June 23--Mayor Rahm Emanuel is seeking to put off a massive teacher pension payment that's due at the end of the month until Aug. 10 under a measure that surfaced Tuesday and is speeding through the legislature.
The request for a delay comes after a series of internal Chicago Public Schools reports indicated that even if the school district drained its checking account, maxed out its credit card and burned cash set aside for other debts, it still would not be able to make the pension payment of more than $600 million, cover payroll and pay all the other due bills.
The measure was approved 8-2 by a House panel Tuesday, and is expected to clear the full chamber and also be heard in the Senate by the end of the day.
Interim CPS CEO Jesse Ruiz said the 40-day reprieve was needed in an attempt to hash out a more permanent solution. But Ruiz did not provide details on what a final agreement may look like or how CPS would make a payment if a deal is not reached by the new deadline.
"We just simply can't get this done by June 30," Ruiz told lawmakers. "So we are asking you here today for more time to continue the conversation to find a more permanent solution for Chicago Public Schools. Absent this action today, CPS will be in the position of deciding between paying... pensions or operating our schools and jeopardizing the beginning of the school year in September."
CPS could be in a better cash-flow situation Aug. 10, which is when state school aid payments are due. But that would require a state budget to be in place, and there's no guarantee it will be as Republican Gov. Bruce Rauner and the Democrat-controlled legislature remain in a stalemate.
On Tuesday, Emanuel noted the six-week extension coincides with the Aug. 10 state aide date and "gives us the time to work through the issues."
"Tying the pension payment allows us to work through all the issues in a comprehensive fashion, not just Chicago Public Schools," Emanuel said at a Southwest Side event to talk about the city's annual street paving program.
Asked whether Chicago schools will be able to open on time, Emanuel again did not directly answer, instead talking as he has this past month about the responsibility public officials have to work out these financial issues.
"As I said to the governor, as I said to the state leaders, we're now at a point, as I said yesterday, it's a breaking point. You have to work with us to find a way to meet the obligations to our teachers in the same way that you meet the obligations to teachers around the state," he said.
The Chicago Teachers Union issued a statement and again accused CPS of deliberately undermining its finances as it negotiates over an expiring labor contract. Chicago educators, the union asserted, "are united in their belief that the $634 million payment must be made as required by law."
"A mini pension holiday is like putting a tiny piece of gauze on a hemorrhaging wound," union spokeswoman Stephanie Gadlin said. "If there is any light at the end of this tunnel, we want to make sure it's not an oncoming train."
On Wednesday, the Board of Education is expected to authorize two borrowing packages totaling more than $1.1 billion to help get the district through the year. Those loans would be paid off with future property tax collections.
Additional property taxes are expected to start flowing to CPS on July 6 and total $816 million by Aug. 10, but that money along with revenue from the state and other sources still would not cover the bills, according to documents that have been presented in recent weeks to Chicago Teachers Union officials and state legislators. Those documents show a negative cash balance of $102 million on Aug. 10.
Although the borrowing would allow CPS to weather the immediate storm, it is not a long-term solution to CPS' cash deficit.
Emanuel repeatedly has said he wants state government to pay more into the teachers' pension fund -- but the chances of the state acting on that are iffy at best, given the state's own budget woes and the current legislative deadlock in Springfield.
Bukola Bello, lobbyist for the Chicago Teachers Pension Fund, said the fund did not take a formal position on the bill because a more comprehensive solution is under negotiation. But she said the delay in payment will force the fund to liquify $100 million in assets. Bello said the fund had previously proposed CPS move to a monthly payment schedule instead of a bulk annual payment, arguing it would save about $29 million a year in interest. But Bellow said CPS was opposed to the idea because of funding shortfalls.
At a House hearing Tuesday, CPS CEO Ruiz was pressed by Republican lawmakers on whether CPS could have made a partial payment on June 30 to prevent assets from being liquified. Ruiz said CPS could have made a $200 million payment, but wants lawmakers to provide more comprehensive help.
Sponsoring Rep. Barbara Flynn Currie, D-Chicago, said suggestions CPS could make a partial payment was a "red herring" from lawmakers opposed to the plan.
"What we are doing is giving the city and giving CPS a little bit of time to see if they can come up with resources, come up with solutions that will help us out of the fiscal problem," Currie said. "It's not just this payment, payroll is an issue. What's going to happen to the size of classes in the coming year."
Currie said the city would have liked "a little longer lead time" to find a solution, but "the offer on the table was 40 days and you take what you can get."
Currie said Emanuel and Rauner spoke about the proposal over the weekend and "my understanding is that this was an agreement between those two entities." Currie said she was confident the legislation would not get wrapped up in the larger budget battle between Democrats and Rauner.
"You never know, things change here from minute to minute but we'll see." Currie said. "My understanding is this is something the governor said he would support standing on it's own two feet if it gets to his desk."
Chicago Tribune's Juan Perez Jr. and John Byrne contributed.
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