Watchdog sounds alarm on CPS plans to empty reserves

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Chief Administrative Officer Tim Cawley and Budget Director Ginger Ostro talk about the district's plans.

Chief Administrative Officer Tim Cawley and Budget Director Ginger Ostro talk about the district's plans.

Chicago Public Schools budget released today provides a 2 percent raise for all staff — but no step and lane increases — and completely drains the district’s reserves, putting the administration in the position to argue that the district has no money to offer teachers anything more.

“We cannot sit on hundreds of millions of dollars and inflict pain on our schools,” says Chief Administrative Officer Tim Cawley in explaining his rationale for zeroing out $431.8 million in reserves. CPS’ total budget is $5.73 billion.

Yet Civic Federation leaders were shocked by the decision to empty the reserves, says Laurence Msall, president of the Civic Federation, a financial watchdog. He stresses that the district is facing a huge pension contribution in 2013-2014 and has no plan to replenish the reserves.

Without pension reform, the deficit next year could be as high as $800 million, according to the district and Msall. “I am worried that they are avoiding a financial crisis, but that it could turn into a financial catastrophe,” he says.

School officials said the proposed budget covers a projected deficit of $665 million, including $144 million that the district plans to trim from its budget. Cawley attributed the deficit to falling state, local and federal revenue, as well as higher costs in such areas as medical insurance.

Responding to the spending plan, Kristine Mayle, financial secretary for the Chicago Teachers Union, said the union recognizes the district’s dire financial straits but that a 2 percent raise, which was the district’s first offer, is “totally unrealistic.”

 “They will have to rejigger their entire budget,” she said. “They did not leave a cushion for us.”

The absence of step and lane increases, which reflect additional years of service and education, is a bold, yet unsurprising move. CPS officials complained last year when they had pay for step and lane, amounting to a 3 percent average salary increase for teachers and costing the district about $40 million.

District leaders have said they want to replace this system with a so-called differentiated salary schedule, which gives teachers extra pay for showing student achievement growth and other factors, such as taking jobs in hard-to-serve areas. Steps and lanes have long been central to teacher union contracts throughout the country.

The district’s 2012-13 budget is 1 percent larger than last year’s. The public will have the next month to offer comment on it before it is up for approval at the school board’s July meeting. In the past, the budget was typically approved at August board meetings. Budget details are availabe on CPS’ website.

District policy requires a reserve of 5 percent, but the board has the authority to waive that. Cawley says he will ask the board to let the administration replenish the reserve over the course of the following two years.

In 2011, former CPS CEO Ron Huberman initially proposed using the reserves, but unanticipated one-time revenue, such as federal EduJobs money, helped create a surplus and they didn’t wind up using any of it.  

Last year, some advocates urged the district to use their reserves, rather than make cuts. At the time, CPS officials, who were brand new to their jobs, resisted. 

But this year Cawley says he felt he had no choice. He dismissed concerns about running into financial trouble, saying that the district does not need the money to manage cash flow and that even drop in the district’s bond rating change would not cost much.

 Investments despite deficit

District leaders said they are not proposing the elimination of any big initiatives or programs and want to continue investing in the efforts they think are important.

 For example, charter schools will get an additional $76 million.

 Part of that increase is due to an agreement the district signed under a grant from the Bill & Melinda Gates Foundation.  The Gates compact calls for equitable charter school spending and greater accountability, among other things. Charter school advocates have long complained about receiving lower per-pupil support than what regular schools receive.

To make good on the compact, the per-pupil allocation for charter schools will increase by 3.35 percent and the per-pupil facility stipend will go from $425 per student to $750. Only charter schools not located in CPS buildings get a facility stipend. In addition, charters will get more money to pay for special education teachers and aides.

Also, the number of charter school seats will increase by 4,665, due to the opening of new schools and the addition of new grade levels in existing schools.

Three years ago, Huberman reduced the per-pupil allocation by 4 percent and since then the amount has been stagnant, says Andrew Broy, president of the Illinois Network of Charter Schools. The increase this year just brings charter school’s allocation back to where it was, he says.

 With a smaller per pupil allocation, Broy says charter schools struggle, especially as they try to keep salaries competitive with traditional schools.

Though Cawley says he did not want to get into a debate about the merits of charter schools, he emphasized that they are one strategy that CPS leadership believes in. “We believe they are a good alternative for some children,” he says.

But Mayle of the CTU says it is a matter of priorities and she wishes district leadership would have other priorities. Besides pushing for a salary increase, CTU wants the district to provide music, art, library and foreign language teachers for each school. Currently, schools with 600 or more students only get only one of these positions, and those with fewer students get half a position.

The district also will spend more to create more magnet and specialty seats, such as in wall-to-wall International Baccalaureate programs. And it will put more local money into early childhood to make up for state cuts.

Some downtown offices will also see an increase in staff with this budget. The talent office, which is responsible for rolling out the new teacher evaluation and training principals, will get an additional 94 positions.

The communications office, which has doubled in the last year, will get one more person, and the public and community affairs office will get about $1.7 million more.

 Program cuts minimal

Mayle says that pledging to invest in various initiatives and drain the reserves in the midst of a budget crisis is a “political calculation” because it puts the teachers union in the position of asking for raises from a district that literally doesn’t even have a saving account.  

At the same time, cuts were minimal. As district leadership does every year, it promised to lay off some central office workers. The exact number is unclear, but district officials say they will save about $10 million.

Also, the district plans to save $12.3 million in transportation, a third of which comes from teaching some special education students to take the CTA, rather than provide a school bus.

One of the biggest cuts the leadership is proposing is Culture of Calm, former CEO Ron Huberman’s hallmark anti-violence program. The program provided intense mentoring to students and other supports in hard-hit schools. Some 64 positions will be eliminated at a savings of $7.7 million.

 District officials say they will be able to continue providing some of the services to students by working with a smaller number of vendors and controlling costs. 

 In fact one of the strategies of this new administration is to identify a small number of vendors to deliver a particular service and negotiate a better deal with them. By doing this, the district says it can save $20 million.