(Bloomberg) -- Chicago refuses to take on more debt to balance the budget of its cash-strapped school system, denying a pitch district leadership floated Wednesday.
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The city will not borrow on behalf of Chicago Public Schools, Cassio Mendoza, a spokesperson for Mayor Brandon Johnson, said on Thursday in response to a proposed budget amendment from the district. School officials suggested another entity issue debt to help cover a portion of the roughly $300 million of additional expenses related to pending teacher and principal contracts as well as an outstanding pension bill that it owes the city.
The district also asked Chicago to consider allocating more cash from a pool of unused economic-development funds called tax-increment financing districts, or TIFs. The district already received $139 million of such money.
The district “will rely on the availability of additional TIF surplus or other appropriate local revenue, which may include other entities incurring debt on CPS’s behalf,” a statement posted to the CPS website reads. Absent those options, budget cuts may be required. The school board is scheduled to vote on the amendment on March 20 after hearings next week.
Chicago Public Schools, the fourth-largest US school district with roughly 325,000 students, has struggled with its finances for decades. Now, as pandemic-era federal aid runs out and a standoff with the teachers’ union threatens to hike labor costs, the district is facing shortfalls of least half-a-billion dollars annually.
Pension Payment
Wednesday’s budget amendment seeks to address a pressing issue for the city and the district: The school system was supposed to make a $175 million payment to Chicago to cover the costs of non-teacher pensions for school employees like janitors or cafeteria workers. The city made this payment, expecting the school board to pay it back, and now has a hole in its 2024 budget that needs to be closed by the end of March.
“Mayor Johnson is supportive of any tools that the school district can utilize on its behalf to balance its budget without cutting teachers or resources for students,” Mendoza said in a statement.
That pension payment has been at the center of a contentious battle between district leadership and City Hall. Johnson had suggested CPS take out a loan to generate the funds, an option CPS Chief Executive Officer Pedro Martinez refused to execute. In October, Johnson overhauled the seven-member school board and its new members in December voted to fire Martinez, though he will remain in his role through June.