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Proposed FY2011 Budget FAQs 

 

November 1, 2010

 

On August 9, 2010, Chicago Public Schools released a preliminary budget for FY2011.  The district also held three community hearings to allow the public to ask questions about the proposed budget.  CPS officials gathered the questions. Answers can be found below, and additional questions and answers will be added on an ongoing basis.

 

Why weren’t more copies of the budget book printed?

 

CPS prints a limited number of proposed budget books to conserve costs. The proposed budget book is posted online at cps.edu for public review and hard copies are available on file in the Board Office for review. Once the budget book is finalized and approved by the Board, copies are distributed to public libraries and schools. In addition, the final budget is posted online.

 

Are there Spanish editions of the budget book forthcoming?

 

Currently CPS only publishes the budget book in English. However, CPS recognizes that large populations of CPS students are bilingual and come from Spanish speaking households. Therefore, CPS will make key sections of the final budget book available in Spanish this year.

 

Where can I find positions and salary information in the budget book?

 

The budget book provides position information and not employee information. Additional budget files in the index of files available online includes budgeted salaries for positions. Employee names, corresponding positions and salaries are posted online and updated four times a year. After the Board approves the budget we will update the link with FY 2011 position information.

 

Where can I find information on the salaries of senior leadership?

 

The position file posted online includes salaries of all CPS employees including the CEO and other senior leaders. CPS will update this position file four times a year.

 

What is the status of the $800 million line of credit?

 

First, it’s important to understand what a line of credit actually is. A line of credit is an opportunity to borrow funds that must be paid back from local tax revenues. It is not new or incremental revenue for the district.

 

On June 15, 2010 the Board of Education authorized a line of credit to cover temporary cash flow fluctuations in FY 2011, such as delayed payments from the State of Illinois. Since then, CPS has solicited bids from financial institutions. CPS is in the process of finalizing the line of credit with several banks and negotiating the terms of the transactions, including the interest CPS will pay and the total amount of the line (which will not exceed what the Board authorized). CPS will negotiate the best possible interest rates and lowest fees.  CPS expects the line of credit to be in place and ready for draw in September. 

 

Some have suggested CPS use this line of credit to close our budget deficit. This is not a legally or fiscally viable option.  We may only draw on the line of credit to cover district-wide expenses (such as payroll) when we have not received the revenue from the state or other sources to cover these expenses.  

 

Why does CPS use consultants? Where can I find consulting figures in the budget book?

 

The reality is that it’s impossible—or least very, very expensive—for any organization of CPS’s size to be able to do everything. CPS hires consultants and service providers who specialize in certain fields to add to our capabilities on a temporary, as-needed basis rather than a permanent one. This helps ensure that the District is getting the most out of its resources.

 

Consulting expenses include a wide array of contractual services our schools and students need—many of them mandated by the federal or state government. Consulting fees include what we pay to outside providers of tutoring, special education services, professional development, art and athletic programming, after school programming and technical and IT services, among others.

 

Consulting spending is budgeted as a part of the larger Professional, Non-Professional and Technical Services budget line. This line totals $152.7M in FY 2011 (see pg. 94 in the proposed budget book). More than half of the total budget line is budgeted directly to schools, mostly for curriculum coaching and technical support, while another $50M is appropriated for federally mandated after school tutoring programs.

 

If you’d like to see how much we reduced FY 2010 consultant spending, you can see a summary and a full list of providers here

 

Why don’t we answer questions at budget hearings? Why isn’t there an honest dialogue at these hearings?

 

We view the budget hearings as just that: hearings. Our job is to listen, collect your feedback, and report it back to our larger team and the Board of Education. If we engage in individual conversations during the hearings, we don’t get to hear everyone who attends. And, many of the questions asked at the hearings require detailed explanations that don’t lend themselves to short answers.

 

How will CPS use the money from the federal education jobs bill? Are we going to divert that money to “programs,” or use it for its intended purpose?

 

CPS will use the money from the federal jobs bill only in ways that are consistent with the Department of Education guidance, including compensation and benefits and other expenses necessary to retain existing employees, to recall or rehire former employees, and to hire new employees, in order to provide early childhood, elementary, or secondary educational and related services. Although we don’t know when the money will be allocated, we are acting immediately to ensure a smooth start to school. We will focus first on returning average high school class size to normal levels and restoring some bilingual positions.

