By: Ted Dabrowski and John Klingner
Coverage of the Chicago teachers strike focused largely on the contest of wills between a new mayor vs. a combative teachers union. But now that’s its over, the cost of the contract is finally being tallied and it totals at least $1.5 billion over five years – money the junk-rated district simply doesn’t have. It’s the most costly teachers contract in CTU history, and that’s even before the cost of pensions is considered. CPS has yet to utter a word about increased pension costs.
Just two to three years ago, CPS faced a true liquidity squeeze. Its position was so weak it actually borrowed to cover its debt payments. Only a state bailout – more money from a favorable new funding formula and a pick up of the district’s $220 million in normal pension costs – got CPS out of its mess. Now, the costs of this new contract set CPS back on the path it was on two years ago. And it accelerates the district and the city’s slide towards bankruptcy.
Wirepoints has run an initial estimate of the contract’s costs using the 41-page agreement and the limited data publicly available. The cumulative 5-year costs total $1.4 billion, though that estimate doesn’t include the value of many benefits due to a lack of data: sick day accumulation, additional health care benefits, stipends for support staff, and more. It also does not include how much the district’s pension liabilities will go up as a result of the contract – what Mayor Lightfoot calls the “most generous” ever.
Wirepoints’ cost estimate includes Mayor Lightfoot’s original offer of 17 percent raises across the board, additional raises on top of that for select workers, and the hiring of hundreds of new support staff. The contract will cost Chicago an additional $500 million a year by 2024.
Taxpayers – the same ones that are expected to plug the city’s $838 million budget deficit – will have to shoulder the cost.
CPS’ credit rating, according to Moody’s, is still five notches deep into junk, and the district’s pension shortfall is nearly $25 billion. With little ability to borrow more, and with additional money from the state still in doubt, higher property taxes are likely the only way for CPS to pay for the contract.
Wirepoints’ estimate coincides largely with the $1.5 billion the CPS budget office has reported, though it has yet to release the details behind that amount.
What about pensions?
The budget office also hasn’t released any estimate as to how much this contract will boost the cost of pensions. Pensions haven’t been a part of the discussion since the beginning of negotiations.
The district’s pension shortfall was expected to increase by $1 billion to $13.2 billion by 2024, even before the new contract was agreed to. Now Chicagoans can expect the shortfall to rise more than was already predicted by the actuaries. Salary increases of more than 24 percent for the average teacher, 48 percent for the average nurse and hundreds more in staffing are sure to increase the district’s pension obligations.
Another pension cost yet to be tallied is the new contract rule allowing teachers to accumulate 244 days of unpaid sick leave. The previous contract only allowed them to bank up to 40 days over their career.
Under current pension rules, teachers who accumulate that 244 day maximum amount of sick leave can exchange it for more than a full year’s worth of pension service credit. That allows those teachers to retire at least a year early and still collect their full starting pension benefit. To see a comprehensive report on bankable sick leave the by same authors, read Unpaid sick leave spikes Illinois teachers’ pension benefits.
Ordinary Chicagoans in the private sector don’t get anything like the benefits offered in the teacher’s contract – guaranteed, multi-year raises, bankable sick leave, premium healthcare benefits, etc. – but Lightfoot has locked them into paying for this contract for five years, regardless of the eventual state of the economy.
It’s a deal set to drive even more Chicagoans out. The city’s population is already shrinking, the only major metropolitan area in the country to do so. Real home prices have fallen since 2000, making Chicago an outlier nationally. And per-household debts for government worker retirements are the nation’s highest for any major city.
People can debate who won the strike all they want, but expect everyone to lose. As more Chicagoans leave, the burden on those who remain will become impossible.
Read more details about the strike and Chicago’s financial crisis:
- Next time the CTU says Chicago teachers don’t get Social Security, show this graphic
- Wirepoints’ speech to the City Club of Chicago: “By focusing on Chicago’s one-year budget, it’s like we’re treating an intensive care patient with an aspirin.”
- Lightfoot’s budget won’t stop Chicago’s downward spiral
- Chicago teachers strike: Why is no one talking about pensions?
- Here is the list of benefits Mayor Lightfoot is offering to the teachers’ union and why it’s terrible for Chicagoans
- Why Chicago’s Lightfoot should push for a pension amendment, not tax hikes