CTU criticizes lies in CPS budget claims... 'Billion Dollar Deficit' is bullshit, and the claims from Rahm's Board of Education in June 2011 were the lies that robbed teachers of the contractual four percent raise
Once again, the Chicago Board of Education has quietly released its audited financial report, called the "Comprehensive Annual Financial Report" (CAFR). The CAFR once again shows that the claims of the first year of the administration of Rahm Emanuel that the schools had an enormous "deficit" were lies. Riding on that "deficit" claim, ritually narrated at the time by the seven members of the Board who had just been appointed by Emanuel, was a four-percent raise that all union members were supposed to receive during the final year of the five-year contract that ran from 2007 through 2012.
The FY 2012 CAFR is now available at the CPS website. It shows that as its first act in June 2011, the Board of Education just appointed by Rahm Emanuel lied grotesquely about the finances of the nation's third largest school system.But in June 2011, at the beginning of the 2012 fiscal year, the members of the Board, one by one, affirmed the presentation, made by "Chief Administrative Officer" Tim Cawley, that CPS was broke and had to exhaust its reserves in order to begin the next fiscal year (which was to begin July 1, 2011). And the public had no way of knowing the facts until the audited books for that fiscal year were published, which took place not until January 23, 2013!
In a January 28, 2013 press release, the Chicago Teachers Union challenged the Board's claims, based now on the audited financial statement which shows the lies of the time.
CTU PRESS RELEASE:
Extra, Extra! The Curious Tale of the CPS’ “Press Release” Budget (press release from the CTY, January 28, 2013 312/329-6250. StephanieGadlin@ctulocal1.com)
By Karen Lewis, NBCT
CHICAGO - The audit of the Chicago Public Schools (CPS) financial results, the Comprehensive Annual Financial Report (CAFR) for the year ending June 30, 2012 was quietly released at midnight on Wednesday of last week. With more than $500 million surplus heading into the new fiscal year, this stealth document effectively blows a hole into CPS’ unchecked claim of a growing “billion dollar deficit.”
The Chicago Teachers Union has long maintained that CPS has an authentic budget and then there’s the “press release budget.” The latter is used to score endless headlines screaming for immediate and drastic action in order to stop the fiscal bleeding. When the city’s teachers, paraprofessionals and school clinicians took to the streets last year during a labor strike, the voluminous “billion dollar deficit” claim helped the district construct a public triage unit so it could effectively explain why educators couldn’t be paid for working longer hours and why our students couldn’t receive the critical wraparound services, textbooks, art, music and world language classes they so desperately needed.
As the district plans to close schools and displace thousands of its students, Chicago taxpayers and the parents deserve answers. CPS’ financial position continues to improve year after year, but in FY 2011-2012, as the district spent less on textbooks, school supplies and teacher salaries, it continued to push a crisis myth of a struggling school district approaching a fiscal doomsday.
CPS is a public enterprise that has an annual budget in excess of $5 billion, employs over 30,000 and is responsible for the education of more than 400,000 children of the city of Chicago. The audit report received little if any news coverage by the major broadcast and print media. The CAFR is traditionally released in December but was delayed for an unknown reason until January 23. Why? Could it be that there was bad news in the report?
You would think that such an important document would at least glean a bit of scrutiny during this period where there is a constant drone of dire financial predictions up and down the entire governmental spectrum from the federal level to the smallest municipalities.
Locally, the taxpayers are under the impression that the system has lost thousands of students. They hear there is an excess of empty seats in a vast sea of underutilized schools, another myth created by the district to justify its draconian school closing policies. The cost of supporting these schools is undoubtedly causing a flood of red ink. Why else would closures and consolidations be one of the hottest news topics of the day? Students and parents worry that their neighborhood school will be the next to feel the heartless decries from Clark Street.
Let’s see how CPS did in the 2011-2012 school year. Well, during the difficult budget process for this particular year the Board approved a budget that had a deficit of $241 million. Not too good but a lot better than was expected when first reviewed. It will be a struggle to lose just $200 million. Now let us see where the year actually ended — with a surplus for the year of $328 million. This must be a tremendous turnaround orchestrated by savvy bureaucrats. Instead of losing $241 million, CPS made $328 million for an improvement of $569 million. Where’s the press release?
