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Crain's Chicago Business adds to skeptics about austerity claims... The Chicago Public Schools billion dollar 'deficit' is disappearing like the City Hall invented fiction it always was!

It is becoming clear that Chicago Public Schools will not be presenting its Proposed Budget for the 2013 - 2014 school year in June, as it should, because the fiscal year ends on June 30, 2013 and CPS is supposed to have a budget (and three public hearings) before it begins spending money on its next fiscal year (which begins July 1).

As more and more facts come out, it is clear that the six members of the Chicago Board of Education have known all along that the Board's City Hall talking point about its "billion dollar deficit" was a lie. The Board members, all appointed by Mayor Rahm Emanuel, had distinguished careers in public and corporate life before they went into subservience to Chicago's mayor. Above, three of them at the May 22 Board meeting, when they voted to implement the destruction of more than 50 of the city's real public schools on orders from the megalomaniac who appointed them. David Vitale, who is a millionaire businessman with experience in both banking and trade, Andrea Zopp, who is currently chief of the Chicago Urban League but who served for years as an attorney, and Carlos Azcoitia, who was a principal and administrator in Chicago's public schools. The other three Board members, see photo below, also have vast training and experience, thereby making their connivance in the public lies about the "billion dollar deficit" even more egregious, despite their sometimes sententious (Bienen) or sanctimonious (Hines) speeches. Substance photo by George N. Schmidt.The public revelation of the Proposed Budget and the hearings are likely to be held in August, instead. This is what CPS has been doing to postpone until the dog days the actual revelation of the state of CPS finances. But leaks from CPS -- and more aggressive reporting by the business and education reporters -- are confirming what the Chicago Teachers Union and independent researchers (including this reporter) have been saying all along:

The CPS "Billion Dollar Deficit" that has driven much of the public prattle about why schools need to be closed for "underutilization" is -- and has been -- as big a lie as the overstated claims about how much CPS would "save" by destroying dozens of real public schools by closing them.

For more than two decades, Substance has published the facts about the budget "deficit" claims regularly, usually showing at least two falsehoods that have become part of the public discussion on school finances, Chicago style.

One, the "deficit" is created by adjusting the "reserves" CPS keeps so as to create a fictiional financial problem. In fact, only one year in the past ten did CPS actually face a financial problem to justify some claims of a projected deficit, and that was at the beginning of the Great Recession. Every other year, despite claims of huge deficits (the first claim of a "billion dollar deficit" was made by Ron Huberman four years ago), CPS has wound up with a significant surplus at the end of its fiscal year.

Two, CPS has been claiming it was "cutting" central office "administration" by enormous dollar amounts for years. Every researcher who actually compared the various claims about "cutting bureaucracy" discovered that had the cuts that various chiefs claimed been true, the CPS central administration would have disappeared a year or two before then-CEO Arne Duncan left Chicago to become U.S. Secretary of Education in January 2009.

The most outrageous claims about cutting "bureaucracy" have come since Rahm Emanuel became mayor in May 2011. On several occasions at press conferences (Emanuel was holding them almost daily to tout some new corporate program, although he has slowed down of late out of fear someone was going to ask him a specific question about his attacks on real public schools) Emanuel told reporters that his administration had cut "$400 million..." from the so-called "bureaucracy." When pressed for specifics, Emanuel's aides did not answer.

The latest publication to begin to expose that lie is Crain's Chicago Business, whose blogger Greg Hinz reported the following on June 6, 2013:

CPS close to eliminating $1 billion budget hole By Greg Hinz June 07, 2013

Despite the lack of pension relief in Springfield, Chicago Public Schools has developed the outline of a plan to completely eliminate a projected $1 billion deficit for the school year that begins July 1.

CPS officials are confirming that the plan, which is not yet final, relies heavily on one-time revenues, especially an earlier-than-usual receipt of local property-tax and state revenues. The plan also is likely to include a property tax increase similar to this year's $62-million hike.

Officials say the financial plan will allow schools to open on time and without major cuts in service, under the preliminary school-by-school budgets that were released to principals last week.

But the very fact that the CPS has been able to eliminate such a large deficit will raise some questions about how real the projected $1 billion figure really was. And financial experts tend to frown on one-time revenues as ultimately unreliable.