 

Why do we spend so much on legal fees? Why do we employ more than 100 lawyers? And if CPS has so many in-house lawyers, why do we also employ outside counsel?

 

Our Law Department employs 46 lawyers to ensure the district complies with all federal, state and municipal laws. As you might imagine, laws and regulations governing schools, students and employees are complex and ever-changing. Our legal team meets an enormous array of obligations, including providing daily legal advice to the board, executive managers and staff.  The department provides advice and support to the principals at more than 650 schools in the implementation of federal, state and local education laws and policies. The department plays a key role in investigating misconduct and unlawful behavior against students as well as advising and assisting in employee and student discipline procedures. Other areas of representation and support include transactional matters, land acquisition and school construction and commercial litigation. Above all else, the department defends school district officials and employees, including teachers and educational support personnel, in lawsuits filed against them in federal, state and local forums. 

 

Because the law is so complicated, it’s nearly impossible to employ an expert in every part of it. We do employ outside counsel for advice on specific issues and expertise on issues to add to the office’s capabilities on a temporary, as-needed basis rather than a permanent one. This helps ensure that we’re getting the most out of our resources.

 

Why does CPS claim that the pension relief provided by the General Assembly is a victory?

 

We do not see this as a victory, but as a short-term, temporary solution for this fiscal year and the next two. Even during this temporary relief, CPS continues to contribute significant payments to the plan. Please note that Chicago Public Schools is the only school district in the state that is required to make contributions to the pension plan. These contributions come from the same operating fund that CPS uses to pay teachers, benefits and other operating expenses. In other districts, the state makes that contribution.

 

Did decision-makers attend the budget hearings?

 

Yes, decision-makers did attend the hearings. But decision making is a process that involves many people, not just one or two. Chief Financial Officer Diana Ferguson and Management & Budget Officer Christina Herzog represent the larger team that builds the budget each year. That includes the budget staff, senior leaders of the district, and the 680 principals of our schools. Ultimately, members of the Board of Education are the decision makers for the district. CPS employees who attended the hearings are responsible for conferring this information to the Board.

 

Were teachers dismissed without regard to seniority? Did CPS deny these teachers due process? Will we bring those teachers back with funds from the federal jobs bill?

 

Teachers were not dismissed without regard to seniority. Regrettably, due to CPS’ financial shortfall, teachers and many other employees were laid off or honorably dismissed.  All teacher layoffs occurred in accordance with the CTU collective bargaining agreement, the Illinois School Code and the Illinois Educational Labor Relations Act. In anticipation of receiving funds from the federal jobs bill, some, but not all, of the teachers who were honorably terminated will return to CPS. CPS is currently working directly with principals and their focus is opening positions, which will return high-school class size to pre-July 1st levels.

 

Why haven’t teachers laid off prior to this year been able to participate in job fairs this year?

 

Given the size of the displacements this year due to budgetary reasons, drops in enrollment, school actions and relatively small number of vacancies for which schools are hiring, we felt it most important to offer this service and support to our recently displaced teachers as they have had a condensed time period to search for work compared to teachers displaced in prior years. 

 

Does CPS receive funds from the Illinois state lottery?

 

Yes, CPS does receive revenue that the State of Illinois collects from the Illinois state lottery. The Illinois state lottery is one of the state’s revenue sources for K-12 education funding; it is not additional funding on top of the state K-12 education budget.

 

When the Illinois General Assembly created the state lottery in 1974, it did not restrict the lottery revenue to a specific educational program. Revenue from the lottery is pooled with other revenues in the State General Funds. As a result, lottery revenues have not significantly increased the K-12 state education budget. Because all revenue sources are co-mingled by the state, there is no way of knowing how much is distributed to CPS.

 

How were the budget hearings publicized?

 

CPS advertised the dates and locations of the budget hearings in the Chicago Sun-Times on August 9, 2010. In addition the dates and locations of the hearings were posted on cps.edu and information was provided to area offices, Local School Relations and principals for distribution.

 

Will the Board of Education review transcripts from the budget hearings prior to voting?

