Chicago City Wire

Chicago City Wire

Tuesday, March 31, 2020

Wirepoints: Teachers' contract deal will increase pressure on tax base, driving even more Chicagoans away


By W.J. Kennedy | Nov 7, 2019


With junk credit and a broke city to fall back on, Chicago Public Schools (CPS) will have to cover the costs of a new teachers’ contract through higher property taxes. That bill will amount to an estimated $1.5 billion over the next five years, according to an analysis by Ted Dabrowski and John Klingner of Wirepoints. And, they say, the estimate is on the low side.

Higher property tax increases will drive even more Chicagoans away from a city where real home prices have fallen since 2000, and per household debt for government worker retirements are the nation’s highest for any major city.

The city and CPS are on the road to financial oblivion and all taxpayers can do is slow down the inevitable.

Wirepoints President Ted Dabrowski

“CPS’ credit rating, according to Moody’s, is still five notches deep into junk, and the district’s pension shortfall is nearly $25 billion,” Dabrowski and Klingner wrote. “With little ability to borrow more, and with additional money from the state still in debt, higher property taxes are likely the only way for CPS to pay for the contract.”

This comes on top of higher property taxes floated by Mayor Lori Lightfoot to cover the city’s nearly $1 billion debt. The higher taxes will sink Illinois, already at the bottom of a recent ranking of tax-friendly states, even lower.

The city will become even more hostile to middle-class families when other costs of the new contract become known, including the higher pensions costs that will correspond with the higher salaries. Salary increases of more than 24 percent for the average teacher, 48 percent for the average nurse and hundreds more in staffing are sure to increase the district’s pension obligations, Wirepoints says.

In addition, Dabrowski and Klingner note, another pension cost yet to be tallied is the new contract rule allowing teachers to accumulate 244 days of unpaid sick leave. The previous contract only allowed them to bank up to 40 days over their careers.

“Under current pension rules, teachers who accumulate that 244-day maximum amount of sick leave can exchange it for more than a full year’s worth of pension service credit,” they wrote. “That allows those teachers to retire at least a year early and still collect their full starting pension benefit.”

The contract puts the district back on an accelerated spiral downward -- where they were two to three years ago when the state had to bail them out with a new funding formula, and by picking up a good chunk of pensions costs.

“Ordinary Chicagoans in the private sector don’t get anything like the benefits offered in the teacher’s contract – guaranteed, multi-year raises, bankable sick leave, premium healthcare benefits, etc. – but Lightfoot has locked them into paying for this contract for five years, regardless of the eventual state of the economy,” Dabrowski and Klingner said.

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