Chicago businesses and homeowners are being hit with another major property tax increase. A school funding bill approved by the Illinois General Assembly gives the Chicago Public Schools (CPS) authority to raise taxes by $125 million.
The Chicago Public School District expects to run a $544 million deficit in the coming fiscal year and is at risk of defaulting on debt payments, according to a recent article in the Wall Street Journal.
To cover bills, the CPS borrowed $725 million at 8.5% interest in March and another $387 million at 6.4% in June. In addition, the district issued $500 million more in debt at a rate of 7.25% to repay creditors.
Last summer, the CPS increased property taxes $250 million to make obligatory pension payments but also agreed to a new teacher contract boosting salaries by 4.5%.
The property tax hike will help address the crisis in CPS pensions, which are currently underfunded by $11 billion.
The problem has been building for years because:
Between 1995 and 2004, the Chicago Public Schools made no payments to the pension fund and made reduced payments in the following years.
There was a hiatus for about a decade where the City of Chicago failed to fund teacher pensions.
The state also failed to fully fund CPS pensions.
The State of Illinois will now begin to cover a larger portion of the Chicago Public School’s teacher pension costs and will pay $221 million, compared with about $12.2 million last year, according to The Chicago Tribune.
Mayor Rahm Emanuel lobbied for the change for years, saying it's unfair that Chicago taxpayers have to foot the bill for their teachers' pensions while also paying taxes that fund pensions outside the city.
Officials say all parties will now be required to do what is necessary to ultimately solve the funding crisis and put the Chicago Teachers Pension Fund in the black.