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Bd. of Educ. v. Chicago Teachers Union

OPINION FILED OCTOBER 20, 1980.

THE BOARD OF EDUCATION OF THE CITY OF CHICAGO, PLAINTIFF AND COUNTERDEFENDANT-APPELLANT,

v.

CHICAGO TEACHERS UNION, LOCAL 1, AMERICAN FEDERATION OF TEACHERS, ET AL., DEFENDANTS AND COUNTERPLAINTIFFS-APPELLEES.



APPEAL from the Circuit Court of Cook County; the Hon. NATHAN M. COHEN, Judge, presiding.

MR. JUSTICE O'CONNOR DELIVERED THE OPINION OF THE COURT:

On June 16, 1977, the Board of Education of the City of Chicago (Board) closed all schools and laid off all employees for economic reasons. Thereafter, the Chicago Teachers Union (Union) sought binding arbitration, alleging that the layoff violated its collective bargaining agreement with the Board. The Board brought an action to enjoin the arbitration and the Union counterclaimed, alleging that the one-day layoff constituted a breach of contract. Following a bench trial, the circuit court enjoined arbitration, but found that the Board breached its contract with the Union. The court further ordered the Board to pay employees covered by the collective bargaining agreement for the day on which schools were closed. The Board appeals.

On October 13, 1976, the Board and the Union entered into a collective bargaining agreement for the school year of September 1, 1976, to August 31, 1977. Provisions were made for annual salaries for teachers and career service employees.

On February 23, 1977, the Board adopted a recommendation which allowed the general superintendent of schools, Dr. Joseph Hannon, to lay off employees for up to three days during June 1977. This action was intended to reduce the deficit in the Board's budget. Subsequently, Superintendent Hannon announced, in a press release dated March 24, 1977, that the schools would close "one day early in June rather than the three days originally contemplated." The schools closed one day early on June 16, 1977, rather than on June 17, 1977, the date provided by the official school calendar.

Arbitration concerning the layoff was initiated by the Union but permanently enjoined by the circuit court. On November 3, 1978, more than three months after trial, the Union filed a motion to conform the pleadings to the proof. The trial court granted this motion over the Board's objection and allowed the Union to file an amended counterclaim for money damages. On March 16, 1979, the trial court issued a memorandum opinion. On April 19, 1979, the court entered a declaratory judgment finding the Board had breached the contract by failing to pay teachers' salaries for June 17, 1977. The court also ordered an accounting of the salaries due and payment for each employee. On May 17, 1979, the trial court stayed its order requiring payment of one day's salary pending appeal. The order for an accounting was not stayed.

Testimony before the trial court essentially pertained to the financial condition of the Board and the circumstances surrounding the making of the collective bargaining agreement. There was a substantial shortage of funds available to the Board for the 1976-1977 school year as documented in the school budget and 1977 annual financial report. There was a carryover shortage from previous years of about $53 million, plus a State aid penalty of about $10 million *fn1 for an accumulated deficit of about $63 million. Moreover, there was a projected operating shortage of about $52 million. This deficit constituted the difference between projected revenues and projected requirements. The Board's financial difficulties were exacerbated by a substantial uncertainty concerning the collection of outstanding taxes. The total budgeted deficit for fiscal 1976-1977 was about $115 million.

The Board's 1977 annual financial report was admitted into evidence and revealed: Teachers' salaries were budgeted as a line item appropriation under the educational fund, the primary fund to which salary costs are charged. The Board budgeted about $506 million as the projected requirement for teachers' salaries calculated in accordance with its collective bargaining agreement with the Union. Expenditures for the fiscal year for this line item amounted to about $488 million. Thus, expenditures were under appropriations by about $18 million.

The next line item was designated pro rata. This budgeted appropriation was about negative $91 million. The pro rata line was defined as a mechanical bookkeeping device that permitted the Board's budget to appear to be balanced when the appropriations for the total of the individual line items exceeded the anticipated revenue. The Board inserted this pro rata line item to present a balanced budget as required by statute. (Ill. Rev. Stat. 1975, ch. 122, par. 34-44.) Thus, applying the pro rata reduction to teachers' salaries resulted in a reduction of that figure to about $414 million. In their 1976-1977 budget, the Board merely summarized this procedure, listing about $414 million as available for expenditure appropriations for teachers' salaries. However, in a separate miscellaneous account, the Board appropriated the same negative pro rata amount of about $91 million. Accordingly, the listed appropriation of $414 million constituted $506 million minus the $91 million pro rata figure.

In a similar fashion, the next line item under the educational fund, civil service salaries (about $132 million) was reduced by a pro rata line (about $23 million). This reduction process was also summarized by the Board in its budget so that only the reduced total figure (about $108 million) was listed. This pro rata reduction process was also noted in the miscellaneous account.

The total of the two pro rata line items amounted to about $115 million, which equalized the Board's total budgeted deficit for fiscal year 1976-1977. No pro rata lines were listed for any of the other 12 Board funds nor applied to other line items in the educational fund. The Board adopted this bookkeeping method because it believed that its financial deficit had to be specifically applied to line items in the budget, and the greatest expenditure in the educational fund was for salaries.

Finally, the annual financial report shows that at the end of the fiscal year the educational fund had an operating surplus of about $13 million, representing revenues in excess of expenditures from current operations. The Board reduced its accumulated deficit by about $17 million during the 1976-1977 school year. Nonetheless, at the close of the year the total educational fund deficit was about $70 million. It was also established that it would cost the Board about $2.8 million to pay the teachers one day's salary.

The trial court heard extensive extrinsic evidence concerning the collective bargaining agreement negotiations. During June 1976 the Board laid off teachers for 16 days. In light of this layoff, the question of employee security and a full 39-week year became paramount in the negotiations. The Union requested a clause in the contract or a written guarantee separate from the contract assuring a full 39-week year. The Board refused both requests. Following a third Union request for a written guarantee, the Board made a statement prepared by Superintendent Hannon to the Union negotiating team as follows:

"Our top priorities are to maintain a full and qualitative school year and to provide stability for a half-million school children, their parents, our staff ...


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