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Civic Federation Analysis on CPS

Civic Federation Analysis on CPS

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Published by Zoe Galland
Civic Federation Analysis on CPS
Civic Federation Analysis on CPS

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Published by: Zoe Galland on Aug 21, 2013
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02/16/2014

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DRAFT
 – 
EMBARGOED UNTIL 12:01 A.M. THURSDAY, AUGUST 22
 
CHICAGO PUBLIC SCHOOLS FY2014PROPOSED BUDGET:
Analysis and Recommendations 
August 22, 2013
 
DRAFT
 – 
EMBARGOED UNTIL 12:01 A.M. THURSDAY, AUGUST 22
 
Table of Contents
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DRAFT
 – 
EMBARGOED UNTIL 12:01 A.M. THURSDAY, AUGUST 22
 1
EXECUTIVE SUMMARY
The Civic Federation
does not support
the Chicago Public Schools (CPS) proposed $6.6 billion budgetfor FY2014 and remains
very concerned
 
about the District’s current and long
-term fiscal health. The
District’s FY2014 Proposed Budget closes a monumental $977 million budget deficit with a complete
drawdown of its unrestricted reserves, as well as use of restricted reserve funds, which are traditionallyconsidered off-limits. The District narrowly avoided completely exhausting its unrestricted reserve fundsin FY2013 due to reduced expenses and early payments from the State of Illinois. In addition to somecarryover of fund balance from FY2013, the District will also use FY2012 fund balance that came fromearly receipt of property tax revenue and unexpected state contributions in FY2012 to balance the budget.As CPS acknowledges, the proposed FY2014 budget plan is unsustainable as budget deficits of nearly $1 billion are already projected for FY2015 and FY2016. However, absent comprehensive pension reform or access to additional revenue sources, CPS has limited options for closing its budget shortfalls. Despite painful spending redu
ctions including layoffs and school consolidations, the State’s inaction on pension
reform has plunged the District into an even deeper financial crisis.CPS cannot afford its existing pension system. This is evident from the size of the FY2014 budget deficitthat resulted from the partial pension contribution holiday. The $404 million pension funding cliff inFY2014 created by the contribution holiday has damaged the already unstable fiscal health of CPS. It isimperative that the Illinois General Assembly, Governor Quinn, Chicago Mayor Emanuel, the ChicagoBoard of Education and CPS stakeholders, including District employees, parents and communitymembers, work together to reform the benefit structure and identify adequate funding sources for theteacher pension system. Another contribution holiday is not a viable solution. It would only further 
 jeopardize the District’s financial health by requiring
even larger, unaffordable contributions in the future.
Significant structural changes to the District’s e
xpenditures and long-term obligations are urgentlyneeded. Relying on one-time revenue sources is unsustainable. By depleting its reserves in FY2014,
CPS’s
financial crisis will escalate further as it projects massive budget deficits to continue. The Districtneeds to address its ongoing structural deficit and develop a formal, publicly-available long-term financial plan.The Civic Federation offers the following
key findings
on the FY2014 Proposed Budget:
 
The total proposed FY2014 CPS budget will increase by $750.2 million, or 12.9%, from theFY2013 final amended budget, rising from approximately $5.8 billion to $6.6 billion;
 
Appropriations for the General Operating Funds will increase by $493.8 million, or 9.7%, toapproximately $5.6 billion in FY2014 from FY2013 year-end estimates of approximately $5.1 billion;
 
In FY2014, required pension contributions will grow by $404.0 million; and
 
The District’s General Obligation debt per capita increased from $1,939 in FY2011 to $2,171 in
FY2012.The Civic Federation has
concerns
about the following areas of the CPS FY2014 Proposed Budget:
 
Continued inaction on the District’s pension funding crisis by the
Board of Education and CPSofficials, the General Assembly and Governor Quinn, accelerating CPS into a deeper state of financial jeopardy;
 
Lack of a publicly-shared long-term financial plan to provide the District with the necessaryguidance and strategies to better address its financial challenges;

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