“Desperate” Chicago Schools Need Half Billion To Avoid Mass Layoffs, Partial Shutdown

– “Desperate” Chicago Schools Need Half Billion To Avoid Mass Layoffs, Partial Shutdown (ZeroHedge, Sep 8, 2015):

Last month, we noted with some incredulity that Illinois is now paying lottery winners in IOUs. Long story short, the state’s inability to pass a budget means big winners will have to wait on their prize money, a ridiculous situation which prompted one Illinoisan to remind state officials that “if we owed the state money, they’d come take it and they don’t care whether we have a roof over our head; our budget wouldn’t be a factor.” State Rep. Jack Franks agreed, noting that the “government is committing fraud on the taxpayers.”

The lottery debacle is just the latest example of Illinois’ deepening fiscal crisis which was catapulted into the national spotlight in May when a state Supreme Court decision that struck down a pension reform bid prompted Moody’s to cut the city of Chicago into junk territory. Since then, the media has been awash with tales of the labyrinthine, incestuous character of the state’s various state and local governments and the deplorable condition of the state’s pension system.

The fallout from the budget crisis is far-reaching in the state with the latest example being Chicago’s public school system (the third-largest in the country), which opened this week with a budget shortfall of nearly a half billion dollars.

Here’s WSJ with the story:

Chicago Public Schools—with 394,000 students and nearly 21,000 teachers—has closed more than half of a projected $1.1 billion shortfall through cuts, borrowing and other means, but is looking to the state to come up with the rest. The school board warns of deep cuts later this year if Illinois, which faces its own fiscal crisis, doesn’t deliver an additional $480 million in the coming months, representing roughly 8% of annual district spending.

“It is like the board is a desperate gambler at the end of their run,” said Jesse Sharkey, vice president of the Chicago Teachers Union, in a recent speech.

“We are really now at a point where further cuts would reach deep into the classroom,” said Forrest Claypool, who was named chief executive of the city schools in July.

Since 2011, the school board has made nearly $1 billion in cuts—including $200 million this year that involved eliminating 1,400 positions, mostly through layoffs. Enrollment declines, due to shifting demographics and Chicago’s shrinking population, have led to school closings, including nearly 50 elementary schools in 2013 alone.

Mayor Rahm Emanuel has clashed with the teachers union, which went on strike three years ago and is currently without a contract. Another strike isn’t out of the question as the two sides are wrestling over the district’s effort to get teachers to pay more of their pension costs.

A group of parents, educators and activists with the support of union leaders launched a hunger strike Aug. 17 in a push to reopen a closed high school in a historically black neighborhood on the city’s South Side. The group argues the board concentrates money in Chicago’s wealthy, predominantly white neighborhoods. Hispanic and black students make up a vast majority of enrollment in city schools, and more than 85% of students are considered economically disadvantaged.

“There is a priorities crisis,” said Jitu Brown, a community organizer and parent who is participating in the hunger strike.

Of course one problem is a sharp increase in pension costs thanks to a “holiday” the board decided to take from 2011 through 2014:

The district’s pension costs have more than doubled in recent years after the board took a partial “holiday” for three years from paying the amount needed to put the retirement system on a path to long-term solvency.

And all the classic options – raising taxes, taking on new debt to payoff the old debt, etc. – have apparently been exhausted:

At first, the board drained reserves and paid off old debt with new, but those options are running out. The district also is raising property taxes as much as it can under a state cap. At the same time, Mr. Emanuel is weighing a much larger increase to confront the city government’s own pension problems, but that wouldn’t go to the schools.

Which means asking the ineffectual state legislature for $480 million, but thanks to gridlock in Springfield, there are no assurances that aid is forthcoming and that, in turn, means that once it’s all said and done, the third largest school system in the country will be forced to layoff thousands and implement what amounts to a partial shutdown. 

Senate President John Cullerton, a Chicago Democrat who sponsored the legislation, said without it the schools would see the layoffs of 3,000 teachers, increased class sizes and a shortened academic year. “We have to resolve this,” he said.

Yes, this has to be resolved and because we want to help, we suggest Governor Bruce Rauner not do things like squander hundreds of thousands of dollars in taxpayer money on celebrity budget gurus like Donna Arduin, who, until she was dismissed two Fridays ago for not being very guru-ish when it came to Illinois’ budget, was making $30,000 a month or, more than half of what a Chicago public school teacher makes in a year.