Could Fiscal Year 2011-2012 been an anomaly? Let’s review a few previous years: In Fiscal Year 2010-2011, CPS budgeted for a loss of $245 million but came in at a surplus of $316 million, an improvement of $561 million, almost as good as 2011-2012.
For Fiscal Year 2009-2010, the budget was for a net loss of $106 million and the actual number was a net loss of $102 million. In Fiscal Year 2008-2009 it was budgeted for a loss of $145 million but actually end with a loss of $143 million.
Looking back to the four fiscal years starting with 2005 up to and including 2008, the cumulative net budgets approved by the Board, had a combined loss of $290 million. In actuality, these four years produced a combined surplus of $521 million. This was an impressive $811 million positive variance to the official budget approved by the Board of Education.
The combined budgeted losses from fiscal years 2005 through 2012 was $1,027,000,000. But the combined actual net surpluses were $920,000,000. CPS out performed its budget by a whopping $1.9 billion. This should be front page news.
For the start of fiscal year 2012-2013, the net assets of CPS were $1.1 billion. It’s there, just look at the CAFR. But be warned, as another budget season is underway, a deficit of $1 billion is just over the horizon. Perhaps it is time to have an honest budget discussion before any schools are closed, school communities are torn apart and children are dislodged from familiar surroundings.
[Karen Lewis is the president of the Chicago Teachers Union and a national board certified teacher.
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The Chicago Teachers Union represents 30,000 teachers and educational support personnel working in the Chicago Public Schools and, by extension, the students and families they serve. CTU, an affiliate of the American Federation of Teachers and the Illinois Federation of Teachers, is the third largest teachers local in the country and the largest local union in Illinois. For more information visit CTU’s website at www.ctunet.com].
By: Rod Estvan
Two ways to look at CAFR
As with all things in life there are multiple ways to look at anything. Some times many ways of looking at something are all correct and may present different truths. Substance and the CTU look at the CAFR as evidence that CPS' claims of fiscal stress were bogus, teachers got ripped off, and fiscal claims as a basis for school closings are illegitimate.
Here is another way of looking at the CAFR, the way I would have looked at a balance sheet when I was a risk manager many years ago when I left teaching for a number of years. CPS knows the exact capture date when the annual audit will examine its fiscal situation. Therefore, CPS like any other entity makes its balance look as good as possible in order to assure its creditors.
There are a wide variety of ways to do this, one way is to project higher expenses than the district expects it will actually realize. Another way is to shift expenses between fiscal years, for example writing contracts for services provided during the latter part of the current fiscal year that would only be payable in the next fiscal year. Another way is to project lower levels of income than could be projected using another approach. The magic of accounting provides numerous other ways to skin this cat.
All of these techniques are understood by analysts and accepted as part of doing business. To put it simply audits reveal some things but not others else wise the public would have been alerted to the pending fiscal collapse of several investment banks well before the onset of the Great Recession.
The overall fiscal situation of public education in Illinois as a whole is not good as are the situations of cities and villages in our state. The driver of this problem is the effective bankruptcy of the State of Illinois. Legally the State of Illinois cannot declare bankruptcy so the fiction of the possibility of eventually coming out from under the current situation continues. To claim as elected officials from both major parties that the root of this problem is pensions is duplicitous, the root of our problem is Illinois constitutionally driven flat income tax.
In our State the most wealthy among us are protected by the Constitution which forces to poorest tax payer to pay at the same rate as the richest tax payer on earned income. As we all know the solution school districts use is property taxes, which in the Chicago metro area are subject to legal increase caps. With the dramatic decline in property values, rates are increased just to keep school districts' income flat or slightly below the rate of inflation.
So I would say yes CPS historically presents its coming fiscal situation annually as a pending disaster. I would also say the CAFR is a snapshot frozen in time that creates more of a cash balance than the district should have using generally accepted accounting techniques.
Rod Estvan