CAIRO, Ill. -- Teachers started walking the picket line Thursday for more pay and benefits, prompting classes to be canceled in one of the poorest cities in the state.

Officials in the district of 950 students are offering teachers a 3 percent raise, which equals about $112,000 that the teachers' union can decide to pay out in cash or toward health benefits, Superintendent Robert Isom said Thursday.

The district wants teachers to start paying a greater share of their health insurance. Currently, teachers pay nothing for coverage for one person, said Ron Newell, president of the Cairo Teachers Association.

The union, which represents the district's 70 teachers, disputes Isom's numbers. The union says the offer comes down to just over $40 per teacher per year -- before the bigger insurance bill is figured in.

"That's not per hour or per day, but for the whole year," Newell said.

The teachers' three-year contract expired in August.

They received raises of 5 percent for the first two years of that pact, then a 3.75 percent pay hike last year, said Newell. The district continued this year to pay last year's salaries and benefits while a new contract is hammered out.

The average teacher in the district at Illinois' southern tip earns around $44,000 a year.

The district has been strapped for cash in recent years, as local businesses dwindle, Isom said.

District officials had to borrow $326,000 in tax-anticipation bonds recently to meet its April 30 payroll, he said.

And Cairo schools will get about $300,000 less in tax money next year compared to the current year, he said.

Newell said teachers can see for themselves that the town's thin business base is getting thinner, and they took that into consideration when making their demands.

But the district receives state funds based on the high percentage of students that are from low-incomes families, Newell said, and that means there is enough money to meet their demands, he said.

"We say fine, there are problems, but let's look at what's actually coming in and actually going out," he said. "We see the money is there."

The two sides are scheduled to meet on Saturday.