 

The Board of Education will have a copy of the budget hearing transcripts for review prior to the Board Meeting on August 25. In addition, staff who attended the budget hearings will brief Board members on the hearings prior to the meeting.

 

When will the Board of Education vote on the budget?

 

The Chicago Board of Education will vote on the FY 2011 budget at the August 25th Board Meeting. (UPDATE: The Board unanimously passed the budget at the August Board Meeting).

 

How much funding does CPS receive from Medicaid and where is it reflected in the budget?

 

CPS expects to receive $49.5 million in Medicaid reimbursement for FY2011 (this is reflected on pages 36-37, 80-81, and 83-85 of the FY2011 Proposed Budget.)

 

Medicaid revenue represents a reimbursement of approximately 15-20% of eligible school-based health services. These services can include case management provided by CPS counselors and clinicians to CPS students with disabilities as required by their IEPs, as well as hearing and vision screenings of all students. CPS uses these reimbursements to partially cover the cost of employees who provide the services, such as social workers, speech pathologists, psychologists, nurses, occupational and physical therapists, audiologists, and hearing and vision technicians. 

 

Where are principal and assistant principal salaries budgeted?

 

The total budget of $2.0659 billion for teacher salaries is listed in the appropriations table on page 39 of the proposed FY2011 budget book and includes $79.9 million for principal salaries and $72.6 million for assistant principal salaries. It is important to note that the majority of elementary APs are ‘teaching APs’ (estimated at more than 450 full-time employees) and provide classroom instruction in addition to school administrative duties.

 

The breakdown of salaries in the budget book is based on account codes in our general ledger; we have separate account codes for teachers (which includes both principals and APs – who are teaching APs at elementary schools) and account codes for educational support personnel (ESPs). 

 

Teacher salaries are budgeted at more than $2 billion. Does this only include salaries? Where are pension benefits budgeted?

 

Teacher salaries are budgeted at $2.0659 billion in the proposed FY2011 budget book. This includes regular salaries for positions (teachers, principals, assistant principals, coaches and participants in the Chicago Teachers Pension Fund) as well as extended day salaries for teachers who teach as part of before- or after-school programs and summer school; vacation/sick day payouts for eligible teachers leaving the district; and substitute teachers.  A breakout of these appropriations in the proposed budget book is below.

 

Teacher Salaries

$1878.0M

Teacher Extended Day

$106.3M

Teacher Substitutes

$39.4M

Teacher Vacation/Sick Payout

$42.1M

Total

$2065.9M

 

Teacher pension costs are included on the Teachers Pension line item (this includes both the CPS’ employer share of the pension costs as well as the cost of the additional pension benefit that CPS pays on behalf of employees). 

 

Salary and pension costs are included on separate lines for non-teachers: ESP (Educational Support Personnel) Salaries and Education Support Personnel Pension.  Healthcare costs for all employees are included in the Hospitalization/Other Comp line.

 

How are schools organized in the schools-at-a-glance section of the budget book?

 

Schools-at-a-glance information is listed alphabetically by schools’ abbreviated/common name within school type (neighborhood, alternative, citywide, etc.).  Both the full name and abbreviated/common name are listed for reference. For example, Jane Addams Elementary School is listed as “Addams.”

 

The school segment reports are ordered by technical unit number and therefore we have included an index with both full name and abbreviated/common name. That index will direct you to the page number on which you can find a particular school.

 

Where is the TAP funding in the budget?

TAP is included in the Human Capital budget amounts on pages 322, 324, 358 of the FY11 Proposed Budget. 

 

The U.S. Department of Education’s Teacher Incentive Fund awarded a total of $27.5 million to CPS in FY2006 for the Chicago TAP program.  This is a five-year grant with an end date of September 30, 2011. CPS is collaborating with several partners, including the Chicago Teachers Union (CTU), the Chicago Principals and Administrators Association (CPAA), and The Chicago Public Education Fund (The Fund) to implement the program, which aims to improve student achievement by attracting and retaining quality teachers in 36 of the district’s highest-need schools.

