Chicago school board fires CEO who opposed borrowing for raises

Chicago Mayor Brandon Johnson's handpicked Board of Education unanimously approved the firing of Chicago Public Schools CEO Pedro Martinez late Friday in a heated special meeting.

S&P Global Ratings and Moody's Ratings have both recently put the board on notice that the largely junk-rated district's credit trajectory will depend on the outcome of current contract negotiations with the Chicago Teachers Union and the willingness to cut costs, with unbudgeted cost increases from any new potential CTU contract looming large.

All seven of the previous board members simultaneously resigned in October amid tensions over Martinez's employment status and a $300 million high-interest loan reportedly sought by Johnson to cover CPS staff raises and a pension payment. Martinez opposed the short-term borrowing.

The mayor, a former CTU organizer, then appointed seven new members.

The leadership upheaval bookends a year that began with Moody's upgrading the board to Ba1, one notch below investment grade. S&P rates the board speculative-grade BB-plus with a stable outlook.

Fitch Ratings assigns the board an issuer default rating and unlimited tax general obligation bond rating of BB-plus and a dedicated capital improvement tax bond rating of A. The outlook is stable.

Kroll Bond Rating Agency rates CPS GO bonds either BBB or BBB-plus, depending on whether the bonds have a special revenue bond legal opinion attached; the outlook is stable.

The district has long known it was facing a fiscal cliff with the tapering off of pandemic relief funds. CPS spent some of those funds on new staff positions, putting one-time revenues toward recurring expenses.

The new board seems to be yielding negotiation results to the CTU's liking, to go by comments from CTU Vice President Jackson Potter at the meeting Friday.

"I want to thank this board for lighting a fire? [toward] what will become a historic agreement," he said, after reading off a laundry list of CTU goals.

Multiple speakers at the meeting called on the current board to wait until the newly-elected hybrid board takes over in mid-January. Johnson gets to appoint 11 of the 21 total hybrid board seats, with the remaining members chosen by voters. CTU-backed candidates won four of the ten elected seats in November.

"Critics will say that this board should not act too soon," Potter added. "We say, you can't act soon enough."

"Where is the voice of the taxpayer?" Alderman Gilbert Villegas said at Friday's meeting. "Who are you here to serve? Special interests? Or the residents of the city of Chicago? We are far from good faith contract negotiations now."

Villegas said "with Pedro gone? it's just the CTU [marking off] their own Christmas wish list," and warned that the state attorney general had been "made aware of" the current situation.

"You know this is wrong," Alderperson Silvana Tabares said, accusing the current board of "carrying out the orders of a mayor who will personally benefit from a costly union contract. ? You are being used."

Alderperson Nicole Lee said she'd heard from parents considering yanking their children out of the public school system entirely.

"Fiscal responsibility is not to be overlooked," Alderman Scott Waguespack said. "It is an obligation of our jobs as appointed or elected officials. We deal with it every day? CEO Martinez is one of the best that I have worked with."

Tara Stamps, Cook County Board commissioner for the first district, blamed Martinez for instability in the schools and railed against environmental conditions.

"How do you expect our children to succeed with leaky roofs, dirty floors, crumbling infrastructure?" said Stamps, who with CTU support replaced Johnson when he left the Cook County board for the mayor's office.

One newly elected board member, Aaron "Jitu" Brown, backed the current board's expected move to fire Martinez, telling them, "The work that you've got to do is urgent." Brown was endorsed by the CTU.

Support for the board's decision to fire Martinez also came from Alderman Byron Sigcho-Lopez, Alderman Carlos Ramirez-Rosa and Alderman William Hall, who slammed the lack of investment in his ward and said, "These children are not only afraid to go to school, but they ain't learning when they get there."

But Alderman Nicholas Sposato noted that 41 of 50 aldermen had asked the current board to wait for the hybrid board before taking any action on Martinez's employment situation.

Some at the meeting spoke against recent developments in the Acero Schools system, a nonprofit charter school network whose board of directors voted earlier this year to close about half its Chicago schools.

At the Friday meeting, the CPS board also unanimously approved a resolution to maintain the seven Acero schools that were targeted for closure, essentially covering the troubled charter network's budget shortfall to reverse the closures until those schools can be converted to CPS schools. It will cost an estimated $3.2 million to keep the schools open another year, according to CBS Chicago.