MEDIA WATCH: Tribune's version of history recalls the glory days of the Chicago School Finance Authority... 'News' as propaganda from the Trib repeats the traditional ruling class lie that in 1979, CPS was 'bankrupt'...

While he was Governor of Illinois, Jim Thompson (above, in a recent photo, much older than once) engineered the claim that Chicago's public schools was "bankrupt" in 1979 -- even though the problem was that revenue for CPS was insufficient (as it is in 2016). Thompson's claim about CPS "bankruptcy" resulted, ultimately, in the creation of the Chicago School Finance Authority and a 30-year debt that crippled CPS for a generation and a half. The aim of the SFA was to cripple the Chicago Teachers Union, which was forced to strike almost every year during the 1980s in order to barely hold on to what it had won through the militancy of the 1960s and 1970s.The Chicago Tribune didn't cover the breaking story about the proposal in Springfield by Bruce Rauner's allies to take over Chicago's public schools. But within a few hours, the Trib had re-oriented its perspective. In its January 20, 2016 story, the Trib outlined the ruling class's version of the glory days of the Chicago School Finance Authority.

We are talking about two "crises", both of which were manipulated by corporate America, its political leadership, and Chicago's corporate media. The result has been a parody of history, where only one side of a complex story has been passed along. And in January 2016, that simplified corporate version of historical reality is back in control of the version people are being told to believe.

The complex history of how CPS finances have always been based on a ruling class "austerity" budget has been oversimplified for decades by reporters -- and even some historians -- who accept the notion that the problem in the late 1970s was that the school system was verging on "bankruptcy." Later, as the usurious interest on the borrowing from the 1979 - 1980 "financial crisis" began to reduce, a new era of corporate "reform" began with the imposition of the "mayoral control model". That model actually began in Chicago, although its New York iteration, which came several years later, has gotten the most attention.


Rauner on CPS takeover attempt:

'The mayor has failed'

by Kim Geiger, Juan Perez, Jr., and Rick Pearson

Chicago Tribune, January 21, 2016

Republican Gov. Bruce Rauner on Wednesday launched a years-in-the-making all-out assault on the Chicago Teachers Union, pushing a state takeover of the city's public school system while contending his onetime ally Mayor Rahm Emanuel had "failed" to get the job done.

Democrats, including House Speaker Michael Madigan and Senate President John Cullerton, quickly decried the plan, which also would allow the district to declare bankruptcy. They each accused Rauner of using Chicago Public Schools' financial crisis as a new avenue to push his efforts to curb union power while diverting attention from the lack of a state budget.

And so the political dynamic surrounding CPS quickly mirrored the impasse in state government: Both sides are digging in over deep-seated ideological differences and playing the blame game over who's responsible for the mess. Meanwhile, a solution remains elusive as rhetoric passes for progress in dealing with CPS finances, leaving thousands of schoolchildren, their parents, teachers and administrators in distress.

For CPS, money woes are a recurring problem that has drawn in the rest of the state every 15 to 20 years. The last time was 1995, when Republicans who ran state government handed control of the city's schools and some financial flexibility to then-Mayor Richard M. Daley. But Daley, using powers agreed to by the GOP, reduced teacher pension payments, and today soaring retirement funding is the major factor in the financial problems the school district faces.

Editorial: Saving Chicago schools

Editorial Board

Even before he was governor, Rauner was a strong critic of the Chicago Teachers Union, and the legislation his top allies in the General Assembly proposed took aim at the labor group. The proposal would allow the governor's hand-picked State Board of Education chief to replace the mayor's appointed school board until the district's finances were deemed fixed. The state panel would have the power to negotiate a new teachers' contract if none is reached in current talks, or oversee a union contract that could be broken if the district filed for bankruptcy.

If the measures were to pass, some Republicans privately acknowledged that the state would be more willing to come up with some money to help close what is estimated as a $480 million deficit. It also would lead to the promise of a new elected school board in the future, a concept pushed, ironically, by the teachers' union, though union contributions to candidates would be barred.

The greater likelihood is that the measures will go nowhere in a legislature tightly controlled by city Democrats. If CPS is forced to close schools and make massive job cuts, Rauner can take cover by arguing he gave Emanuel and Chicago Democrats a choice in rescuing public education, only to be rebuffed by supporters of the status quo.

In backing the new legislation offered by House Republican leader Jim Durkin, of Western Springs, and Senate GOP leader Christine Radogno, of Lemont, Rauner also ratcheted up his criticism of Emanuel.

It was part of a continued theme by Rauner, who in recent weeks has sought to take advantage of souring public opinion toward the mayor following the November release of the video of the 2014 shooting of Laquan McDonald, a black teen, by Jason Van Dyke, a white Chicago police officer.

"He's failed on public safety, he's failed on schools, he's failed on jobs in the neighborhoods, he's failed on taxes, he's failed on reforms. And I'm tired of it. We have to take action," Rauner said of Emanuel, accusing the mayor of being "afraid" of the CTU.

"I believe if we get involved, we can take on the teachers union in Chicago," Rauner said.

