Bankruptcy talk hits Chicago: Illinois governor proposes bankruptcy for Chicago Public Schools
Gov. Bruce Rauner and Republican state lawmakers have proposed bankruptcy for Chicago Public Schools; Mayor Rahm Emanuel has rejected the idea of bankruptcy, repeating his demand that Illinois taxpayers bail out the struggling school district.
Bankruptcy talk hits Chicago
At long last, Illinois has a sensible proposal to help Chicago schools: bankruptcy.
The cause of Chicago’s fiscal crisis is untenable pension promises, super-sized union contracts and bloated administrative payrolls.
As a direct result of those problems, the Chicago Board of Education, or CBOE, which governs the nation’s third-largest school district, is buckling under severe financial strain. The CBOE’s operating deficit is projected to reach $1 billion a year through 2020.
Yet union arrogance abounds. The Chicago Teachers Union is threatening to strike, demanding still more benefits.
Republicans propose state takeover of CPS
The solution, proposed by Gov. Bruce Rauner and key Republican leaders on Jan. 20, is a state takeover and bankruptcy for Chicago Public Schools. According to Bloomberg Business:
Christine Radogno and Jim Durkin, the state’s top Republicans in the legislature, outlined a proposal Wednesday that would allow the state to take control and even push the system, charged with educating almost 400,000 students, into Chapter 9.
“What we’re proposing is a lifeline,” state Senator Radogno told reporters in Chicago. “We didn’t come to this lightly. The track record of Chicago and its public school system is abysmal.” …
Illinois Governor Bruce Rauner, a Republican who has been at odds for months with the Democrat-controlled legislature over the state budget, has said he won’t bail out Chicago’s school system unless Mayor Rahm Emanuel supports limits on unions or other proposals he’s seeking to enact. …
School officials passed a budget for the year that started July 1 with a $480 million hole, asking the state for the money to fill the gap. Without it, the district faces drastic cuts and more borrowing, officials have said. …
“The mayor is 100 percent opposed to Gov. Rauner’s ‘plan’ to drive CPS bankrupt,” Emanuel’s spokeswoman, Kelley Quinn, said in a statement. “If the governor was serious about helping Chicago students, he should start by proposing — and passing — a budget that fully funds education and treats CPS students like every other child in the state.”
Chicago’s school district bonds have been cut to junk by all three major credit-rating companies. On Tuesday, Fitch Ratings lowered its grade on $6.1 billion of general-obligation debt by three steps to B+, four ranks below investment grade. Bonds due in 2039 traded on Jan. 15 for an average of 88 cents on the dollar to yield 6.5 percent.
Tax hikes and more tax hikes
Emanuel’s solution to Chicago’s fiscal mess was to enact the largest property-tax hike in recorded city history.
The Oct. 28, 2015, article, “Chicago’s Sheep Dogs Approve Mayor’s Tax on Sheep; Quote of the Day ‘It’s Not a Piece of Art,’” decried the abuse of taxpayers at the hands of their high-taxing city government.
The “sheep” in question are Chicago taxpayers who will have to hand over $588 million in property taxes, most of which will go to fund the city’s police and fire department pensions.
Curbed Chicago notes that “some aldermen and activists have warned that the historic tax hike will hit renters the hardest.”
The report added, “There have already been some neighborhood skirmishes in Logan Square, Humboldt Park and notably in Pilsen regarding runaway gentrification, and some activists say that the property tax increase will only exacerbate the effects.”
Did Emanuel’s tax hike solve anything?
Of course not. The school system is still broke. And instead of admitting the problem, Emanuel wants the rest of Illinois taxpayers to save the system.
The system is bankrupt. It cannot be saved. Any rational person would not want to save a corrupt, taxpayer-bilking operation that does a horrendous job at its primary goal: teaching.
Rauner needs to stand his ground for as long as it takes, regardless of the short-term consequences.