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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!

George N. Schmidt - June 07, 2013

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.

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