Mayor Brandon Johnson warns he will need to dip into reserves unless school board approves pension payment, borrowing

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Mayor Brandon Johnson warns he will need to dip into reserves unless school board approves pension payment, borrowing

Mayor Brandon Johnson’s administration said Tuesday his latest pension payment and borrowing plan for Chicago Public Schools is imminently needed to avert a city budget deficit, the latest twist in his struggle with CPS leadership over the fate of the school district’s finances.

At a City Hall news conference, the mayor and Chief Financial Officer Jill Jaworski addressed their March 30 deadline to persuade the school board to make a $175 million pension payment that is blowing a hole in last year’s budget. His team’s pitch for the similarly cash-strapped school district to cover that cost — as well as the start of the upcoming Chicago Teachers Union contract — is to issue

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, the Tribune reported last week.

Now, Johnson’s team is arguing that if the school board doesn’t follow suit, he must then ask aldermen to authorize dipping into city reserves to close the 2024 deficit. A significant drawdown of the city’s reserves could trigger another credit downgrade from the ratings agencies. S&P already

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the city on the second-lowest notch above junk status because of Johnson’s 2025 spending plan.

That the mayor is now staring down the barrel of those two politically unsavory choices is a remarkable turn of events after he endeavored for months to flex his power over CPS CEO Pedro Martinez during Chicago’s final stretch of mayoral control of the Board of Education. But Johnson brushed off the insinuation that his administration could have better prepared for this outcome.

“Look, I don’t know if any of the situations that I’ve been under have been ideal, right?” the mayor told reporters. “This is not just simply about responding to inconvenient circumstances. It’s about creating the ideal circumstances so that parents actually feel confident that the education that their child will get will reflect the education that children in certain parts of the city have gotten. That’s the ideal situation that we’re fighting for, and that’s why I’m mayor of this city.”

Jaworski pinned blame for the city and school district’s financial predicament on CPS leadership, while acknowledging that aldermen were assured during the most recent budget cycle that the remaining deficit from 2024 would be balanced once the district got enough tax increment financing funds to pay for the pension cost.

Though Johnson’s 2025 budget allocated $298 million in TIF surplus funds, CPS opted to “budget some of that for other uses,” Jaworski said.

In a statement, CPS said the district can only make the pension payment with further TIF revenue from the city.

“In July 2024, CPS put forward a balanced budget that was approved by the Board of Education,” the statement said. “Given our budget challenges, the district worked diligently to identify as many cost savings as possible while aiming to best support our students and staff, building on the district’s success and ongoing work of the past couple of years.”

Last week, Johnson’s deputy mayor for labor relations, Bridget Early, began disseminating a plan for the school district to accept the obligation of the $175 million Municipal Employees’ Annuity and Benefit Fund, which covers non-teaching CPS personnel, by March 30. City officials clarified Tuesday that the swift turnaround is because of the city’s 90-day deadline to finish accounting for the 2024 fiscal year that ended Dec. 31.

But such an amendment to the CPS budget would require two-thirds approval from the 21-member hybrid school board. The president of the board only votes in a tie, which means seven board members voting against the plan would kill it.

Johnson, whose mayoral campaign was buoyed by the teachers union, currently maintains control of the board. Until 2027, the mayor gets 11 appointments while the rest are elected. Of the 10 members who won seats in November, four were endorsed by the teachers union and six were charter school-backed or independent.

At least one of the elected members with CTU support has come out against taking out a loan for the district.

“I think it’s damaging in the long run, and I’m not going to be voting in that capacity to do that,” Jennifer Custer, an elected school board member who won in the Far Northwest Side’s District 1, said. “In the absence of additional revenue, CPS lacks options to cover both the labor contracts and the pension payment without enacting midyear cuts to schools.”

Custer said there is “potentially a strong cohort” — including appointed members — leaning against the mayor’s idea to borrow $242 million.

But her colleague Jitu Brown, a union-backed elected board member who ran unopposed in the 5th District on the West Side, said the body is “examining strategies” to avoid cuts that have “historically been made on the backs of ****** and brown students.”

“I’m one vote, but my position is if a loan is viable, then I’m in favor of it,” he said.

One of the concerns board members are weighing is CPS leadership’s warning that green-lighting Johnson’s plan would violate the statutory requirement to present a balanced budget. CPS argues it cannot add debt and accomplish that.

Johnson, for his part, contends Martinez — now in his six-month lame-duck ******* after the school board

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without cause in December — himself committed to CPS assuming the pension payment.

However, at a 2024 City Council hearing cited by the mayor’s press office as proof of that stance, the CEO said the district must first get $325 million in additional TIF revenue for him to agree. After setting aside operating expenses and costs from the new Service Employees International Union Local 73 contract, CPS only has $139 million out of its current $298 million in TIF surpluses left — not enough to pay for the MEABF and CTU contract costs.

Thus, district leadership as well as some board members argue the only two ways forward are finding additional revenue or making expenditure cuts. Johnson concurred with the first path on Tuesday, repeating his refrain that the city needs more “progressive revenue.”

But it’s unlikely Springfield will come to his rescue before the March 30 deadline to figure out the city’s budget gap — or by the time CTU and CPS would need to agree on a contract to avert a strike.

Jaworski, meanwhile, challenged CPS’ reservations on why it cannot take on more debt: “There is a manner in which they can come up with a plan of finance to do a borrowing, if that is fully necessary at the end of the day to meet their obligations to balance their budget.”

Meanwhile, Johnson-appointed board President Sean Harden has hired financial advisory firm Baker Tilly to provide an outside opinion on the district’s economic challenges and risks with various funding approaches. That report, which will cost the board $35,000, has not come out yet.

The $242 million in bonds floated by Johnson’s team would either be repaid with 4.37% interest in five years or 4.6% interest in 10 years. His administration projects CPS can pay the money back with freed-up revenues from expiring TIF districts.

Asked Tuesday where the city’s year-end reserve balance stands, Jaworski said it’s too early to provide those figures. The last time the Johnson administration made a major dip into reserves was when he successfully sought City Council approval for an additional $70 million to pay for the migrant crisis last spring.

Chicago Tribune’s A.D. Quig contributed reporting.

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