Here's what officials are telling me.

As now envisioned, the biggest chunk of the hole will be filled by assuming that the system will get about $344 million in state revenues and local property taxes two or three months earlier than in the past, and early enough to count on for next year's budget.

Most of that money, $244 million, would come from property taxes collected by Cook County.

For decades, the county was late in sending out second half bills, not getting them into the hands of taxpayers until October or even November � much later than the Aug. 1 due date that the law supposedly requires. But county officials last year expedited the system so that $244 million was paid in July, within 30 days of the end of the fiscal year and thus credited to it. CPS now is assuming that will occur again.

In somewhat similar fashion, CPS is assuming that the state will meet payment deadlines again, now that Illinois finances are in somewhat better shape than they were a couple of years ago. That's another $100 million or so.

Officials also are hinting at other unpopular-but-necessary cuts that may come in the absence of pension relief, but do say that no mass layoffs are expected in schools.

Laurence Msall, president of the Civic Federation, underlines that CPS isn't getting any new money, merely faster delivery thereof. But he's most concerned not about the property-tax income but the state funds. This week, two of the three major ratings services downgraded Illinois debt.

However, CPS officials said they have taken steps to make sure the money will be available.

Another chunk of budget relief will come from further cuts in CPS central office spending, "significantly" more than $50 million. CPS still intends to lease out its headquarters and move to cheaper space. It is also seeking additional federal funds it thinks it can get, and will draw down some other unspecified reserves, officials said.

Officials would not answer repeated questions about whether the budget will assume levying to the property-tax cap, a step which last year raised tax income by a projected $62 million. But it is believed that the projected $1 billion deficit assumed no hike in property taxes, so levying to the cap (as CPS usually does) would yield more income.

I also can't put a number on the cumulative value of cuts included in the school-by-school budgets that went out this week. Officials emphasized that some schools got more money and others got less, but confirmed that overall spending would decline by a fairly modest amount they declined to specify.

While some questions will be raised about the budget plan, passage will both allow schools to open and give CPS more time to get needed pension relief in Springfield, officials said.



Comments:

June 7, 2013 at 6:18 PM

By: Rod Estvan

Questioning CPS deficit numbers

Both George and Greg Hinz are correct to question CPS's actual deficit numbers. Historically they have been inflated, but none the less CPS does have a deficit as do 3/4 of school districts in Illinois.

Many districts in Illinois are drawing down so called reserve funds and cutting teachers along with services. CPS isn't in a unique situation. Here is an example, one of many.

O'Fallon, Illinois District 90 a kindergarten through eighth grade district in southern Illinois has made plans reported in April to layoff ninety teachers and other employees after the citizens of the district rejected a 49-cent property tax increase. In 2012 this district ran a $412,498 deficit on revenue totaling $32.5 million. The 2012 deficit was about 1.3% of revenues. The district is planning on a $1 million dollar revenue decline in FY13. Many people living in District 90 think the layoff proposal is basically a lie to try to get people to pass the tax increase.

CPS's claim of a billion dollar deficit on revenues of around $5.3 billion is simply difficult to accept because the ratio would be an amazing 18.8% of revenues.

District 90 has around 212 employees so the proposed layoff of 90 would be a reduction of 42% of the employees. If CPS laid off 42% of its employees that would be around 17,400 employees, now that would really be a cut to protest. So even the suggestions of a CPS layoff of 4,000 employees is nothing compared to what has been publicly proposed in District 90.

Illinois as a whole is a fiscal basket case and so are many school districts. We should not forget that when we point out how CPS and other school districts have historically used deficit numbers as a PR tool but many districts in our state have very big problems.

Rod Estvan

June 10, 2013 at 12:58 AM

By: Valerie F.Leonard

CPS Budget

CPS has just closed 49 schools due to a perennial $1 billion budget deficit (so they claim). They are projecting another $ 1 billion budget deficit for 2013-2014, even after cutting "..nearly $600 million since 2011."

