CHICAGO, Nov 5 (Reuters) - The Chicago Public Schools (CPS) said on Tuesday it would use $134 million in one-time revenue and savings to cover additional spending in its current budget partly because of a tentative contract agreement with its teachers union that ended an 11-day strike.
The third-largest U.S. public school system also said that increased labor costs in the coming years should be covered by growth in existing state and local revenue.
CPS’ financial outlook improved with a revenue boost starting in fiscal 2018 under a new Illinois school funding law. Escalating pension payments, drained reserves and debt dependency have pushed the district’s general obligation credit ratings into junk.
The yet-to-be-ratified deal reached last week would give teachers an average raise of 16% over five years. It also calls for enforceable increases in staffing of nurses and social workers, as well as a commitment to reduce class sizes.
The district confirmed last week a cost of as much as $1.5 billion over the life of the contract.
While the $7.7 billion fiscal 2020 budget the district’s board approved in August covered funding for higher teacher salaries and staffing, the final deal increased spending by $33 million.
An additional $15 million is also needed to cover a new contract with a union representing other school workers. An $86 million gap was caused by other factors including a recent move by Chicago Mayor Lori Lightfoot to shift $61 million in pension costs to CPS from the city.
The district said it would use $68 million in savings from not making up six of the strike days and a $66 million additional allocation of surplus Chicago tax increment funding to cover the higher spending.
Blake Yocom, an analyst at S&P Global Ratings, which rates CPS BB-minus with a positive outlook, said that while the one-time measures should close the fiscal 2020 budget gap, CPS could face future challenges.
“It’s more the long-term pressure that the contract created,” he said.
Chicago Teachers Union members will vote on the contract next week. The school board has scheduled a Nov. 20 meeting on the labor contracts and revised budget.
Reporting by Karen Pierog; Additional reporting by Brendan O’Brien; Editing by Peter Cooney
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