July 01--Mayor Rahm Emanuel directed Chicago Public Schools to meet Tuesday's deadline for a $634 million contribution to Chicago's teachers retirement fund but warned making the state-mandated payment would lead the cash-strapped district to make classroom cuts ahead of the new school year.
In the days leading up to Tuesday's deadline, Emanuel had sought to delay the payment until August while calling for broader changes to how Chicago teacher pensions are funded. But with Springfield mired in a wide-ranging struggle between Republican Gov. Bruce Rauner and ruling Democratic lawmakers, there was little momentum to grant Chicago relief.
That left Emanuel with a choice: Skip the required pension payment and risk being sued by teachers and having the school district's woeful credit rating sink further or make the payment and face a cash crunch that could lead to deep classroom cuts.
By late Tuesday, the Chicago Teachers' Pension Fund announced Emanuel had decided to do the latter, confirming it received a $619 million payment that, combined with an earlier $15 million contribution, covered the full requirement.
Both Emanuel's administration and CPS did not respond to questions on what funds, what borrowing or what combination of the two the district tapped to fulfill the payment. In a brief statement, interim schools CEO Jesse Ruiz would only say that borrowing was involved.
"We really don't have insight into how Chicago Public Schools came up with the money to pay this tonight," pension fund Executive Director Charles Burbridge said during an appearance on WTTW-TV on Tuesday night. "We want to make sure the checks don't bounce."
In the same email containing the Ruiz statement, CPS officials said 1,400 positions "will be impacted beginning Wednesday." They declined to answer questions about what that meant.
Earlier, Emanuel had refused to say whether he'd make the payment during an afternoon news conference at City Hall, where he reiterated his frequent complaint that it's unfair for Chicago taxpayers to contribute to the rest of the state's teachers pensions through their income taxes while also having to pick up the CPS teacher pension costs through their property taxes.
"In Aurora, they can focus on education. In Winnetka, they can focus on education. In Chicago, because of the way the system is set up, we focus on a pension payment," Emanuel said. "That means the resources of our teachers, principals and administrators is not about education, but they're tied around an axle figuring out if they make the pension payment that no other part of the state is required to do."
The district has more than $1.1 billion in new short-term borrowing authority approved last week by the school board, on top of $500 million in authority it already had. But $700 million of the district's debt must be repaid by early October, with the rest due a year later.
That could lead to the district running out of cash to pay all its bills during the coming school year -- unless there are significant education cuts, new revenue or a combination of the two.
Emanuel and Ruiz are expected to hold a news conference Wednesday to outline the classroom ramifications of making Tuesday's payment.
"School will start, but our ability to hold the impact of finances away from the classroom, that's going to change," Emanuel said. But the mayor declined to say whether such a breaking point would lead to teacher layoffs or increased class sizes.
Late Tuesday, Emanuel ally and Senate President John Cullerton filed a new proposal in Springfield aimed at restructuring how CPS pensions are funded. Much of the plan traces an approach unveiled by Republican Gov. Bruce Rauner last week.
The legislation would require the state to pay for the district's so-called normal pension costs -- the annual amount CPS owes to the pension fund, not including years' worth of missed payments that were signed off on by state lawmakers. The bill also would give CPS $200 million to help absorb the blow of Tuesday's pension payment but would not address the $500 million in unfunded pension liabilities the district still owes.
Chicago Tribune's Hal Dardick and Juan Perez Jr. contributed.
bruthhart@tribpub.com