 

The Chicago TAP program provides classroom observations, job-embedded professional development, and school-based career opportunities to teachers and principals.  The first year of the grant in FY2007 was a planning year, so there were no school expenditures for that year.   From FY2008 through FY2011, there were 10 schools per year that participated in the program for a total of 40 schools.  In the final year, 36 of those schools will be implementing TAP. For FY2011, TAP expenditures include salary and benefits for 60 lead teachers at $6 million, 19 new lead teachers at $1.9 million, and performance-based compensation for all 36 schools at $2.7 million.  

 

Does CPS receive TIF funding?

Yes, the City of Chicago has committed TIF funding to CPS for school construction and improvements, including expansions, renovations and ADA improvements. TIF has also supported a range of other improvements at CPS, from new and improved playgrounds and lunchrooms to facility improvements. These enhancements provide quality of life improvements that benefit both students and staff.

 

The use of TIF has not only allowed CPS to modernize many facilities located in TIF districts but it has also allowed CPS to redirect its own limited capital budget to CPS projects where there is not a TIF district and those TIF funds aren’t  available.

 

Can TIF funds be used to balance the budget?

No, TIF funds can only be used for costs directly related to a TIF-funded capital project. CPS cannot use TIF funds to reduce the FY 2011 operating budget deficit since this would not be a proper, lawful use of funds.

 

However, indirectly, TIF funding does free operating dollars that would be needed to support debt service on capital projects such as the building, renovation and expansion of schools at CPS. The use of TIF to fund schools projects and issue bonds means that CPS does not have to issue bonds and use its operating dollars to pay debt service. These resources can be used to fund CPS operating costs while still allowing capital projects to move forward.

 

Where can I find information on TIFs?

The following websites have additional information about TIF funding and its impact on CPS:

 

General information

http://www.cityofchicago.org/city/en/depts/dcd/provdrs/tif.html

http://www.cookcountyclerk.com/tsd/tifs/Pages/default.aspx

 

Civic Federation website summary of the funding that CPS gets from TIFs

http://civicfed.org/civic-federation/blog/chicago-public-schools-reap-tif-revenues

 

Civic Federation article about the impact of TIFs on CPS revenue

http://civicfed.org/civic-federation/blog/tif-does-not-take-money-away-chicago-public-schools

http://www.civicfed.org/civic-federation/blog/tif-solution-chicago-public-schools%E2%80%99-budget-crisis

 

When did the board begin using variable rate debt? Who made the suggestion to do so? 

The Board of Education elected to begin using variable rate debt in Fiscal Year 2001, with the advice of independent financial advisors.

 

When were the first interest rate swaps used? How does this align with the passage of the Board’s derivatives policy?

The Board of Education first used interest rate swaps in Fiscal Year 2003. CPS followed the guidelines under state law, which specifically allows interest rate swaps.  Additionally, the Board approved swap use in its bond resolution in 2001 prior to any issuance. The existing debt management policy at the time, while not specifically addressing derivatives, allowed the Board to assess financial alternatives to include new and innovative financing approaches that take the best advantage of market conditions.  The link to the current debt management policy is below. It specifically approves the use of instruments that provide interest cost savings and specifically prohibits entering into derivatives for speculative purposes: http://policy.cps.k12.il.us/documents/404.1.pdf

 

Who recommended that CPS become involved with interest rate swaps?

 

The decision was made by the Board of Education with the advice of independent financial advisors.

 

How much of the debt service fund is set aside for payments on interest rate swaps?

 

The debt service fund balance estimate is $164 million as of June 30, 2010. We are confident this amount is sufficient to cover any potential payments on interest rate swaps, as well as other functions in the debt portfolio.

 

What is the current position on your derivative instruments? What amount would the district have to pay its counterparties based on that rate if the contracts were due to be paid today?

 

As of June 30, 2010 the position of CPS’s swaps is negative $216 million. This means that if we elected to terminate the swaps it would cost $216 million. However, CPS has no intention of terminating these swaps at the current time.

 

 Are the derivatives mentioned above CPS’s swaps or do they belong to a different city department? Which one?

 

All of the swaps reported are CPS’s swaps. CPS has no responsibility for nor does it report any derivatives of other city agencies.

 

The district’s debt management policy requires the Board to prepare a quarterly derivative report. How is this requirement fulfilled?

 

CPS complies with its debt management policy. The CPS Investment Committee meets quarterly to review investment reports, including derivatives reports.