The Chicago Public Schools have made the $600 million payment they were required to make on into their pension fund. Now they don’t know how they’re going to make payroll:
It turns out, Mayor Rahm Emanuel had a Plan B.
Unfortunately, it involves borrowing and up to 1,400 layoffs.
With not a moment to spare — and with no help from Springfield — Chicago Public Schools made good on a mammoth $634 million payment to its teachers’ pension fund on Tuesday, the same day it was due.
The cash-strapped CPS used a combination of borrowed money and a promise of cuts to cover the payment after a deal to delay the contribution failed to materialize in Springfield. Last week, Emanuel’s hand-picked school board authorized $1 billion in borrowing just in case state lawmakers didn’t come through on the delay bill.
“Springfield has failed to address Chicago Public Schools’ financial crisis, so today CPS made its 2015 pension payment by borrowing money,†interim CEO Jesse Ruiz said.
“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,†he said. “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.â€
As many as 1,400 employees will be laid off beginning Wednesday, according to CPS.
It’s obvious that the CPS can’t continue to function without tax increases but there are state-imposed limits on how much and how frequently the CPS can increase taxes. Every tax the CPS is empowered to make is regressive and will reduce the city’s economic activity which will reduce the tax base and, consequently, future revenues.
I feel obliged to mention that the state’s contribution to public education in Illinois is the lowest among the 50 states and Chicagoans are in the peculiar situation, unique in the state, of bearing sole responsibility for paying for the retirements of Chicago teachers while still bearing partial responsibility through their states taxes for the retirements of teachers outside Chicago.
