As Chicago Public Schools faces deficits of around $500 million in each of the next five years, two upcoming Board of Education votes could impact district finances for years to come.
CEO Pedro Martinez’s job will potentially be up for a vote when the Board convenes for a special evening meeting Friday, culminating a monthslong political standoff with the Chicago Teachers Union and Mayor Brandon Johnson over whether CPS should take on new debt to fund the cost of a Chicago Teachers Union contract.
But the agenda items proposing to either terminate or offer a buyout to the embattled schools chief, who’s promoted fiscal responsibility, aren’t the only momentous decisions on the table. A second decision could set an unsustainable precedent, according to CPS officials who presented to the Board last week.
Following weeks of protests against seven impending school closures announced by charter operator Acero Schools in October, CPS presented three scenarios. The district could provide Acero funding so that it can continue operating the schools next year, transition students to CPS schools or reopen the closing locations as district-run schools as of the 2026-27 school year.
The seven-member Board is hand-picked by union ally Mayor Brandon Johnson – whose demand CPS take out a short-term, high-interest $300 million loan was refused by Martinez – opted to both cover Acero’s shortfalls next year and subsequently reopen five of the seven locations as district-run schools. Bailing out the charter operator and assuming its operations come with a cost, CPS said.
An estimated $3.2M will be required to keep all of the schools open next year, according to a district presentation that estimated up to $28 million would be needed to then convert and operate all seven locations as district-run schools. “Providing additional funding sets a precedent that CPS can and will fund charter schools..and bail out charters on the brink of closure,” the analysis states.
A good credit rating matters…school districts included
Both decisions, on Martinez’s tenure and Acero Schools, could reverberate across the school system.
S&P, one of three credit ratings firms whose determinations impact government agencies’ ability to issue bonds, has been monitoring the district’s political turmoil and recently warned the Board that how it chooses to fund the CTU contract will mark a turning point in CPS finances.
Credit ratings from firms like S&P impact government agencies’ ability to issue bonds, which are often used to fund major one-time capital projects, such as new school buildings or fleets.
Negative credit ratings result in higher interest rates, in which fine margins can make a big difference, of potentially millions over a bond term, which tends to match the lifetime of a project, such as a building expected to be in use for 30 years.
At a time in which it’s “critical” for the district to drum up revenue or slash costs, introducing uncertainty through a turnover in leadership isn’t viewed favorably, said S&P analyst Ying Huang.
While management stability is only one of many factors that determine a credit rating, Huang said that when leadership changes that occur amid uncertainty on key decisions could have a large financial or operational impact.
With CPS operating more than 600 schools in total, Huang said the firm wouldn’t presume the absorption of a handful of charter schools would necessarily have a big impact on the district’s financial outlook. But that could change if the decision appears to have a “holistic” impact on operations. “It really depends on the magnitude. Is it part of a bigger picture,” she said.
More voluntary closures by charter operators can be expected, district officials have warned, noting in a CPS presentation that 20 charter schools in the last decade have done so, without the district offering financial assistance in response.
Financial transparency
Leading up to the meeting Friday, the CTU insisted more transparency was needed in district finances. “At the bargaining table, CEO Martinez is stonewalling,” a spokesperson said Friday. “The CEO has made salary offers without showing how he’ll pay for them. He refuses to lay out a transparent budget or any plan to raise and win new revenue.”
But George Washington High School teacher Erika Meza, a member of the REAL (Respect. Educate. Advocate. Lead.) caucus in the union said the focus on Martinez was a distraction preventing the union from collaborating with the district to identify the structural solution that the S&P said was so critically needed.
“We’re asking for green schools and affordable housing and that’s great, but how are we going to pay for that? We’re asking CPS to be transparent about their finances. We ask the same of our own union,” said Meza.
