The $355 million lie
A CORE Position Paper
The $355 million lie: About this time every year CPS leadership “misplaces” more than $300 million dollars and blames teachers…
“…drastic measures, like closing 100 schools, increasing class size to a whopping 45 students and laying off 4,000 teachers would not even cut the deficit by half, Huberman said.”
Quoted from WBBM, Feb 25, 2010[i]
Last Thursday, Chicago Public Schools CEO Ron Huberman announced a $900 million projected deficit for next year. Huberman’s presentation[ii] specifically singled out “increases in pension costs” and “increases in teacher compensation” as the main causes of this crisis.[iii]
The following letter is designed to answer some important questions that are raised by Huberman’s announcement.
Can we trust this announcement? No. This is a political announcement designed to build public support for attacking teachers. Though there is a recession, and we expect there to be some deficit, Huberman’s numbers are suspect.
- For the past eight years the BOE has projected a deficit in January or February only to show surpluses in the actual audited budget as presented in August.[iv] These discrepancies have averaged over $300 million each year.
- No transparency—the presentation that we have been shown is not a budget, does not reveal any of the underlying assumptions on which the projection has been based, and does not seem to add up to $900 million, in any case.[v]
- The percentage CPS spends on salaries has actually shrunk since 2004, while the amount of the reserve (fixed charges) has ballooned to over 8% of the budget. [vi] That’s right, we getting a smaller piece of the pie, but being blamed for the financial troubles.
What about our pension?
- The Chicago BOE is required by law to pay $307 million to the pension fund by June 30, 2010. This number will increase to over $500 million next year.
- While this may seem like a lot of money, we should remember that the BOE did not make any contributions to our pension fund between 1995 and 2005—as they diverted some $1.2 billion to their general operating budget. Had they invested this money, our pension would be 99% funded.[vii]
- The average Chicago teacher pension is $39,000 a year. We do not receive Social Security.
Can we expect help from the state? Are there any other revenue sources?
- The State of Illinois has a regressive tax structure and is facing a budget crisis of about $12 billion on a $26 billion budget. Although Huberman and CTU president Stewart are lobbying Springfield for more money, we are unlikely to get much help.[viii]
- In Chicago, Tax Increment Financing (TIF’s) drain about $250 million/year out of the schools budget. This money should be returned to the schools.[ix]
Where do we go from here?
- On Wednesday, February 24th the BOE voted, over our strenuous objections, to close three schools and fire the entire staff at five more. On Thursday, February 26th they told us that they need our cooperation to solve a billion-dollar-shortfall that’s been caused by their bad decisions.
- Show us some respect… and the books! In addition to ending the practice of ‘turning around’ schools, show us the books before we start any negotiations. In future years, let us write the budget.
If we take our case to the public we can win support—more is being asked of our schools and our teachers than ever before. Now is not the time to cut front line educators.
[i] http://www.wbbm780.com/Chicago-Schools-CEO-Projects–1-Billion-Deficit/6446387
[ii] http://www.chicagonow.com/blogs/district299/FY2011%20Budget%20Presser%20r1.pdf
[iii] http://www.catalyst-chicago.org/notebook/index.php/entry/566
[iv] For the last 8 years, CPS has consistently released inflated budget deficit numbers based on no evidence or descriptions of where these numbers are coming from. Later when audited, they showed surpluses each year. Over the years surveyed, the public projections announced in January or February were off by an average of $467 million per year.
v These two slides, from pages 10 and 11 of Huberman’s 2-25-10 presentation are fairly typical. Note the lack of detail or explanation of underlying assumptions.
[vi] Despite the Board’s constant insistence in each year since FY2006 that teacher pensions and/or compensation are devastating the budget, their own numbers contradict this. From its 2010 Proposed Budget suggest that the percentage of district spending on teacher salaries has dropped markedly since 2004. In FY 2004, Teacher Salaries represented 48% of the general operating fund, while in the proposed 2010 budget, they made up only 38% of the general operating fund. The pension crisis is also a misnomer. Even accepting CPS’ own numbers, the portion of the budget due to teachers’ pensions only represents 9.6% of the budget in FY2010. This year’s portion of the budget for both pensions and teacher salaries combined is still less than the portion that only salaries represented in 2004. In the same time, the unidentified category “Other fixed charges” has ballooned from -.06% of the total operating fund to 8.27%.
[vii] As a recently elected Trustee of the Chicago Teachers Pension Fund, I am quite familiar with the escalating pension obligation that the Board of Education is legally mandated to honor. Before CPS, the Civic Committee or any other entity begins the discussion of any legislative relief for CPS to ts pension obligations, the root of the problem must be acknowledged. Specifically, the reason the Board of Education finds itself in the position it is in is because, for 10 years, from 1995-2005, the Board of Education did not pay into the Pension Fund. While CPS received City funds that were earmarked for the Pension Fund, for those ten years, CPS spent that money on its own agenda, including outsourcing work to private contractors and funding charter schools. Now, CPS is crying poor and looking to take money from school teachers’ retirement. This should strike every working man and woman as unfair and illegal. (Until the law is changed in the Illinois State Legislature, it is illegal for CPS to not meet its 307 million dollar annual pension obligation due on June 30, 2010.) Jay C. Rehak, Teacher Trustee, Chicago Teachers Pension Fund, TEL: 312 343 6273
[viii] see, for example http://www.ctbaonline.org/
[ix] Ben Joravsky “Off Track” http://www.chicagoreader.com/chicago/chicago-public-schools-cps-cutbacks-track-coaches-athletics/Content?oid=1467256 Last year alone, the TIFs siphoned about $250 million in property tax dollars out of CPS’s supposed share.”
