A consultant report on the Chicago Public Schools' financial condition by Ernst & Young recommends that two property tax hikes be approved to help the cash-strapped school district tackle its pressing fiscal issues.
The report, obtained by the Chicago Sun-Times, explains just how dire the school district's financial problems are.
"CPS is projecting a cash shortfall of $1.9 billion at the end of FY '16 and, absent material cost deferral or third-party intervention, CPS is projected to run out of cash as early as this summer," Ernst & Young's report reads. "Even with a ... pension holiday in FY '15 and FY '16, CPS will still be facing a $1 billion cash shortfall in FY '16 that will likely have to be funded through incremental debt borrowings and significant budget reductions."
Ernst & Young also notes that CPS' current cash-on-hand situation means the school district will be unable to both make payroll and pay the $634 million pension payment due to the Chicago Teachers' Pension Fund at the end of the month.
Among other recommendations, the firm is suggesting a $50 million property tax hike to cover school construction costs and past project debts. The report explains that the school district has "never activated" a "capital improvement tax" that it has had the authority to levy for over 20 years.
This proposed tax hike reportedly appears more likely to go forward than Ernst & Young's recommendation for a second tax increase increase between $100 million to $400 million. That second proposed tax hike would "effectively replace general state aid" put toward school construction debt obligations, the consulting firm says.