At the beginning of the 2012-2013 school year they said:

"Last year we eliminated $400 million in spending through a combination of cuts to administration and operations outside the classroom, which helped offset this year’s structural deficit. Despite our efforts to further reduce spending, the District continues to struggle with increasing statutory and contractual obligations and declining state and federal revenues. This year we’ve been just as vigilant as last, identifying another $144 million in spending reductions by scrubbing our budget line by line, contract by contract, and program by program. We have also ended the status quo way of doing business with CPS by implementing rigorous private sector procurement practices that will ensure less money ends up in the pockets of vendors and more goes to our schools. We are proposing to take decisive steps to close the deficit of over $665 million, including:

"$144 million in cuts and efficiencies to operations/administrative and Central office-run education programs;

"$62 million from available property tax cap ($28 per household per year);

"$14 million increase in TIF revenue;

"$432 million in fund balance; and

"$12.3 million in additional adjustments."

If CPS cut $400 million in 2011-2012, proposed cuts of $666 million in 2012-2013 (for a total of over $1 billion in actual and proposed cuts between 2011 and 2013), how is it that they say they only cut nearly $600 million since 2011, and are projecting a $1 billion budget deficit for 2014?

June 10, 2013 at 5:29 AM

By: George N. Schmidt

CPS budget claims have been lies, nonsense

As Valerie notes, CPS claimed massive "cut" over the past couple of years, supposedly in "bureaucracy" (or other places outside the classroom). At several press conference during the summer of 2011, I heard Rahm Emanuel make up facts about the CPS budget cuts, claiming he had cut administration anywhere from $400 million to $600 million. When I asked his City Hall press people for specifics, they dodged the question by pushing it over to Rahm's CPS press people (Becky Carroll) who has never met a lie she didn't repeat so long as it was consistent with her master's talking points.

There weren't $400 million in central office bureaucrats in May 2011 when Rahm took office. In addition to that, going back all the way to Arne Duncan, every year the CPS administration (often backed by the babbling from a mayor) claims it is, once again, "cutting bureaucracy." Rahm just took the same nonsense and brought it beyond the ridiculous, repeating it over and over as if, by magic, his words became true.

Part of the problem in Chicago just got worse: fewer and fewer experienced reporters who are told by their editors to get the facts. The average "news" story today is a game of "he said but she said." If Rahm says something, no matter how outrageous, it is a "fact."

Because of that approach to mayoral babblings, Chicago has been told for the past six months that the CPS "deficit" was "$1 billion!!!" and that closing schools would save enough money to offset lots of that (with the savings always changing and Barbara Byrd Bennett afraid to hold a press conference because a reporter might ask for some facts, rather than carefully scrubbed talking points)...

CPS is supposed to present the public with a Proposed Budget this month, but once again they are going to stall until August (the latest they can get away with holding the legally required budget hearings based on a Proposed Budget that the public can read).

There are a lot of other bits of nonsense in the CPS budget statements over the past two years (roughly since Rahm's Board took power and "J.C." became CEO of CPS; remember him?)...

Doubtless, CPS officials will continue to repeat their lies vie emails, carefully scripted press releases, and a pathological avoidance of public press conferences as long as they can get away with it. Becky Carroll's experiences as a flack for Rod Blagojevich was good training for her current work as a flack for Rahm and who ever the latest "Chief Executive Officer" might be. But as to the facts, when the Board's actual budget numbers come out, every one of those assertions will, once again, be proven to be FOS.

Which will not stop them from arising once again like swamp gas the next time.

June 10, 2013 at 12:50 PM

By: Rod Estvan

What are the current TIF surplus numbers

I noticed this morning in the Sun Times that Jackson Potter recommended the city authorize the transfer of surplus TIF funds to the CPS to offset potential cuts.

I know you can see the balances at https://data.cityofchicago.org/Community-Economic-Development/TIF-Balances-by-Fiscal-Year/hz8p-ewk5 But I am unclear what percent of these balances aren't pledged for TIF bonds. A good well researched article on this issue would be helpful.

Rod Estvan

June 12, 2013 at 10:02 AM

By: Jean R. Schwab

Erie Charter gets facility improvements while Von Humboldt is closed!

I live by Erie Charter School and have noticed that very expensive lights and improvements (a new wing) are being added. Last weekend plants were planted. So many expensive improvements are being made when

Von Humboldt is about a block away and has been ignored for years. Where are the funds for Erie coming from? Personally, I want my taxes spent on Von Humboldt.

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