"(Emanuel) caved in the teachers strike 41/2 years ago, and he's sending the message right now (in contract talks that) he's going to give them what they want and then say, 'State, pay for it.' We are not going to let that happen," the governor said.

The seeds of Rauner's proposals can be found in what Rauner has billed as his "Turnaround Agenda," which includes provisions that would allow sharp curbs on collective bargaining with public worker unions, eliminate the requirement that prevailing union wages be paid on public works projects and put more of the onus on injured workers to prove their workers' compensation claims are justified.

Those are items Rauner has said are key to resolving the state government stalemate, but they also have been nonstarters with Democrats allied with labor unions and trial lawyers. Though no friend of the CTU, Emanuel also has rejected Rauner's efforts to enlist the mayor's help to try to get Democratic lawmakers to back union-weakening laws in exchange for cash assistance to the schools and the city.

One measure would add CPS to a state financial oversight law that it is exempted from but applies to all other Illinois school districts. Radogno, the Senate GOP leader, said the oversight of a state finance authority outside Chicago's political culture was needed.

"We're trying to change that status quo. We don't feel like we've had a good look at what's going on in Chicago Public Schools. Everybody is sort of inbred in terms of the political system," Radogno said.

"There is no support to bail out Chicago or its schools if they're not going to help themselves and if they're not going to engage in a discussion to help the entire state," she said.

Another measure would allow school districts such as CPS to declare bankruptcy, which could allow it to void union contracts. Illinois law does not allow local governments, including school districts, to file for bankruptcy.

Rep. Ron Sandack, of Downers Grove, the House Republican floor leader who has long backed legislation allowing for municipal bankruptcy, called CPS "a dying employer right now. The system is absolutely collapsing on itself. To do nothing would be unconscionable."

But Democrats quickly assailed the Chicago school proposals as well as questioning the motivations behind them.

"Giving control of our children's future to a governor who can't pass his own budget, who is racking up billions in unpaid bills and who is crippling higher education across the state makes zero sense," Kelley Quinn, Emanuel's spokeswoman, said while the mayor was attending a conference in Washington, D.C.

"With just a few weeks to go before delivering a second (state) budget address without having passed his first budget, it's clear the Republicans in Springfield are trying desperately to distract from their own failures," she said.

Jesse Sharkey, CTU's vice president, said during a break in contract negotiations that Rauner's actions were "very disruptive and unhelpful to the bargaining process right now."

"It's a disruption and it's also a stunt, because last time I checked Rauner doesn't have anywhere near enough votes in the legislature to move any of the things he's talking about," Sharkey said, adding that he believed the city was negotiating "seriously" and talks had been "productive."

Democrats accused Rauner, a former private equity investor, of calling for a CPS bankruptcy to try to help financial advisers and bankers or to push for creation of more charter schools.

And Madigan raised the specter of Flint, Mich., and noted the controversy over lead found in the city's water supply there as a result of a state oversight board's decision.

Cullerton, a key Emanuel ally, called the GOP legislation a "ridiculous idea."

"This is not going to happen. It's mean-spirited and evidence of their total lack of knowledge of the real problems facing Chicago Public Schools," Cullerton said.

"The unfair treatment of pension systems by the state is the immediate cause of CPS' financial problem. That situation ought to be addressed rather than promoting this far-fetched notion that the state is somehow in the position to take over Chicago schools," he said.

Cullerton was citing the mayor's top complaint: City taxpayers pay for Chicago teacher pensions through property taxes while also paying for teacher pensions outside the city through state income taxes.

Escalating required contributions to the teachers' pension fund are driving the Chicago Public Schools cash shortfall. In each of the past two years, pension contributions by CPS have topped $600 million, nearly triple what was required in previous years when the district was given state permission to make lower payments even as the retirement fund shortfall grew larger.

The increased CPS pension contributions, coupled with state reductions in payments to the fund, further strained an already tight budget. This year, the required contribution from CPS is $676 million. The state is paying about $12 million into the fund, compared with more than $62 million last year.

Forrest Claypool, who Emanuel appointed to serve as CPS' chief executive, has argued the state should start contributing more to the Chicago Teachers Pension Fund. But critics note that for years CPS shortchanged the fund. For a decade under Daley, CPS made no payments to the fund, albeit with state permission.

Claypool called the GOP proposals "a sideshow" and a "reckless smokescreen" that distracted from the district's recent demands that lawmakers change how Illinois schools are funded and bail out CPS.

"CPS is taking steps to fix everything within our fiscal control and keep as much money in our classrooms as we can," Claypool said in a statement.

"CPS and the CTU leadership are working feverishly to reach a deal that would cut costs while preventing midyear layoffs, the district is going to market with $875 million in bonds and we're on the verge of even deeper cuts to the bureaucracy," he said.

CTU's Sharkey and some Democrats also questioned the timing of Rauner's criticism and the Republican legislation coming just before CPS goes to the bond market. The legislative proposals were announced as Fitch Ratings again downgraded the school district's debt this week.

