Johnson rejected by Board of Education on CPS loan, pension payment

Mayor Brandon Johnson’s appointed Board of Education has refused to take on a pension payment that the mayor had insisted be paid by the school district. And the board and Chicago Public Schools leaders are strongly opposing a City Hall request that they take out a loan to cover the payment and a new Chicago Teachers Union contract, sources told the Chicago Sun-Times and WBEZ.

The stunning rejections from Johnson’s own school board and district leaders come as discussions continue on the short-term, high-interest loan CPS officials and board members fear could impact the district’s financial health.

The tension around taking on debt and the pension payment was the crux of a month-long delay of the school system’s budget proposal, issued Wednesday.

CPS faces a $505 million deficit, and the district’s preferred plan for covering that gap was through administrative budget cuts, laying off central office staff, restructuring debt and leaving vacancies unfilled. District leaders said they felt those were the best options after failing to secure more funding from state lawmakers.

The mayor publicly pronounced the day after the district released its budget that he would not accept any cuts. His office clarified Friday that Johnson is OK with operational efficiencies but opposes any cuts to “critical support staff” in schools. His deputy mayor for education said the administration was “working on something” to meet those wishes.

"The city, Chicago Public Schools, and the Chicago Board of Education are engaged in ongoing conversations to find solutions to the serious fiscal challenges that the school district faces," the mayor's office said in a statement.

Four sources told the Sun-Times and WBEZ that City Hall has been asking CPS to take out a short-term, high-interest loan to prevent the cuts that would have to be made to pay the pension payment and contracts for the CTU and the newly organized principals’ union. CPS officials have worried the one-time fix for this year’s deficit would grow next year’s hole, quickly approaching $900 million.

CPS has taken on debt to solve its financial problems and repair schools in the past and currently has about $9.3 billion of outstanding long-term debt. This year, it expects to make $817 million in debt payments, which means that nearly $3,000 per student that could be going to education is instead going to pay off debt.

The pension payment to the Municipal Employees’ Annuity and Benefit Fund, which covers retirement for school clerks, teaching assistants and other CPS non-teachers, has caused friction ever since former Mayor Lori Lightfoot shifted a large portion of the cost from the city’s budget — where it has historically been — to CPS’ books. Johnson worked for the CTU when they said Lightfoot was “ripping off CPS” and “robbing students” by doing so.

But in budget talks this year, Johnson pushed CPS to pay $175 million toward the fund. And his administration thought the district and Board of Education had agreed to do so.

It turns out that’s not the case.

The district budget released this week does not list the pension payment as an expense, according to the district.

Board President Jianan Shi and other board members could not be reached for comment.

The mayor’s former employer, the CTU, has grown increasingly hostile toward CPS CEO Pedro Martinez in the past week in a rapid deterioration of their once-cordial partnership. In its strongest statement yet, CTU Vice President Jackson Potter said Friday that Martinez’s budget is “an act of make-believe” and “the product of a man driving with his hands over his eyes.”

“It isn’t based on the needs of our students or our city. It is structural inequality masked as fiscal responsibility,” Potter said in a statement. “Instead of aggressively taking on the state’s underfunding of our schools, he prefers Black and Brown students pay the tab. Putting something ill-considered forward is the opposite of responsibility.”

Some CPS leaders have been disappointed that they aren’t getting more help from City Hall as they negotiate a new Chicago Teachers Union contract, a source close to talks said.

The CTU also has been critical of past loans taken out by the school district, but Potter suggested last week there are better loan options available. He said the CTU does not favor anything like the bad deals of the past, calling them “complicated financial instruments that were essentially predatory loans or payday loans in disguise.”

“We are not going to allow that to happen,” he said.

Potter said the real issue is that the state and federal government should be providing more support for schools. He also said the school district should look at whether it can get any money back from bad deals of the past.

Ald. Jeanette Taylor (20th), the mayor’s hand-picked chair of the City Council’s Education Committee, said she strongly opposes using a “high-interest loan” to avoid school layoffs.

“It’s a 'no' for me. I don’t think it makes sense," Taylor said Friday. "Go to the rainy day [fund]. Why would we put ourselves back in debt?"

“Don’t you know we already have a pension crisis? We have all these crises and we don’t do the right thing when it comes to trying to figure it out. Weigh all options before you do that. What are the other options? ... Have we looked at everything we can look at before we make that decision?”

Taylor said she does not blame the CTU for pressuring Johnson to borrow the money to stave off school layoffs.

“The union ain’t got nothing to do with this. This is about us being responsive to making sure these young people get what they need,” Taylor said.

“The previous administrations have made bad mistakes and we’re now having to deal with it and pay for it. But, we’ve got to be different than them. So I’m just hoping we look at all options before we go with some high-interest loan.”