Sections:

Article

BOARDWATCH: Access Living Statement on Board's New Budget superseded when the Board refuses to consider the 'Proposed Amended Budget'

Rodney Estvan - October 24, 2012

[Editor's Note: The following is the text of the statement prepared to be delivered at the October 24, 2012 meeting of the Chicago Board of Education by Rodney Estvan of Access Living Chicago. The prepared statement was given to the members of the Board prior to the meeting, but after the Board admitted there were major problems with the budget presented by Chief Administrative Officer Tim Cawley and Chief Executive Officer Barbara Byrd Bennett, Cawley announced that the Board would not be voting on the budget at the October 24 meeting, and that hearings would be scheduled for November 5, 2012, at a location or locations to be announced.]

Rod Estvan, policy analyst for Access Living Chicago, speaking at the October 24, 2012 meeting of the Chicago Board of Education. Estvan's prepared statement was not read, since the Board changed its plans and did not submit the controversial budget at the October 24 meeting. Substance photo by George N. Schmidt.Statement to the CPS Board on the Proposed FY 13 Amended Budget, By Rodney D. Estvan M.Ed., Education Policy Analyst, Access Living Chicago, October 24, 2012

On or around the late afternoon of October 5, 2012 CPS put up on its website its Amended Budget for FY 13. This budget replaced the budget approved by the CPS Board on August 22, 2012 (1). The budget approved by the Board is the exact same budget CPS presented to the public in its "tentative form" on July 6, 2012. The budget adopted on August 22nd is referenced in the CPS amended budget which the Board votes on today as the "adopted budget." (2).

CPS unfortunately has removed the adopted budget from its website. When the public clicks "prior year budgets" (3) and attempt to access the FY13 budget that CPS approved they are sent back to the FY13 amended budget. Therefore, the public can't easily compare the amended to the approved budget unless they had the foresight to retain a copy of the approved budget before it was replaced by CPS.

It should be noted that the CPS Board never held a meeting of its Finance and Audit Committee to review either the approved budget or the amended budget it is now voting on. This was in our opinion a mistake, we believe if the Board had drilled down on the details of the amended budget it would have wanted public clarification about several matters including the following:

-- At pdf page 17 of the amended budget we read the following (highlight added): FY2013 Amended budget: The first year of the new CTU agreement is projected to cost $103 million above what was already included in the adopted budget. The $103 million includes $59 million for a 3% cost of living salary adjustment, $33 million for step increases (provided to teachers for additional experience), $5 million for lane increases (awarded for enhanced academic credentials/achievement), and $6 million for increases for non-teaching staff that are

CTU members (e.g., school clerks, clinicians, etc.).

It was Access Living's understanding based on various budget briefings given to the media that the adopted budget included a 2% cost of living adjustment for unionized teachers and other staff. In an article Ms. Rossi wrote for the Chicago Sun Times (July 11, 2012 ) on this issue she repeats that idea stating: "It also gives everyone — from teachers to top central office staff to principals — a two percent pay raise, at a cost of $50 million." (4). The problem in relation to this statement in the amended budget document is not the total cost presented for the CTU agreement, but the statement that the full cost of $103 was "above what was already included in the adopted budget."

In reality, assuming the two percent pay raise was already included in the adopted budget, the actual additional costs added for the contract's terms were significantly less than $103 million. We have no doubt if the Board members had carefully reviewed the amended budget in a committee session it would have corrected this statement. That was likely a mistake because in the amended budget it lists the Board's total salary costs as being $2,655,690,797 (5), but the adopted budget listed total salary costs as being $2,572,441,322. (6).

The difference between these two budgets is $83,249,475, considerably below the $103 million figure CPS cites in the amended budget, and this figure also includes salary costs for the increased teaching staff hired as part of the contract (see interim agreement dated July 24, 2012). (7).

-- We feel that the amended budget's discussion of CPS debt restructuring is oblique, in particular this passage is troubling: In August, 2012, CPS issued $470 million in new bonds. Typically, this would have required funds to be set aside during FY2013 to pay debt service. Accordingly, the FY2013 budget, prior to this amendment, included $13 million of General State Aid. However, by using “capitalized interest,” a portion of the bond proceeds were set aside to pay interest on the new debt. This frees up General State Aid, which then does not need to be set-aside for debt service. Similarly, the proposed restructuring will provide bond proceeds to pay debt service costs that would otherwise come from General State Aid. An estimated $42 million will be freed for the Operating budget.

Based in part on this capitalization of interest, which has not yet occurred by the way, CPS increased its estimated revenue coming from General State Aid (GSA) from the approved budget total of $862.8 million to $932.8 in the amended FY13 budget, or an increase of $70 million. What the amended budget does not tell the reader is that capitalized interest means borrowing the interest to pay off debt, rather than taking it out of current GSA payments. This debt restructuring will mean lengthening the number of years that debt will extend, forcing costs up over the long run to realize cash this fiscal year. The capitalization of the interest on the loan increases the amount of money CPS will have to pay back to its lenders. We think Greg Hinz explained this issue well in one of his recent columns. (8)

We think the Board should have met in committee to discuss the longer term implications of the proposed debt restructuring and possible alternatives to trying to realize cash via this approach. We also have very significant concerns over the idea that school closures in the years to come may provide some fiscal relief to the structural deficit CPS finds itself in. We would recommend that Board members think about the cost dynamics of school closures and consolidation, Newtown CT is going through type of analysis currently and there may be very limited savings by consolidating schools that are well under any reasonable utilization level. (9)

Before CPS holds hearings over school closings it should hold Finance and Audit Committee meetings to discuss what level of savings can be generated by school closings. The idea of converting some under enrolled schools into charters can't possibly generate savings within any reasonable time frame and it should not be considered given the current fiscal situation of CPS. (10).

NOTES:

1 It was approved by Board resolution 12-0822-RS1.

2 See pdf page 15 of the amended budget.

3 http://www.cps.edu/About_CPS/Financial_information/Pages/Financialinformation.aspx

Statement to CPS Board Page 2

4 Rossi, R (2012, July 11) "Boos and hisses at Chicago Public Schools public meeting" Chicago Sun Times.

5 This appears in a table on pdf page 22 of the amended budget.

6 Pdf page 21 of the approved budget title "proposed" until it was approved.

7 On October 10, 2012 the CPS Budget Officer and Chief Administrative Officer were directly emailed about this issue but we received no response to our inquiry. The email was also copied to Ms. Rossi at the Chicago Sun-Times.

8 Hinz, G (2012, October 20) "Not all local budgets play by the rules" Crain's Chicago Business.

9 See http://www.newstimes.com/news/article/Will-closing-a-school-save-money-405382.php and http://newtown.patch.com/blog_posts/board-of-finance-special-meeting-possible-school-closure-be-there?logout=true The Newtown CT school district is composed of only 9 schools that serve 5,490 students, but the complexity of the discussion relating closing only one school and whether or not there would be a cost savings for the district is useful as an example of the relative complexity of this issue.

10 Ahmed-Ullah, N. S, (2012, October 11) " Charter networks being urged to take over troubled schools in city" Chicago Tribune.

Copyright 2006-2020 by Substance News. All rights reserved.