The simple fact is Chicagoans can’t afford the union’s demands, or Mayor Lightfoot’s offer…
from Zero Hedge
Submitted by Ted Dabrowski and John Klingner of Wirepoints
Chicago teachers are striking for the third time in seven years. The Chicago Teachers Union has rejected what Mayor Lori Lightfoot says is “the most lucrative CTU package in its history.” The union shunned 5-year, 24 percent teacher raises and continues to demand more, including thousands in new hires and additional benefits like affordable housing.
Over 25,000 teachers and 7,000 support staff will be on strike while 300,000 students will be left in the lurch.
It’s become standard operating procedure for the CTU to strike when it doesn’t like the school district’s contract proposals. In 2012, the union struck for one week over a contract dispute with then-Mayor Rahm Emanuel. It did the same again in 2016, when the union held a one-day walkout.
In both cases, the union’s demands drove Chicago deeper into its financial hole. Now this strike poses a new danger to the fiscal viability of the city and the school district. The simple fact is that Chicagoans can’t afford either the CTU’s demands or Lightfoot’s offer.
Regardless of how the strike ends, the massive costs inflicted on CPS will force Chicagoans’ tax bills to keep rising, the city’s population to keep shrinking and property values will continue to suffer. Neither side’s deal will help teachers or residents if the city and the school district move faster toward insolvency.
Here are 13 reasons why the strike spells trouble for Chicago:
Chicagoans can’t afford either the CTU’s demands or Lightfoot’s offer.
1. Chicago teachers are already among the highest paid in Illinois. Chicago already offers new teachers a starting salary of $56,665, the 6th-highest out of Illinois 870 school districts. That salary rises rapidly as teachers work more and achieve higher degrees. A career Chicago teacher with a masters degree is paid a maximum of $100,000 a year by CPS, still one of the highest in the state.
That level of compensation is far out of reach for most Chicagoans, but even younger teachers get paid far more than what the average Windy City resident can afford.
The average teacher salary in CPS equaled $78,211 in 2019. That’s 55 percent more than what the average full-time private sector worker makes ($50,356).
If the union agrees to Lightfoot’s contract proposal, that average salary will rise to nearly $100,000 by 2024.
2. High salaries translate into big pension benefits for career teachers. The average CPS teacher who retired in 2018 with 30-34 years of service had a final average salary of nearly $98,000 and a starting pension of over $70,000.
3. The district’s offer is unaffordable. Under the district’s proposal, the average teacher will get a salary hike of 16 percent over the five-year contract (24 percent if step and lane raises are included). The average teacher salary will be nearly $100,000 within just five years. Nurses’ average salaries will jump to $73,000 from $49,000 during those same five years, an increase of nearly 50 percent.
4. The CTU’s demands are even more impossible. The CTU’s demands include a 15 percent raise over a three-year contract and numerous additional benefits, including affordable housing benefits and thousands more in support staff, all of which Lightfoot says will “cost $2.5 billion that the city can’t afford.”
The union is demanding all those benefits at a time when both the school district and the city are mired in a deep financial crisis. Here’s how bad things are:
5. Chicago and CPS have some of the nation’s worst credit ratings. Both the city and the school district are already junk-rated by Moodys, Ba1 and B2 respectively. Only the city of Detroit has a lower rating than Chicago.
6. Both the city and school district are drowning in red ink. Chicago’s debts continue to grow steadily worse every year. The city alone is now stuck with a net position of negative $30 billion. And CPS has a negative $14 billion net position of its own.
7. The school district has been shrinking for years. District enrollment has dropped by 75,000 students, or 15 percent, since 2000.
8. Residents are already hurting from the $860 million in new annual taxes imposed by Mayor Rahm Emanuel. The list of new taxes and fees over the past few years include:
- A $543 million property-tax hike in 2015, the single largest in the city’s history.
- A separate $250 million property-tax hike by CPS to pay for pensions in 2016.
- Numerous fee hikes on garbage collection, utilities, permits and more.
- New taxes on ride sharing, online entertainment, e-cigarettes and more
9. Chicago is losing people. The city’s population has shrunk four years in a row, the only major metropolitan area in the country to do so.
10. Chicago homes have lost value. Real city home prices have fallen since 2000, making Chicago an outlier nationally. Home prices in the Chicago have grown just 44 percent since 2000. By comparison, inflation was up 46 percent over the same time period.
11. Chicagoans are drowning in retirement debt. Chicagoans are on the hook for a collective $150 billion in overlapping government retirement debts, based on Moody’s pension calculations. That’s nearly than $145,000 per Chicago household.
12. Chicago is an extreme outlier fiscally. Cities across the nation are dealing with deep pension problems, but Chicago is in a class of its own. The Windy City has the nation’s worst pension crisis under almost every measure.
J.P. Morgan compiled funding ratios for the country’s major cities and found Chicago pensions, at just 23 percent, were the nation’s worst-funded. They’re effectively insolvent. The Chicago Public Schools’ pension fund is just 50 percent funded.
The state’s pro-union collective bargaining laws are a big reason by Chicago has such a belligerent teachers union. Here’s what makes Illinois, and by extension the CTU, different:
13. Illinois is the only state among its neighbors that enshrines teacher strikes. In contrast, strikes are illegal in Wisconsin, Indiana, Missouri, Kentucky and Iowa. In fact, Illinois is one of just 12 states nationally where teacher strikes are legal.