It's no secret that Chicago Public Schools has been struggling financially for years, but a new report obtained by the Chicago Sun-Times indicates that CPS' money "problem" is more of an actual crisis.
The report by the consulting firm Ernst & Young predicts CPS could run out of cash as early as this summer, according to the Sun-Times. This means the school district would not be able to make payments to teacher payroll, pensions and previous debt.
The new report comes out just before the June 30 deadline to pay $634 million to the Chicago Teachers Pension Fund. It's becoming increasingly clear that CPS will not be able to make the payment unless a third party steps in to save the day in the next seven days.
But the pension payment isn't the only payment at stake anymore. If CPS pays what it can to the pension fund, it will have no cash or credit left to pay off any other bills, resulting in possible teacher layoffs, increased class sizes and even a later start date for schools, according to the Chicago Tribune.
So how does the city fix this financial crisis with minimal impact to the students? The answer is most likely higher property taxes.
In its report, Ernst & Young recommends City Council approves two property tax increases, according to the Sun-Times. The first tax increase would bankroll school construction and pay off old debts, and the second — and more unlikely to be passed — would "replace general state aid" to pay off school construction debt. The second tax increase would also likely require approval from Springfield.
Last week, Cook County Clerk David Orr released a new report detailing information on possible tax hikes. In his report, Orr predicted property taxes for the average homeowner in Chicago will rise an average of $90 this year, in part due to CPS' financial state. If the city follows Ernst & Young's recommendation, homeowners will face an even bigger increase in their property taxes.
City finances look grim in the foreseeable future, with CPS' problems just one of the many the city faces. Moody's downgraded the city of Chicago's credit rating to junk status in May, and the agency soon after downgraded CPS and the Chicago Park District to the same status.
While politicians battle out new budget plans at City Hall and in Springfield, odds are Chicago taxpayers await a more expensive future. The biggest impact of the financial mess, however, could hit CPS' 400,000 students, who await the start of an uncertain new school year in the fall.