This spring, state law established the Chicago School Reform Board of Trustees and directed it to assume control of the Chicago public school system. The new board was to expand on the educational progress made since the Chicago School Reform Act of 1988 and bring fiscal stability to the district.
To that end, the first, and perhaps most important, challenge was to develop a budget that not only allowed schools to open on time in September, but also addressed the district’s structural imbalance between revenues and expenditures. The seemingly annual budget crises of the school system resulted from the district having long-term expenditure commitments that exceeded its long-term revenue sources.
Since 1990, deficits resulting from this imbalance were papered over with fund transfers and the use of one-time revenues, enabling schools to open in the fall but also condemning the district to year-to-year subsistence, with the budget hole reappearing at the end of each fiscal year. That approach emphasized the short term over the long term, often aggravating the long-term financial picture for the district. This board has brought new thinking.
A review of the 1995-96 budget and the accompanying four-year budget plan indicates that the budget, on the whole, is a good thing for the school children of Chicago.
First, this budget is balanced, which means that schools opened on time and will be able to operate for the entire year. Education could be the focus from the moment school doors opened.
Second, this budget indicates the board is concerned about bringing long-term financial stability to the Chicago Public Schools. This budget is not an isolated document; rather, it fits into a larger scheme. A four-year contract has been negotiated with the Chicago Teachers Union. A four-year financial plan indicates that the management team believes balanced budgets are reasonably capable of being achieved through 1998-99. The plan also indicates that the board expects to reduce, but not eliminate, the system’s structural deficit.
Third, expenditure cuts were made in a manner that did the least damage to the classroom. Class sizes were kept at their old levels. The majority of position reductions were made in non-school units and in locations removed from the classroom. This budget focuses resources on the classroom; hopefully, that will continue in subsequent budgets.
That the district is pursuing a long-term financial vision that relies on expected revenue sources, and that it has long-term labor contracts mean that education improvement can now be the primary focus of the system. While the Panel is concerned about some budget cuts, the new administration should be applauded for starting down a responsible financial path.
The new management team has been hailed in some circles as miracle workers because it solved in less than two months a budget problem that has annually plagued this school system. To some extent, this comparison is misleading, because the current administration operates under a radically different set of rules and circumstances than did previous administrations. The effort to root out waste in the system and to crack down on contract abuses is commendable; these are actions the old board could have taken but chose not to pursue. However, three items that emerged from the new legislation were major factors in the ability of the Board of Trustees to present a balanced budget to the public only six weeks after taking control of the system. These are:
LABOR RELATIONS The new legislation was dramatic, both legally and politically, in changing the standard relationship between management and labor in this school district. Legally, the legislation banned strikes for 18 months and took off the bargaining table any number of items which were previously subject to collective bargaining. These moves will allow the board to appropriate, for example, money from the pension tax levy for general-fund purposes for the next four years.
It also gave the board the dominant position in contract negotiations with the Chicago Teachers Union. Politically, the legislation sent strong signals that privatization had to occur, and the board did that by eliminating approximately 1,000 maintenance and operations jobs and contracting out certain responsibilities previously covered by board employees.
The legislation also established a direct link between the Board of Trustees and the mayor. This board was directly appointed by the mayor with the mission of establishing financial stability for the system, which is a far cry from this relationship five years ago, when the mayor’s handpicked Interim School Board guaranteed employee contracts that the district did not have the long-term resources to cover.
EASING FUNDING RESTRICTIONS The new legislation allows the board greater flexibility in the allocation of revenues, which the new board took advantage of. Money previously dedicated for pension costs and playground services, for example, was moved into the general fund.
Similarly, money previously dedicated for textbooks and equipment was moved into the general fund. Hopefully, the equipment notes the board intends to sell will allow schools to purchase the books and equipment to which they otherwise would have been entitled.
New block grants for state categorical programs allowed the board to move yet other money into the general fund. The end result is that this board has a larger pool of general funds with which to work, which allows it greater opportunities to reduce the deficit.
NO FINANCE AUTHORITY OVERSIGHT Were the School Finance Authority powers still in existence, this budget would not have passed muster. That’s because the plan to reduce yearly outlays in building improvements by funding them from a proposed $600 million bond issue, and the projected savings from vendor contract renegotiations are merely forecasts, not reality. This is not to say that these plans are bad ideas or cannot be realized; rather, it is just an acknowledgment that the Finance Authority imposed stiffer budgetary restrictions on previous boards.
This budget and the proposed four-year financial plan represent just the beginning of bringing financial stability to this system. It is not accurate to state that the Board of Trustees has approved a four-year balanced budget; rather, the board has approved a balanced budget for the 1995-96 school year and developed a plan to generate balanced budgets through the 1998-99 school year.
Plans are built on projections, and projections are prone to change, which then forces the plans to be altered. While the assumptions behind the four-year budget plan appear to be solid, future events could throw this board a curve that would force it to revisit its budget projections through the end of the decade.
Even if the next four years work out exactly as this board plans, the district will still face a deficit in 1999-2000. While the structural deficit will be reduced, it will not be eliminated. Initial projections peg it to be slightly less than $100 million, and that number will climb if the board is required to stop appropriating the pension fund levy for general fund purposes once the four-year term of the legislation ends.
The work is not over. The 1995-96 budget is the first step in bringing four-year stability to the school system. Four-year stability is a great improvement over the year-to-year instability that existed under previous management, but “four years” should not be confused with “permanent.” This board must continue to be vigilant in maximizing revenues and minimizing expenditures so that the structural deficit can be brought down even further and eventually eliminated. The financial stability of any fiscal plan must extend beyond its intended four years.
Todd Rosenkranz is the senior budget analyst for the Chicago Panel on School Policy.