CEO Jean-Claude Brizard and Budget Director Ginger Ostro detailed the district’s budget woes before an Illinois General Assembly committee today at a hearing on the Illinois State Board of Education budget.

Committee members asked the CPS officials to appear as part of an examination of whether to shift CPS from a block-grant funding system – where the district is guaranteed a certain percentage of some state funds – to a system where CPS would have to account for each dollar of state money it spends, as other districts do.

It’s not clear whether the idea will gain traction, but committee chair Rep. William Davis (East Hazel Crest) said at the hearing’s close that “there’s been a lot of concern from members” that funding may need to be adjusted as enrollment in CPS has declined. In recent years, other large districts in the state have advocated that they, too, be allowed a set percentage of state block grant funding.

The district responded to questions about the projected financial impact of an end to block-grant funding by saying that “given the significant fiscal challenges that CPS is facing now and in the next three years because of our pension costs, any change that would impact the amount of funding we receive from the state, as block grants or reimbursement could mean deep cuts in the classroom.”

“We believe that block grants improve outcomes by providing flexibility and give decision- making authority to local districts and schools to better meet the unique needs of their students,” the statement said. (As for the coming year, the district says that school-level budgets will be released sometime before the month is up.)

Skepticism about the size of CPS budget deficits is widespread among the district’s critics, but Ostro made the case that ballooning pension costs – which will eventually include larger-than-normal required contributions because a three-year “pension holiday” declared by the legislature is expiring – spell indisputable trouble for the district.

 “Even if we eliminated the entire central office three times over, we couldn’t close the budget gap,” she said. Central administration spending is just $120 million.

By fiscal year 2014, she said, pension expenses alone will be 10 percent of the district’s operating budget.

“This is a significant fiscal pressure we’re facing, and one we look forward to discussing and working with you to address,” Ostro told the legislators. She also pointed out that Chicago is the only city in the state, and one of the only urban districts in the country, that funds its own teacher pension system.

Davis questioned Ostro sharply over the district’s use of roughly one-fifth of its general state aid funding to pay debt service fees. “We would hope that was money that would be going to the classroom,” Davis said.

Ostro responded that the practice had been occurring for over 10 years and that she didn’t know if it was typical among other districts. Earlier in the presentation, she had pledged that CPS would mend its ways. She noted that the district will release its capital plan on May 1st and is clamping down on capital spending. From now on, she said, capital projects will generally be limited to those required for the health and life safety of students.

However, Ostro noted, even as capital spending decreases dramatically, debt service costs will keep going up.

This year, Ostro said, CPS used about $240 million in reserves to balance its budget. When questioned, she noted the district expects to have $289 million in unrestricted reserves left at the end of the 2011-12 fiscal year.

Another committee member lectured CPS on the importance of working with the Chicago Teachers Union, which is currently in negotiations with the district, to devise ways of saving money.

Rep. Edward Acevedo (Chicago) questioned why it took so long for the district to make capital improvements in buildings that were listed in the line-item capital budget, citing complaints from constituents but declining to mention the names of specific schools. He also asked Ostro to look into food handling procedures, claiming he heard from a produce company that their vegetables spoiled rapidly in CPS kitchens because they are stored next to hot food.

“Clearly we would not want to be wasting fresh fruit. That’s a very important part of what we’re trying to bring into the system,” Ostro said.

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