LIES, BIG LIES, AND THAT 'BILLION DOLLAR DEFICIT' THAT NEVER WAS... CPS continues the 'Great CAFR Cover Up' following February 26, 2014 Board of Education meeting... or 'Why do you need to audit the books when Rahm told you there was a billion dollar deficit?!!'

The claim that Chicago's public schools were facing a "deficit" of a billion dollars (or in some statements, "approaching a billion dollars") became the common narrative for the nation's ruling class throughout the end of 2012 and all of 2013. It was one of those "facts" that "everyone knew" because officials of the nation's third largest school system repeated it over and over like a chant from the old Latin Mass, as if to conjure it up as a fact would happen simply because it was repeated in the dark of a basilica -- and nobody asked "What's that mean?"

Although CPS officials told certain members of the press and public that the CAFR for Fiscal 2013 (the fiscal year from July 1, 2012 through June 30, 2013) would be available to the public after it was presented to the Board of Education at the Board's February 26, 2014 meeting, as of the end of the day on February 26, 2014, the most recent CAFR that is available from the nation's third largest school system is still the FY 2012 CAFR. The cover up continues.It was always one of the bigger lies of the Chicago Public Schools, especially after the Chicago Teachers Strike of 2012 ended in September 2012. So after Mayor Rahm Emanuel dumped former "Chief Executive Officer" Jean-Claude Brizard (locally known as "CEO 1.0) and appointed Barbara Byrd Bennett (CEO 2.0), the story line about the "deficit" continued to be repeated, not only in local corporate media stories, but also in national punditry that picked up various propaganda pieces of the Rahm Emanuel yarn. Everyone knew that CPS was facing a "billion dollar deficit." Otherwise, CPS didn't need "pension reform" and Barbara Byrd Bennett didn't really have to gut the city's real public schools (while increasing charters, again) by means of a trick called "Student Based Budgeting."

Some of the more ignorant pundits even went brain dead and went from reporting a "billion dollar deficit" to a new "billion dollar debt." And with editors more and more scarce at Chicago content providers, the various lies went through unattributed and unchallenged.

But there was always one document where the public could find the actual facts of a fiscal year at CPS -- the CAFR. According to the CPS Website, the CAFR is: "Comprehensive Annual Financial Report (CAFR) The Comprehensive Annual Financial Report (CAFR) is the official report for government agencies and includes combined statements of revenues, expenditures, and changes in the financial position. This report also provides supporting schedules necessary to demonstrate compliance with finance-related legal and contractual provisions, extensive introductory material, and a statistical section that gives more detailed information on Chicago Public Schools and the local environment."

So, reporters waited until the CAFR was released, as it always had been, at the December Board of Education meeting. Traditionally (as far as this reporter can tell, for about a hundred years), the Board of Education received the CAFR for the previous fiscal year at its December meeting and the CAFR became public in January (always before the January Board meeting).

Until 2014.

The December 2013 Board meeting took place and No CAFR.

The January 2014 Board meeting took place and No CAFR.

For basic journalism classes, that answered the Who, What, When and Where.

The question was "Why?"

The answer is as simple as a lie's a lie.

By June 30, 2013, when FY 2013 ended, CPS didn't have a "deficit" of a "billion dollars." Actually, CPS, which had been talking deficit all year, was showing a huge surplus.

So when the CAFR comes out, even with all the attempts to cover up the financial facts, the nation's third largest school system will try to avoid answering questions about all those propaganda claims about that "billion dollar deficit."

The CAFR for FY 2013 finally surfaced on the agenda of the February 26, 2014 Board meeting. According to Board Report 14-0226-CO2, the CAFR was being presented to the Board. And some CPS officials told reporters and others that it would be available to the public after the Board meeting ended.

But as of bed time on February 26, 2014, the Board meeting is long over, and the CAFR is still not on line at the CPS website.

For those who want to read a CAFR, they are on line all the way up to the FY 2012 CAFR at:

That CAFR has been up at since January 2013, a month after it was presented to the Board members. But the most recent CAFR, for FY 2013, is still not available to the public.

But the cover up of the financial facts of the nation's third largest school system continued as February 2014 ended and March loomed.


