The bargaining team for the Chicago Teachers' Union unanimously rejected a contract offer from the Chicago Board of Education in an important vote Monday.

The union's 40-member team said the proposal "does not address the difficult conditions in the schools, the lack of services to our neediest students or address the longer-term fiscal crisis that threatens to gut public education in the city." Members said they have "legitimate distrust" of the district and decided not to send the proposal to the full union for a vote.

"We are not convinced that they will make good on their promises set forth in this proposal that are very vague and not clear," said Chicago Public Schools teacher and bargaining team member Monique Redeaux-Smith.

Teachers have been working without a contract since June. For months the union has been threatening a walkout. Rejecting the offer means negotiations will move into the "fact-finding" phase, which must go on for about four months before a strike can take place.

The latest proposal was a four-year deal. It included raises of 2.75 percent next year and three percent for each of the following two years. But on the flip side, teachers would have been required to contribute more to their pension fund and pay a portion of their health insurance premium.

CPS also threw in retirement bonuses of $1,500 for each year of service in an effort to encourage some long time teachers to step down.

The district was looking for 1,500 teachers to retire. If that doesn't happen, the contract would get reopened for renegotiation in July.

CTU President Karen Lewis had earlier said she was hopeful about the proposal, but said in a statement Monday union members have given more than $2 million back to the district in the last five years and argued the financial struggles CPS faces are a revenue-based issue.

“Simply signing a contract with CPS will not bring them a windfall of resources from the state,” she said. “We have to exhaust every option available, which includes terminating those swap deals, returning the TIFs to the schools and a financial transaction tax that could bring hundreds of millions of dollars to the city. Without some real movement on the revenue problems, we can’t trust that they will honor any words offered in a four-year contract deal.”

CPS CEO Forrest Claypool said the offer would have prevented midyear teacher layoffs.

“While we are disappointed by today’s result, CPS remains committed to reaching an agreement with our partners at the CTU that is in the best interest of our students, parents, teachers and city," Claypool said in a statement. "We are committed to returning to the bargaining table and working around the clock to reach an agreement. As we continue to bargain, we must move forward with plans that restore fiscal stability to the District.”

Claypool has made it clear the city wants to eliminate a decades-old agreement in which the district pays 7 percent of the teachers 9 percent contribution to their pension fund.

According to Catalyst, a public education watchdog -- CPS didn't budge on that pension pick up demand in its proposal. In return, the teachers would have seen a reduction in testing, more autonomy in grading and reduced paperwork.

Sources told NBC5 that both House Speaker Mike Madigan and Senate President John Cullerton met privately with Lewis in the past two weeks.

The district is currently facing a $500 million budget hole and recently announced hundreds of layoffs to its central office and administrative staff. The possibility of teacher layoffs also remains.

Last week, Republican lawmakers proposed legislation that would allow the state to take over CPS and give the financially struggling school district the opportunity to claim bankruptcy. The plan was strongly opposed by CPS, CTU and Mayor Rahm Emanuel, however.

“CPS has been living on borrowing for too long,” CTU Vice President Jesse Sharkey said in a statement. “Now to turn around and blame teachers and staff for that debt while letting bankers off the hook is not acceptable. We think bankruptcy is a bluff, but if it isn’t, the mayor and his handpicked school board need to examine our commitments to progressive revenue.”