Illinois governor seeks control of Chicago school system

The new Republican governor of Illinois, Bruce Rauner, is starting his second year of his first term.  He is confronted with a state that has the lowest credit rating of any state; the highest debt of any state; and worse, the most powerful Democrat machine of any big city in the city of Chicago.

He recently suggested that the state take over the financially troubled Chicago public school system.  His plan has been characterized as politically motivated by editorial writers such as Mark Brown of the Chicago Sun-Times.  Brown attacked the plan as an “opportunity to take the school system in bankruptcy and break the teachers union he so loathes.”  In late 2015, Rauner suggested that bankruptcy may be the only solution for insolvent communities.  Federal law requires state legislative approval for any cities filing for bankruptcy.  Illinois Democrats have vowed to never allow Chicago to file for bankruptcy. 

The Sun-Times has defended the huge Chicago Democrat machine for many decades.  But the fact is, these comments don’t do anything to help the students or the taxpayers, who are expected to fund luxury-level pensions.  What these critics choose to ignore – without suggesting positive solutions – is that the Chicago Public Schools (CPS) face two huge problems.  For one, Chicago schools fail to teach their students.  They attend some of the worst-ranked schools in the nation.  The second huge issue is the unaffordable pension debt facing the taxpayers of the city.  In these two important areas, student performance and financing, the Chicago Public School system is arguably the worst in the nation.

First, the issue of how teachers are failing the students.  Four out of ten CPS high school students don’t graduate, and a full 91% of high school graduates who go to college must take remedial courses in math and other basic schoolwork skills.  And in 1985, Chicago’s Mayor Harold Washington issued an executive order to make Chicago into the nation’s first official sanctuary city.  Today Hispanic students drop out of high school at a rate double that of black students, and Hispanic girls who are age 19 have a higher rate of motherhood than African-Americans.

The second major issue is the financial condition of the CPS system.  Chicago’s public school system has been authorized by the state to issue its own bonds.  Their credit rating has plunged to junk bond status, just like the state’s.  No surprise – the Democrats who have spent the state into financial chaos also run the CPS.  In August, 2015 S&P lowered the CPS’s rating to junk.  This followed Fitch and Moody’s, who also lowered the CPS bond ratings lower than junk.  The CPS ignores any suggestion of fiscal responsibility and borrows money at a very expensive interest rate. 

This is not a surprise, since the state finances of Illinois are the worst in the nation.  Illinois has a massive unfunded state pension debt that Moody’s estimates to be $205 billion.  In addition, it has unfunded pension plans in the city of Chicago and Cook County, the county that contains the city.  SEC commissioner Daniel Gallagher noted in 2014 that the average household of Chicago owes the city, county, and state $88,000 to pay for unfunded pension debt.  Politicians have borrowed this much using the households’ earnings as collateral.

The debt of the CPS is due not just to pensions, but to high salaries.  In July 2014, the Illinois Policy Institute reported that career CPS teachers earned about $70,000 a year.  Over their entire career, they would contribute a total of $133,179 to their pension fund but would receive $2,074,922 in retirement.  Yes, that’s two million.  This shortfall is being made up by out-of-control borrowing and taxation

In just this year, Mayor Emanuel borrowed and raised another $1.1 billion.  And that’s expected to last only a year and a half.  In 2014, the average Chicago worker earned a median income of $31,052.  This means that every single retired teacher needs to have all the income earned by the average working Chicagoan in 64 and a half years.  

And of course, if Chicagoans don’t pay higher property tax bills, essential services, not pensions, will be cut.  It is difficult to understand how Democrats can portray themselves as champions of the working man, as Hillary Clinton claims, while public unions earn twice as much as the regular worker and expect those workers to fund their full pay for life, with benefits. 

Chicago’s entire 2016 budget is $7.8 billion and the property tax payments paid by homeowners and renters go entirely to pensions and municipal bond debt.  So while the unfunded pension liability piles up, very little, if any, of it will be paid down by property taxes.  To add insult to injury, Cook County raised the sales tax on Chicago residents a full percent to 10.25%, and the Board president, Toni Preckwinkle, admitted that 90% of the increase would go only to pay pensions.  For this year, at least.  Moody’s cautions that the increase is only cosmetic and does nothing to address the long-term pension issues of the school teachers’ pension plan and those pension plans of over 35 other public-sector unions.  These continue to be papered over with financial engineering that only delays the inevitable

And the reason Chicago has such an abominably awful public school system is that the city has, since WWI, funneled minority groups such as black and then Hispanic residents into highly segregated communities of poverty.  This disgraceful practice of creating impoverished city neighborhoods has been a consistent strategy of Democrats in the biggest cities of the West, Midwest, and Northeast since FDR. 

This racial segregation has created the poor school systems and high unemployment.  While Mayor Emanuel closed 50 schools in Chicago in the past few years, the remainder are still underperforming. 

Governor Rauner has 100 years of racial segregation, institutionalized failure and debt, and reckless spending to correct, but he is willing to start somewhere.  Like Donald Trump, he was a successful businessman, refuses to take a salary or pension, and was elected by the voters of Illinois who were sick and tired of politics as usual.  He has a huge fight on his hands, the petulant Democrats who have supermajorities in the Illinois House and Senate refuse to balance a budget and the state has operated without a budget for a year. 

Illinois residents can only hope for change.  In the meantime, those who are fed up are leaving the state at the rate of one every five minutes.  

