A crisis wasted: Rahm ignores his own advice

Rahm Emanuel famously argued that

by Ben VanMetre

The Chicago Public School system is broke. Its pension system is severely underfunded. Its reserves are empty. And the CTU continues push the system ever closer to bankruptcy. After a long time in the making, the CPS crisis has arrived.

Mayor Rahm Emanuel had the chance to make things better. He had the chance to improve the fiscal footing of CPS. He had the chance to give students a better education. He had the chance to make Chicago a better city.

He blew that chance. The mayor himself famously argued that “you never want a serious crisis to go wasted.” Unfortunately, he ignored his own advice.

The opportunity for reform has come and gone. The strikes are over and the dust has settled. And now CPS is in worse shape than ever.

This year the CPS found itself confronting a $665 million deficit. Its solution? Raid the entire reserves of more than $400 million. Coupled with other maneuvers, it looks like CPS may be able to scrape up enough cash to cover the shortfall.

But the reserves are now empty, so that move cannot be repeated.

And CPS faces an even larger deficit during the next school year. A $1 billion shortfall, largely created by the expiration of a three year pension “holiday,” will surely push CPS near its breaking point.

This $1 billion won’t magically appear in the CPS coffers. CPS will need to come up with the money somehow, and it has a year to do so.

If the CPS plans to tap new revenue, it will need to look to local, state or federal sources.

Asking Chicago taxpayers to cover the shortfall is a tall order considering they already face some of the highest taxes in the nation. The city has lost 200,000 residents over the past decade — increasing taxes on the remaining residents will just give them another reason to leave.

CPS could look to all of Illinois’ taxpayers for the money. But the state just hit families with a $1,500 increase in their tax bill. It’s not likely that these families will be willing to pony up additional money for a CPS bailout.

Nor is a federal bailout an option. Bailouts are highly unpopular. They reward failure and punish success.

With increased revenues off the table, CPS will need to come up with the $1 billion in spending cuts.

The largest chunk of the CPS budget is spent on salaries. A mere whisper of a salary cut for teachers will surely fill the streets with angry red shirts again (for the kids, of course). Mayor Emanuel and union kingpin Karen Lewis just punched through substantial pay increases for teachers. So there’s no reason to believe that spending cuts would come from this chunk of the pie.

Benefits are also large portion of spending. But retiree costs will continue to grow. As the pension holiday expires, pension costs will increase by more than 225 percent, to $684 million during the next school year. And with the CPS pension system only 32 percent funded, extending the holiday isn’t an option.

The only spending cut left on the table can be found in the classroom. These cuts come in the form of closing schools, laying off teachers and increasing class sizes. Don’t be surprised when 100 to 200 Chicago schools shut their doors.

Karen Lewis didn’t waste this crisis. She used the opportunity to increase teacher salaries. She’s won this battle, but she’s locked CPS into a path that is simply unsustainable.