For the Record: A primer on the budget deficit

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On Wednesday, the Board of Education will hold an emergency meeting to
decide if they will, indeed, declare that the district doesn’t have
enough money to pay for the 4 percent teacher and other staff raises
promised in the union contracts. If the board declares a fiscal emergency, it will be based on the
district’s huge deficit, which makes paying $100 million in salary
increases virtually impossible. 

On Wednesday, the Board of Education will hold an emergency meeting to decide if they will, indeed, declare that the district doesn’t have enough money to pay for the 4 percent teacher and other staff raises promised in the union contracts. If the board declares a fiscal emergency, it will be based on the district’s huge deficit, which makes paying $100 million in salary increases virtually impossible. 

For weeks now, reporters, including those at Catalyst, have been pressing CPS officials to clarify what the deficit includes. The amount of the deficit is important, as the larger it is the stronger is the district’s claim that it can’t pay the raises—if indeed that is the case they want to make.

Originally, the deficit was projected at $720 million. Since then, CPS officials announced that they would reduce central office, facilities and maintenance costs by about $75 million, leaving a hole of $645 million. 

Here’s how various costs impact the deficit estimates:

FEDERAL STIMULUS RUNNING OUT: The $645 million, according to CPS, stems partly from the loss of $260 million from the American Recovery and Reinvestment Act and $104 million from EdJobs, an emergency federal grant created last August.

The ARRA money is supposed to be spent at the end of this fiscal year. While CPS has not disclosed exactly how much may be left, there’s some indication that there is money remaining.

In April, CPS officials announced that leftover federal stimulus money was going to pay for Summer Upgrade, an optional summer school initiative for students who didn’t fail a class but wanted the extra academic boost.

Now, it is unclear what is happening with the summer jobs money. It is not listed among the summer programs. However, a Safe Haven program announced by CEO Jean-Claude Brizard on Tuesday will be funded with some of the remaining stimulus money, says CPS spokeswoman Becky Carroll.

EdJobs money can be carried over, and CPS should have some of it left. CPS officials said they were going to spend half of the $104 million in the 2011 fiscal year and save the rest for the 2012 fiscal year, which starts on July 1.

Though CPS is publicly saying that the loss of federal money is part of the deficit, Carroll says officials are not sure if these pots will really be empty next year.

“In general, we’re saying that we won’t know what the final numbers for the entire fy11 budget will look like until we get to the end of the fiscal year,” she wrote in an email.

SALARY, BENEFIT INCREASES: On top of the loss of federal money, the projected deficit includes $70 million for step/lane, health care and pension increases. Then, there’s the $100 million for raises—currently included in the district calculation even though the money didn’t show up in school-level budgets.

DWINDLING RESERVES: The remaining $190 million that is included in the deficit is money that CPS officials say they need to rebuild the district’s depleted fund balance—essentially a savings account. Carroll says the fund balance is being used because the district is in the midst of a fiscal crisis.

Last year, former CEO Ron Huberman said he planned to use the fund balance, as well as a line of credit, to manage the district’s cash flow while waiting for the state to catch up on back payments of state aid. For the past couple of years, the state has been woefully behind in paying its bills and currently owes the district upwards of $292 million.

Huberman justified spending down the reserves, saying he expects the state will pay its bills eventually. “It is a reasonable assumption,” he said.

Carroll insists that there’s now no connection between the depleted fund balance and the money owed to CPS by the state. By the end of December 2010, the state was able to catch up on some of its back payments, says Mary Fergus, spokeswoman for the Illinois State Board of Education.

But by that time, the state was also in the hole for the current fiscal year.


STATE BUDGET CRISIS: The state budget also has bearing on the CPS deficit. The projected deficit assumes that state funding will remain level with last year, but that’s not likely to be the case. The budget now awaiting Gov. Pat Quinn’s signature calls for a significant cut in education funding.

CPS officials say that the state’s education cuts would create an additional $77 million hole for CPS.

But even that figure is up in the air. The biggest part of that cut—$37 million in general state aid—might be offset completely by the fact that CPS now enrolls more poor students and therefore stands to get additional state aid, according to CPS officials.