” Chicago Teachers Union President Karen Lewis said in a statement released late Tuesday.

“These layoffs prove that the Board never intended to make the pension payment in good faith and that they are using this to justify more attacks on our classrooms,” she said. “Putting 1,400 people out of work is no way to balance a budget and resource our schools.”

The district faces a host of financial problems. It has a $1.1 billion budget deficit, and a recent internal report painted a stark picture of CPS’ finances, indicating that the district could soon run out of cash.

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A version of this news article first appeared in the District Dossier blog.