By Mary Wisniewski CHICAGO (Reuters) - Three years after a public school strike, Chicago teacher contract talks are off to a rocky start, with the debt-burdened district demanding a 7 percent pay cut, union officials said on Tuesday. The Chicago Teachers Union said in a statement it was "highly insulted" by the district's demands, which include increases in health insurance premiums. The current contract expires on June 30. The nation's third-largest school district, which serves 400,000 students, faces a prospective $1.1 billion deficit. Getting to a new contract, without another strike, will be the first major test of Mayor Rahm Emanuel's second term. The process has been complicated by legal problems. Chicago Public Schools Chief Executive Officer Barbara Byrd-Bennett, appointed by Emanuel, took a leave of absence in April pending the outcome of a federal probe into a contract awarded to a company that had employed her. CPS officials could not immediately be reached for comment. They have in the past declined to comment on negotiations, which formally started March 26. Last week, the district declined to extend the existing contract by one year, which would have cost $105 million. "Once again, the board has created a fiscal crisis in order to justify its continued attack on our classrooms and communities," union President Karen Lewis said. "CPS is broke on purpose." Union staff coordinator Jackson Potter said the union wants Emanuel to look at financial fixes, such as raising taxes on the richest residents and recovering what they say are excessive fees paid to banks that do business with the schools. The teachers want smaller classes, less standardized testing and to staff all schools with nurses, librarians and art teachers. Talks have been complicated by turnover at the top of the district. Byrd-Bennett is the district's fifth CEO since November 2010. She helped negotiate the last contract and was known to be friendly with Lewis. Antipathy between Emanuel and the teachers' union runs deep, from the 2012 strike, the district's first in 25 years, to a decision to close 50 schools in 2013 and more recent differences over testing. Lewis considered challenging Emanuel in this year's mayoral election but was sidelined by illness. The union backed challenger Jesus Garcia, who lost an April 7 runoff. The union said the demand for a pay cut appears to be retaliation against the union following the mayoral election. (Reporting by Mary Wisniewski; Editing by Eric Beech)
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