Once again, the Chicago Public Schools made national news with another strike by teachers and administrators, who shut the district down for the day.
The Chicago Teachers Union called it a “Day of Action: Fight for Funding Rally & Protest March” and described the efforts as follows:
In this unprecedented strike for political demands and state funding that encompass the entire state, our picket lines represent our strength and our resolve to fight for the schools our students deserve. We are in a battle with powerful forces that want to privatize schools, permanently reduce our livelihoods and divest from struggling neighborhoods. Our unity right now is the only protection we have against continued financial instability in the school district.
We are still at the beginning of a struggle that has already proven to be protracted and difficult. This one-day unfair labor practice strike will set in motion the larger forces that will ultimately be necessary to save our schools.
In the fight for funding, it’s worth inquiring about the actual state of Chicago Public Schools’ finances.
According to the fiscal year 2015 report, the district had revenues of $5.5 billion but spent $6.5 billion in one year to educate 397,000 students using 39,141 workers, including 26,123 teachers. If one does some quick, topline math, you will find that:
- The Chicago school district is running a $1 billion deficit.
- Chicago Public Schools spends nearly $16,000 per student.
- There is 1 staff person for every 10 students in Chicago Public Schools
- For every 15 students, there is one teacher.
Now, at a lot of teacher strikes in Chicago, you will see signs like those below:
With $16,000 spent per student in the district, the teacher claiming to have 52 students in one class should run the numbers because her classroom actually represents $832,000 in public spending on education. It’s unlikely she’s seeing all of that money. So where does it go?
Below is a screenshot of the budget, which reveals how the money is spent and a much bigger problem than the $1 billion shortfall:
If you’re an accountant or even just decent with reading spreadsheets, you know that in a budget, such as the one above, anything in parentheses is a negative number. That means that while the Chicago Public Schools ran a $1 billion deficit, the district actually has an overall hole in its budget of $11 billion. That’s a lot of money.
The main driver of that $11 billion deficit is $6.2 billion going for the “Implementation of GASB 68”. What’s GASB 68? Here’s the description from the Governmental Accounting Standards Board (GASB) Statement No. 68:
The primary objective of this Statement is to improve accounting and financial reporting by state and local governments for pensions. It also improves information provided by state and local governmental employers about financial support for pensions that is provided by other entities. This Statement results from a comprehensive review of the effectiveness of existing standards of accounting and financial reporting for pensions with regard to providing decision-useful information, supporting assessments of accountability and interperiod equity, and creating additional transparency.
This Statement establishes standards for measuring and recognizing liabilities, deferred outflows of resources, and deferred inflows of resources, and expense/expenditures. For defined benefit pensions, this Statement identifies the methods and assumptions that should be used to project benefit payments, discount projected benefit payments to their actuarial present value, and attribute that present value to periods of employee service.
In other words, GASB 68 better reveals the true state of the Chicago Public Schools’ pension program – and it’s a disaster.
It shouldn’t be any surprise that the Chicago Teachers Union is pushing for more money. The district, while bringing in $5.5 billion in annual revenue, is running an annual deficit now of $1 billion and has an overall hole in its budget of $11 billion. Most of that shortfall is being driven by teacher pensions.
Given the state of both Illinois and Chicago politics, expect an exponential rise in increasingly frantic calls for more money by Chicago Public Schools and other government entities. Traditionally, government pensions have been seen as a sure thing. That may not be the case in coming decades.