Fitch cited a litany of factors, including CPS' limited ability to raise revenue, difficult union negotiations and a "lack of material progress" in efforts to stitch up a yawning budget gap. Standard & Poor's downgraded the district's debt by two notches last week.

CPS officials say the borrowing is crucial to keep the debt-laden system afloat, though market conditions mean CPS could pay a steep premium.

Mike Griffith, a school finance strategist with the Education Commission of the States, said school districts filing for bankruptcy is "a rarity." By his count, only six school districts have filed for bankruptcy since 1954. The last one, which he said came in the early 1990s, was a tiny system in Missouri.

Griffith noted that a municipal bankruptcy is different than a personal bankruptcy because it would turn over to a federal judge the control of school district operations.

"I think everyone looking at it definitely sees it as a last resort, because they could dramatically lower teacher pay. They could force you to close a lot of schools, to sell those buildings, to do many steps that people would be reluctant to do," he said.

The city's schools have been under the state's emergency oversight before. In 1980, a district fiscal crisis that prompted banks to withhold loans from CPS prodded state lawmakers to create the Chicago School Finance Authority to supervise schools.

CPS had to submit a balanced budget to the authority, which had power to keep school doors closed until it approved or rejected district spending plans and contracts. That arrangement lasted until 1995, when a Republican-led legislature gave Daley the control of CPS that he wanted.


January 22, 2016 at 8:38 AM

By: Rod Estvan

Runner plays his hand now the CTU must play theirs

All of us that are left alive that lived the reality of the Finance Authority take over of CPS in 1980 need to prepare teachers and parents for what could be coming if we are not vigilant. I wrote my Masters Thesis on this experience because it had such a profound impact on me and I used many articles that George wrote back then along numerous other sourecs as academic references in my thesis. One lesson that we all learned is that bankruptcy is when the financial institutions refuse to provide an entity with any further short term credit and at that point CPS has a profound cash crunch. Heather Gillers in a Trib article published on Jan 21 titled “Next CPS budget will have an even bigger hole to fill: $800 million” attempted to discuss that tipping point. Currently CPS still has a line of credit in the many millions of dollars, but the truth is eventually it will get cut off given the path we are on.

Conceptually a huge problem for the CTU in this current crisis is ideologically being tied down to the theory of “broke on purpose.” Its an idea that to a degree the fiscal crisis is a created one and to a degree its part of a long term attempt to break the Chicago Teachers Union and force ever greater privatization. I would argue that the leadership of CPS under both Daley and Emanuel are not capable of such a long term vision, they spend their time trying to appease the Civic Committee by privatizing, trying to provide some level of functional literacy to desperately poor children by funding pre-school and universal kindergarten that they have no funding for, and open ever more selective schools for the middle and upper class residents of Chicago that the district can also not afford. There is no vision, there is no master plan, its just survival.

Charter schools and privatization efforts will eventually face the axe too if the crisis progresses. As much as our patriotic financiers of America love privatization, they like losing money even less and will not hesitate to force CPS to lower payments to charters and cut payments to other privatization schemes to a degree that making what they consider a “reasonable” profit is no longer possible.

Rauner plays banks and other financial institutions for the profit whores they are. Hence he had no hesitation over borrowing money and then bankrupting a firm he has acquired that he projects not to generate a “reasonable” profit in the immediate future when operating GTCR. He wants to apply those principles to the public sector which no doubt a significant part of even conservative civic elite of Chicago finds frightening. But they have discovered that they can’t control Rauner once he got power. (This is also a deep fear in relationship to Trump winning the Republican primaries.) In order for the CTU to survive and for future children to get any type of an education the inherent contradictions within the civic elite have to be utilized to the extent possible. Rauner by playing the bankruptcy card rather than the traditional restructuring card may have over played his own hand. Right now he has complete hegemony over elected Republicans in the State legislature, but I have no doubt there are conservative members of the Assembly getting very nervous as to where this is all going.

If Ruaner had used the existing school code that provides for a financial oversight panel to be appointed with significant oversight powers over school boards and played that out for a year he would have been in a stronger position to seek full dissolution of the CPS Board. But by moving so fast he has given the CTU and our children a chance, its an opportunity that needs to be exploited. Part of exploiting this opportunity is seeking more money for CPS via a property tax referendum that is allowed under the existing PTELL law that applies to CPS and Rauner can’t stop by executive action. It need not be designed to provide enough money to attempt to solve the entire fiscal crisis, but enough to show the credit rating agencies the City can and will fund its schools with or without a State bail out. The Governor would no doubt pull out every dollar to defeat such a referendum arguing it is a plan to fund the “union bosses.” Its a fight that needs to be taken on and its the one long term source of funding beyond TIF money which will likely be released.

Rod Estvan

January 23, 2016 at 6:34 PM

By: Margaret Wilson

CPS and State bankruptcy

I think it is important for Substance staff and readers to reread the history of the near bankruptcy of New York City in 1970 especially what was written in the Nation. We can learn a lot from the mistakes the working class made there.

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