An arbitrator had recommended a big raise for teachers, but school leaders had said they could not afford it.
The teachers union is expected to announce whether they accept or reject the proposal within the hour.
Earlier, at a back-to-school awareness event in Humboldt Park, Chicago Public Schools CEO Jean-Claude Brizard said the arbitrator's recommendation of a double-digit percent pay increase for teachers is simply unaffordable.
"There's no way in the world I can pay $330 million in increases, which would mean the laying off of a lot of teachers and increasing class size," said Brizard.
The finding from arbitrator Edwin Benn reportedly recommends a 15 to 20 percent pay hike for teachers next year and an increase over four years of more than 35 percent.
The raises, which take into account a longer school day as well as cost of living and seniority bumps are less than what the union wants, but far more than the 2 percent annual raises offered by the district.
"My hope was that the arbitrator's report would give us a middle ground that both CPS and CTU could work from and come to consensus. Clearly what came back to us has been a disappointment," said Brizard.
The report also calls for eliminating a teacher merit pay system proposed by CPS.
If one or both sides reject the recommendations, a strike could be authorized after 30 days, though CPS and the union have indicated they will keep talking.
"I ask you not to vilify us at all, I don't want to be the villain, don't separate me from the children of the Chicago Public Schools when you talk about teachers," said CPS teacher Miriam Ruiz.
Some CPS parents are worried.
"They can avoid a strike if they both come to an agreement and do what's in the best interest of the kids," said parent Rosemary Smith.
"I... think it's very important that the teachers are compensated for extending their days," said parent Kecia Waldschmidt. "Without any fair compensation, that's not going to work for them."
Chicago Mayor Rahm Emanuel has been critical, calling the raise too generous given the city's budget crisis and the $655 million deficit that the school district is dealing with this year.
"The report at a 35-percent raise over three years is not tethered to reality," said Emanuel. "I believe everybody to be properly compensated, but I don't believe you have a system that doesn't give our kids what they need,"
The teachers union has not said whether it will accept or reject the arbitrator's nonbinding decision. But union leaders agreed with the arbitrator, who says teachers should get paid more for moving to a longer school day.
"The fact finder has determined that CPS's longer day amounts to a 19.4-percent increase on average that teachers will have to work," said Chicago Teachers Union President Karen Lewis.
If the arbitrator's recommendations are accepted, it will be incorporated into the contract, but if the report is rejected by either side, it raises the pressure in contract negotiations and pushes teachers a step closer to a threatened strike.
"Look, I believe in a fair deal, one that's fair to our children, one that's fair to our teachers and one that is fair to our parents," Emanuel said.
"We are working toward a contract that will lead to schools opening in the fall. However, should contract negotiations fail, we will have to make a determination on next steps," Stewart said.
The school board was meeting Wednesday afternoon, as was the Chicago Teachers Union.