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Chicago Contract Busts Budget; Layoffs Loom for Lowest Performers

Chicago teachers voted overwhelmingly today to ratify their new contract, sealing the deal that ended September's 7-day strike. The Chicago Teachers Union prevailed in obtaining a 2-3% annual raise for the next three to four years (totaling as much as 17.6% cumulatively), and in keeping the teacher workday short despite a lengthening of the school day for elementary students.

These two provisions will cost the city some $300 million and $150 million, respectively, over the next three years. While the Chicago school system has even bigger budget woes due to capital and debt issues, these new contractual obligations promise to accelerate the coming fiscal crisis, which will almost certainly lead to massive layoffs.

Paradoxically, this could do more to improve the performance of Chicago's teachers than the merit pay and student performance rules that Emanuel wanted to build into the new contract. Allow me to explain.

Chicago schools have a layoff and recall policy that is based heavily on performance, and only partially on seniority, thanks to a state supreme court ruling earlier this year. The new contract specifies the layoff order as follows:

  1. Unit
  2. Certification
  3. Unsats
  4. PAT's (Probationary Assigned Teachers) by rating tier
  5. Tenured Needs Improvement (<250, then >250)
  6. then all other tenured teachers by seniority

This gets a bit technical, but it essentially means that among people who do the same job, those with the lowest performance will be laid off first. Seniority only comes into play if it's necessary to lay off all the teachers who are below proficient as well as some who are proficient or better.

CTU president Karen Lewis predicted during negotiations that up to 6,000 teachers could be fired if the city prevailed in its effort to weigh student test scores more heavily in teacher evaluations. However, it appears that the sheer expense of the new contract may have the same result: If the city is forced to lay off teachers, its performance-based layoff and recall policy will result in the dismissal of the lowest performers.

The Daily Beast's James Warren explains the budgetary situation and laments the city's failure to keep the costs of the new contract down, predicting a heavy round of layoffs in the cash-strapped windy city:

Laurence Msall, president of the Civic Federation, a tax and government research group, said late Tuesday that it was too early to fully analyze the contract's details but it seemed very difficult for the city to accommodate the pay hikes. Significant reductions in schools and teachers will be necessary.

The current budget, he noted, provided for only a 2 percent raise, with no hikes for years of service and advanced degrees. That meant draining all the reserves in the school system's general fund and some added restricted reserves totaling $431.8 million to close a deficit of $665 million. In doing that, the system failed to heed its own fund-balance policy.

The system has already projected a $1 billion deficit for the 2014 fiscal year due to its structural deficit and the end of a three-year partial suspension of contributions to the teachers' pension fund. Those required contributions will grow by at least $338 million, Msall said, to $534 million in fiscal 2014, from $196 million in fiscal 2013.

The system's long-term debt has risen by 28.3 percent, or $1.1 billion, in the last five years, largely due to its capital construction program.

"In summary," he said, "the wage increases and other enhancements will likely require very dramatic cuts in personnel."

It's something that Emanuel, even as he turned emotional Tuesday, knows is unavoidable: to save itself, the system must shrink dramatically.

Oddly, Warren characterizes the new contract as predatory on the part of teachers:

The teachers, who now average about $74,000 a year and cost the system in the vicinity of $100,000 with benefits, will continue to ravenously suck up most of the system's cash.

All school systems spend the bulk of their budgets on teacher salaries (why wouldn't they?), and Mr. Warren's own figures reveal that the existing budget crisis in Chicago's schools is based largely on capital projects and debt.

Chicago is one of the toughest school systems in the country, and anyone who begrudges its teachers their pay should go earn a teaching certificate and try substitute teaching in Chicago schools—which average 90% free/reduced lunch— for even one day. If the city is getting great teachers for $100K, that's a bargain.

You can call it self-serving, but I think Chicago's teachers did the right thing here: They insisted on being paid well, and they knew that the lowest performers would pay the price. That's how it should be. Rewards flow to the competent—no merit pay necessary.

When the high tide of a budget crisis rolls in, it's supposed to wash out those who are dragging down the system, not hit everyone equally.

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