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STRIKEWATCH: Bond rating lowering came in November 1979, as Wall Street moved to eliminate the Illinois usury law and reap enormous profits from CPS bonds, other borrowings

George N. Schmidt - April 04, 2012

There has been so much comment traffic following the publication here at substancenews.net of John Kugler's brief video history of the February 1980 strike that some background became necessary. The following is offered as part of that history, without reference to the notes and documents we will all need as we finally get to write an accurate history of our union and of the public school systems of Chicago (that's a deliberate plural, since we had two in 1979 and now we have four). Consider this one contribution to our side of a story that for too long has been told by the other side (and its minions among the paid professors and paid pundits).

Teachers on a north side picket line in February 1980. The five-day February 1980 strike was preceded by a five-day "non-strike" in which Chicago teachers shut down the entire school system without a picket sign or picket line. In all, Chicago teachers shut down the entire school system for ten days in January and February 1980, although only five of those days were an official union strike.The "school financial crisis" of 1979 - 1982 that gave rise to the shut down of January 1980 and the five-day strike in February 1980 was foreshadowed some time in November 1917 when Moody's, then Standard and Poors (Fitch didn't exist at that time), lowered the bond rating of the Chicago Board of Education. Most of us teachers didn't know anything about municipal bonds and bond ratings at that time, but I knew enough to see that something wicked was coming. One of the first things we did at S.U.B.S. (and Substance) was tell all of the low-seniority FTBs to utilize their medical and dental insurance, because the future would be bleak.

I had to have my nose rebuilt (too many disagreements in my youth; the bone had blocked the back and needed to be chiseled out) and did between Thanksgiving and New Year's. (They actually asked if I wanted a different nose and showed me the "Nose Book" they used for nose jobs at Augustana Hospital; I told them I just wanted my nose, but with the ability to breathe through it again...). Many of the rest of us also used our medical benefits quickly then, and to good purpose.

By April 1980, thousands of us had been laid off. We'd get a notice (mine was hand delivered to me in my classroom by Blaine DeNye, principal of Manley, who was man enough to do that and a gentleman enough to thank me and wish me well; some principals were less professional...) and have to report to the Bureau of Teachers Personnel, which back then was in the Builders Building at 228 N. LaSalle St. (that building has been rebuilt and given a new number; "228" no longer exists). Hundreds of us were pouring in every hour, and Teacher Personnel was barely prepared. We could barely get out of the elevators, and every now and then Ray Principle would stand on a desk and call out a bunch of names. You were given a bunch of papers, told to sign then, and told to GTFO of the building (so that next crowd could squeeze in).

By 1984, the majority of CTU members still carried the classic CTU sign that read "ON STRIKE FOR OUR CONTRACT" (in all bold letters, all caps). But after the leadership of the unions representing all the workers working for CPS — from truck drivers to the cashiers in the lunchrooms — a new sign was also on the lines. Above, a striker and her children carrying signs in front of the old CPS headquarters at 1819 W. Pershing Road. The signs read "Coalition of School Union Employees". The scam from LaSalle St. and Wall Street was that beginning in the 1930s CPS had been paying most checks with "tax anticipation warrants." These were basically based on loans from the banks (on which, by the way, they made interest) that CPS was good for between the two big months (back then, August and March) when the tax money would go into the CPS accounts. By the late 1970s, if you recall, interest rates had soared (I was once "lucky" to get a mortgage at only ten percent!), and the banks no longer wanted to loan CPS the money at the old rates, which were capped by an Illinois Usury law. So suddenly, "everyone" — Continental Illinois, the local ruling class (in those days the top Pritzker was Jay, the newspapers, Arthur Andersen, and Mayor Jane Byrne — noticed that CPS had been borrowing money (short term) to pay the bills. The "Crisis" was upon us.

Since nobody at CPS who would talk was willing to talk about what was going on, the railroad that ran us up to the Chicago School Finance Authority ran full speed. By the end of 1980 (these massive thingies take time), CPS had eliminated more than 5,000 jobs, the School Finance Authority was in charge of CPS finances (austerity was not a thing of the 21st Century), and the crooks at Salomon Brothers (of "Liar's Poker" fame) had brokered the bonds that went for as high as 13 percent (once the Illinois usury cap was lifted).

By law, the SFA was in power for 30 years, until the last of the 1980 bonds were paid back in 2009 and 2010. Once the ruling class changed its tactics in the early 1990s (ruthless dictatorial and apartheid-based control over Chicago's schools was not an invention of the 21st Century), the "School Finance Authority" became the "School Reform Authority." The chairman of that entity, which hired Checker Finn as its very very expensive consultant on true "school reform", was Martin Koldyke.

Once mayoral control was in place courtesy of the Amendatory Act of 1995, the ruling class discovered it didn't need the reform authority any longer, since there was now direct, dictatorial executive control over the schools. The corporate media announced that what CPS really needed to "reform" was the executive leadership of experienced business people.

Hah. From the first day of the Mayor Control chapter of reform it was about crony capitalism, as the appointment of two City Hall hacks with no private sector business experience proved then (and has been so since).

So Daley appointed two entrepreneurs — Paul Vallas and Gery Chico — as "Chief Executive Officer" of CPS and President of the "Chicago School Reform Board of Trustees."

Chico and Vallas were crony capitalist, not private sector entrepreneurs. If either of them had had "entrepreneurial" experience as private capitalists, it was hustling lemonade when they were kids. Each had a pure Democratic Party patronage pedigree.

Prior to his appiontment as "CEO" of CPS, Vallas had been Daley's budget chief.

Chico, a Chicago lawyer of the political tribe, had been Daley's chief of staff.

Both were political hacks, but within a few weeks, the ruling class had portrayed them as the "business" types who were just what "reform" demanded. (During all those years, the commisar for LaSalle St. on the Board of Education was Norman Bobins, the affable CEO of LaSalle Bank, who served to make sure the policies of CPS were aligned with the dictates of the Illinois Business Roundtable and the Civic Committee of the Commercial Club, its local branch).

While there are a thousand narratives from those still alive who remember the gruesome days of carnage from 1979 - 1982 (it took CPS three Septembers to meet the ruling class's demands for cuts to show "fiscal responsibility, and at the end the school system had 8,000 fewer workers, and the highest class sizes in recent history for those who survived), there are basically two fundamental narratives. The official history (which you can read at any point in the Tribune) says that CPS was guilty of excessive spending due to the unconscionable demands of the workers, led by the greedy Chicago Teachers Union, went "broke," and had to borrow a couple of billion dollars in the bailout that came with the selling of those hugely expensive Series 1980 School Finance Authority bonds.

What really happened was that the banks and their allies ganged up on CPS because they no longer wanted to pay the low interest rates required under the Illinois usury laws, created a crisis, and mortgaged the future of Chicago's public schools at enormous expense for more than a generation. The bonds were the beginning of all that predatory capitalism that came to characterize Wall Street and the Atlas Shrugged generation since. It was not a coincidence that Michael Lewis's first book, "Liar's Poker," was about the growth of a casino culture at Salomon Brothers in the 1980s. The Chicago Teachers Union fought back, as the history books showed. For that, the ruling class never forgave us, even if our strikes — 1980, 1983, 1984, 1985, and 1987 — were all defensive in nature.

And we won.

Until a new generation of "leaders", following Jackie Vaughn's death in January 1994, decided that a lucrative safety net (for them at least) was to make the CTU into the largest company union in Illinois, allied with our pal Richard M. Daley and guys like Paul Vallas and Gery Chico.

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