The new Republican governor of Illinois, Bruce Rauner, is starting his second year of his first term.  He is confronted with a state that has the lowest credit rating of any state; the highest debt of any state; and worse, the most powerful Democrat machine of any big city in the city of Chicago.

He recently suggested that the state take over the financially troubled Chicago public school system.  His plan has been characterized as politically motivated by editorial writers such as Mark Brown of the Chicago Sun-Times.  Brown attacked the plan as an “opportunity to take the school system in bankruptcy and break the teachers union he so loathes.”  In late 2015, Rauner suggested that bankruptcy may be the only solution for insolvent communities.  Federal law requires state legislative approval for any cities filing for bankruptcy.  Illinois Democrats have vowed to never allow Chicago to file for bankruptcy. 

The Sun-Times has defended the huge Chicago Democrat machine for many decades.  But the fact is, these comments don’t do anything to help the students or the taxpayers, who are expected to fund luxury-level pensions.  What these critics choose to ignore – without suggesting positive solutions – is that the Chicago Public Schools (CPS) face two huge problems.  For one, Chicago schools fail to teach their students.  They attend some of the worst-ranked schools in the nation.  The second huge issue is the unaffordable pension debt facing the taxpayers of the city.  In these two important areas, student performance and financing, the Chicago Public School system is arguably the worst in the nation.

First, the issue of how teachers are failing the students.  Four out of ten CPS high school students don’t graduate, and a full 91% of high school graduates who go to college must take remedial courses in math and other basic schoolwork skills.  And in 1985, Chicago’s Mayor Harold Washington issued an executive order to make Chicago into the nation’s first official sanctuary city.  Today Hispanic students drop out of high school at a rate double that of black students, and Hispanic girls who are age 19 have a higher rate of motherhood than African-Americans.

The second major issue is the financial condition of the CPS system.  Chicago’s public school system has been authorized by the state to issue its own bonds.  Their credit rating has plunged to junk bond status, just like the state’s.  No surprise – the Democrats who have spent the state into financial chaos also run the CPS.  In August, 2015 S&P lowered the CPS’s rating to junk.  This followed Fitch and Moody’s, who also lowered the CPS bond ratings lower than junk.  The CPS ignores any suggestion of fiscal responsibility and borrows money at a very expensive interest rate. 

This is not a surprise, since the state finances of Illinois are the worst in the nation.  Illinois has a massive unfunded state pension debt that Moody’s estimates to be $205 billion.  In addition, it has unfunded pension plans in the city of Chicago and Cook County, the county that contains the city.  SEC commissioner Daniel Gallagher noted in 2014 that the average household of Chicago owes the city, county, and state $88,000 to pay for unfunded pension debt.  Politicians have borrowed this much using the households’ earnings as collateral.

The debt of the CPS is due not just to pensions, but to high salaries.  In July 2014, the Illinois Policy Institute reported that career CPS teachers earned about $70,000 a year.  Over their entire career, they would contribute a total of $133,179 to their pension fund but would receive $2,074,922 in retirement.  Yes, that’s two million.  This shortfall is being made up by out-of-control borrowing and taxation

In just this year, Mayor Emanuel borrowed and raised another $1.1 billion.  And that’s expected to last only a year and a half.  In 2014, the average Chicago worker earned a median income of $31,052.  This means that every single retired teacher needs to have all the income earned by the average working Chicagoan in 64 and a half years.  

And of course, if Chicagoans don’t pay higher property tax bills, essential services, not pensions, will be cut.  It is difficult to understand how Democrats can portray themselves as champions of the working man, as Hillary Clinton claims, while public unions earn twice as much as the regular worker and expect those workers to fund their full pay for life, with benefits. 

Chicago’s entire 2016 budget is $7.8 billion and the property tax payments paid by homeowners and renters go entirely to pensions and municipal bond debt.  So while the unfunded pension liability piles up, very little, if any, of it will be paid down by property taxes.  To add insult to injury, Cook County raised the sales tax on Chicago residents a full percent to 10.25%, and the Board president, Toni Preckwinkle, admitted that 90% of the increase would go only to pay pensions.  For this year, at least.  Moody’s cautions that the increase is only cosmetic and does nothing to address the long-term pension issues of the school teachers’ pension plan and those pension plans of over 35 other public-sector unions.  These continue to be papered over with financial engineering that only delays the inevitable

And the reason Chicago has such an abominably awful public school system is that the city has, since WWI, funneled minority groups such as black and then Hispanic residents into highly segregated communities of poverty.  This disgraceful practice of creating impoverished city neighborhoods has been a consistent strategy of Democrats in the biggest cities of the West, Midwest, and Northeast since FDR. 

This racial segregation has created the poor school systems and high unemployment.  While Mayor Emanuel closed 50 schools in Chicago in the past few years, the remainder are still underperforming. 

Governor Rauner has 100 years of racial segregation, institutionalized failure and debt, and reckless spending to correct, but he is willing to start somewhere.  Like Donald Trump, he was a successful businessman, refuses to take a salary or pension, and was elected by the voters of Illinois who were sick and tired of politics as usual.  He has a huge fight on his hands, the petulant Democrats who have supermajorities in the Illinois House and Senate refuse to balance a budget and the state has operated without a budget for a year. 

Illinois residents can only hope for change.  In the meantime, those who are fed up are leaving the state at the rate of one every five minutes.