Mayor Brandon Johnson on Tuesday likened himself to a guardian attempting to evict an grownup little one from the basement — solely on this situation, the overgrown child is Chicago Public Faculties and the guardian is town of Chicago.
The parent-child comparability comes as Johnson continues to insist that the college district reimburse town for a fee to a pension fund that features 1000’s of CPS staff.
Johnson’s name for the college board to maintain its personal funds comes at an pressing second. On Tuesday, the board obtained a long-awaited memo from a monetary agency it employed to put out prospects for locating cash to make the pension fee. Although the memo doesn’t present a advice, the one actual risk it outlines is producing cash by refinancing or refunding excellent debt.
On Thursday, the board will take into account amending CPS’ price range to incorporate three new expenditures: the pension fee and prices related to contracts for lecturers and principals unions, that are nonetheless being negotiated. The modification wants two-thirds of the board members to approve it. With the board now partly elected and partly appointed, it’ll probably go or fail on the thinnest of margins.
The stakes are excessive: If it’s not accepted, town must shut its 2024 books with a deficit and must attain into reserves to fill the opening. This might set off one other credit score downgrade, which might make future borrowing troublesome and costly. Twenty-seven metropolis council members signed a letter demanding that CPS make the fee.
However CPS CEO Pedro Martinez has argued the college district can’t afford to make the $175 million pension fee. He referred to as a suggestion from Metropolis Corridor that the district borrow fiscally irresponsible. His staff has additionally argued that it’s unlawful to take a mortgage to cowl working bills. This rebuke of the mayor price Martinez his job; he has been given a six-month termination discover.
In the intervening time, CPS solely has $139 million accessible however doubtlessly wants about $200 million extra to cowl all of the three new expenditures.
The memo, by the Baker Tilly Advisory Group, walks by all of the methods CPS might discover cash to cowl all of the bills. It fairly rapidly dismisses the thought of slicing prices this yr, noting that the college yr will likely be over in a number of months. Given the timing, the memo reads, “it will be troublesome to generate adequate financial savings to cowl each the present price range shortfall and different Board obligations.”
The varsity board might additionally ask town for more cash from particular taxing districts referred to as TIFs, however that is also unlikely, given the timing and provided that if cash is launched now, it will not be accessible sooner or later, in line with the memo.
The memo talks about a number of methods to generate cash by refinancing or refunding, but it surely stresses that the small print must be labored out by college district municipal advisers or workers. One of many concepts entails reissuing bonds for capital tasks. One other suggestion is to look at pulling cash out of reserves. It additionally notes that a few of these concepts are contingent on rates of interest and different market volatility.
CPS didn’t reply to questions concerning the memo, however final week, it pushed again on the thought of refinancing. College district officers stated they refinance yearly however want the cash for subsequent college yr, suggesting it will be a nasty concept to do it now.
Board President Sean Harden on Tuesday stated the memo, commissioned by the board, affords up different choices moreover a short-term mortgage.
“This kills the entire narrative that borrowing is irresponsible or that it will quantity to a payday mortgage,” he stated. “It rights the ship.”
Harden, who was appointed by the mayor, stated he’s hoping that it shifts the board to a “options mindset.”
Discovering cash for the pension fee has been a supply of excessive drama since final summer time. The town is legally chargeable for making the fee to the municipal pension fund, but it surely consists of non-teacher CPS workers, resembling paraprofessionals. The town coated the fee for 100 years, however in 2021, former Mayor Lori Lightfoot started demanding that the college district pitch in.
As an organizer for the CTU, Johnson criticized the transfer by Lightfoot. However as mayor, Johnson is insisting CPS tackle the fee. His argument, like Lightfoot’s, is that CPS could have a totally elected Board of Training in two years and due to this fact must be unbiased of town.
Johnson reiterated that message at a press convention Tuesday.
“This board goes to be an unbiased physique … I don’t need to sound like my dad, however in some unspecified time in the future, they’re gonna have to maneuver out. That’s what that is. It’s a relationship that we now have to disentangle,” Johnson stated.
“We’re not simply kicking `em out,” the mayor added. “By the point I used to be 18, my father gave me a pair extra years. We’re simply saying we now have a pair years earlier than you’re gonna be absolutely by yourself. And that’s actually what this course of is about shifting ahead — how to ensure this unbiased physique can stand by itself.”
However Martinez has fought exhausting in opposition to CPS taking up the fee. Prior to now, he stated that he made the pension fee as a result of CPS bought extra cash from town by TIFs and was flush with federal COVID reduction funds.
Martinez upped the stakes final week, warning the board that in the event that they accepted the modification, they may very well be accused of passing an unbalanced price range, which is in opposition to the legislation. College district officers and board members may very well be charged with a misdemeanor, he stated.
He additionally despatched out a word to “colleagues” warning that if there was no cash left for the lecturers contract, it might set off a strike.
Harden stated he’s hoping his board colleagues see there could also be a strategy to make the fee however added the modification may very well be revisited if it seems that none of those prospects pan out.
He additionally stated this complete scenario has set the stage for additional discussions about how the college district can cease being as depending on town.
