James Meeks Chairman
Illinois State Board of Education 100 N. First St.
Springfield, IL 62777-0001

Tony Smith Superintendent
Illinois State Board of Education 100 N. First St.
Springfield, IL 62777-0001

March 4, 2016

Dear Chairman Meeks and Superintendent Smith:

Thank you for your interest in understanding the financial challenges facing Chicago Public Schools. You wrote that your sincere hope is to “identify opportunities for actions to be taken that will improve the financial condition of Chicago Public Schools, 'avoid certification of financial difficulty,' and, most importantly, result in fiscal stability.” We share the very same goals, since stabilizing CPS' finances is essential to giving Chicago's children the education they need for the bright futures they deserve.

To that end, we are happy to provide you with the materials you requested, so that you can better understand the depth and magnitude of the crisis that has reached our students‟ classroom doors, as well as the need for a solution from Springfield for students living in poverty all over the state – whether it‟s Chicago, Decatur, Elgin, East Moline or countless other cities.

Chicago's school crisis did not happen overnight, and it clearly won‟t be solved overnight. The solution is a shared one, and it cannot be reached without equitable funding from the State.

The Governor has acknowledged the extraordinary challenges CPS faces, and has pledged to address these problems with various actions, including offers that:

Illinois increases state funding support for low-income districts and rural districts (News- Gazette, 8/5/15);
Move Illinois “up significantly” from “dead last” among the states for general revenue support
for education (News-Gazette, 8/5/15);
Illinois picks up both the normal pension cost and defrays the cost of health insurance contributions in FY16 and FY17, if teachers absorb the pension pick up (Chicago Sun-Times, 7/8/15);
Illinois makes pension equity part of overall education funding reform (The Daily Herald,
8/19/15);
Acknowledge that “the first step in the process is to start funding our schools at higher levels” (WREX-TV, 2/22/16).

We hope that these materials will also clear up unfortunate misunderstandings about CPS' finances, particularly the claim that CPS receives more money than the rest of the state through special block grants. The reality is that CPS students receive less than $3 for every $4 that students throughout Illinois receive from the State.

For the sake of our children, we are not waiting to address our finances until the State reaches the solution needed for children living in poverty in Chicago and beyond. In fact, we are taking aggressive steps now, cutting hundreds of millions of dollars from our budget and reducing the FY17 budget deficit by nearly 30 percent. We are doing everything in our power to continue to invest in our children and minimize cuts to the classroom.

As you know, in order to offer bonds, CPS was required by federal securities law to provide a true and accurate picture of its current financial situation through its Official Statement. Much of the material you requested is drawn directly from this document. CPS also provided materials to investors in presentations, which are available publicly and included as attachments to this letter. In addition, materials are also taken from the CPS web site, which has volumes of relevant information.

Finally, a note on our budget projections and financial plan. CPS is making strong progress toward addressing our financial issues. We have made and plan to continue to make sound managerial and financial decisions. At the same time, it is conjecture to make definitive projections about our finances in the absence of a state budget, plan to fix the funding formula or state education spending projections for the next three years.

We'll update projections based on the best information we have in our FY17 budget, to be released this summer. In order to adequately project the information you requested over the next three years, we need the State to provide us with its projections.
 
We are providing hard copies of the materials you requested in an attachment, as well as links to where the material can be found on our web site. We are happy to meet with you at any time to walk you through CPS‟ financial condition in greater detail and to discuss how we can work together to achieve our shared goal of putting it on a stronger financial path going forward.

Sincerely,

 
Frank M. Clark
President, Chicago Board of Education

 
Forrest Claypool
CEO, Chicago Public Schools



ADDENDUM - REQUESTED FINANCIAL INFORMATION

      Annual bound audits (current year plus the past three years)

These audits, conducted by independent outside firms, are available on the CPS web site.

Link: http://cps.edu/About_CPS/Financial_Information/Pages/Annualreport.aspx

      Monthly bank reconciliations by fund (current year)

The attached statements include the monthly bank reconciliations for the first quarter of the fiscal year, which ended in September.

      Annual cash flow by fund (with actual amounts for each month that has been closed for current year plus the past three years)

Cash statements on an annualized basis are included within the CAFR.

Link: http://cps.edu/About_CPS/Financial_Information/Pages/Annualreport.aspx

      Projected cash flow for next year FY by fund

CPS will provide this information when the FY17 budget is finalized.

      Current trial balance, financial positions

As with bank reconciliations, CPS reconciles its trial balance on a quarterly basis. The most recent available information is from the first quarter. We have included an interim draft and unaudited trial balance.

Link: http://cps.edu/News/Documents/FIN_CPS_TB_Q1_FY2016.pdf

      Three year financial projections and assumptions (current year plus three projected FYs)

CPS will publish an FY17 draft budget this summer with projections reflecting the budget’s assumptions.

      Three year financial plan to obtain balanced budget plus budget reduction assumptions

CPS addressed this request in its letter. 

      Monthly payroll amounts (current year plus past three years plus three years projected)

Chicago Public Schools posts the District’s full Employee Position File quarterly. This lists the names, job, titles, departments and salaries of all full-time CPS employees.

Link: http://cps.edu/About_CPS/Financial_information/Pages/EmployeePositionFiles.aspx

      Major contracts such as food services, transportation, etc. to obtain annual increases (current contracts)

Contract awards are posted on CPS’ web site. We have included hard copies of contracts that are $30 million or greater.

Link: http://www.csc.cps.k12.il.us/purchasing/contract_awards.html

      Negotiated labor contracts (current year contracts)

Labor contracts are posted on CPS’ web site.

Link: http://cps.edu/Pages/CollectiveBargaining.aspx

      Health insurance assumptions (current year plus past three years plus three years projected)

Attached please find a summary of CPS health care costs for the past several years.

Link: http://cps.edu/News/Documents/FIN_summary_cps_healthcare_costs.pdf

      Alternate Revenue Bond Amortization schedules to determine increases of GSA or other revenue that need to go to debt services instead of operations (amortization schedule for each bond issuance)

Link: http://cps.edu/About_CPS/Financial_information/Pages/BuyingCPSbonds.aspx



Page Last Modified on Saturday, March 05, 2016