February 27, 2014 at 6:48 AM

By: Rod Estvan

Cash flow reports are critical

In order to fully grasp the actual fiscal condition of CPS, more needs to be examined than the CAFR. What the the CAFR does is provide cash balances at one specific point in time, not over the course of a school year. Because CPS uses the CAFR to try to prop up its credit rating, it can to a degree have artificially inflated reserves that are allowed by generally accepted accounting practices.

In order to gain a deeper under standing of the actual cash flow situation of CPS Substance would have to FOIA from the CPS Treasurer all "cash flow forecasts" and reports developed pursuant to the Chicago Public Schools Investment Policy.(Board report 13-1218-PO1). This would likely produce a lot of data from which Substance could look at the entire fiscal 2013 situation. CPS could attempt to block access to these reports claiming they were all "drafts." But that would be a story in its self.

Such a project could be undertaken by groups of teachers with an accounting background and a more complex analysis could be produced by Substance. What would be of particular interest would be the cash flow lows over the course of a fiscal year. The low levels of cash flows actually indicate a more accurate picture of the fiscal condition of the school district.

My guess if that if Substance looked at this issue in detail and made it public in a creditable manner the credit rating of CPS would decline. CPS has been creative about its fiscal condition because the State school code prohibits only CPS from declaring a deficit and it's adopted budget is required by law to be balanced. ISBE formally uses the CAFR to determine that CPS has a balanced budget for the past fiscal year. Also because CPS unlike all other districts in the State issues bonds against state aid revenue instead of property taxes the entire debt ratio system ISBE uses to look at CPS is ineffective in a major way.

Rod Estvan

February 27, 2014 at 11:12 AM

By: George N. Schmidt

CAFR Coverup, Day Two (Feb. 27 2014)

Every morning between 8:00 a.m. and noon I'll be stopping by one of the most mendacious websites in Chicago to update our readers on how the coverup of the CAFR FY 2013 is continuing. As readers know, the CAFR was supposed the be presented to the Board of Education at its December 2013 meeting, and to the public after New Year's Day 2014. But because the CAFR will show that CPS was lying about that "billion dollar deficit" the CAFR is still not out. And because the Big Lie about the BILLION DOLLAR DEFICIT was the reason why Barbara Byrd Bennett and Rahm's Board voted on May 22, 2014 to close 50 of the city's real public schools, once the story about the audited CPS finances becomes public, the Big Lie will join many of those of the previous century in the long list of those items that propagandists, even, are ashamed of. Tune in tomorrow at noon for "CAFR Coverup, Day Three..." When the CAFR comes out, we will begin reporting on each of the distinct lies that went into the mendacious claims repeatedly made by David Vitale, Barbara Byrd Bennett, and the other minions of the mayor during last year's attacks on the city's real public schools, attacked which were based on the "austerity" narrative and which resulted in the destruction of dozens of communities through the closings of their real public schools despite the pleas of more than 30,000 citizens who turned out to protest the plans between December 2012 and May 2013.

February 27, 2014 at 6:23 PM

By: Nathan Goldbaum

CAFR is out

February 27, 2014 at 8:51 PM

By: John Kugler

$1 Billion Surplus?

Am i reading this shit right? Page 13 of the CAFR (damn that was a nice shell game they just played on teh City of Chicago):

CPS ended FY2013 with a fund balance for its General Operating Fund of $949 million, a decrease of $120 million or 11.23%, from FY2012. Of this, $798 million is restricted or assigned for specific uses, while the balance is held as a reserve to cover future

years deficits.

WOW if I am right that was a nice shell game they just played on the City of Chicago, but maybe I am wrong who knows I am just a fired Carpentry teacher. How about some ex post facto money guru tells us what that above sentence means.

February 28, 2014 at 5:28 AM

By: George N. Schmidt

$1 Billion (plus) surplus is about right...

Well, despite the fact that the "reserves" (CPS has been doubling down on how many of them it creates for the past eight years, since Substance finally blew the whistle on the fact that they were lying about the "requirement" that a certain percentage of the Operation budget be kept in "reserves."

Yes. It's now more than a billion dollars. That's about right, John Kugler. And that comes during the year when the "billion dollar deficit" was supposed to be the reason for closing the largest number of real public schools in the history of the USA. Followed by the year (this year) when 'PENSION REFORM!!!' was required because of that same "deficit."

But in order to get straight answers to that question, citizens and reporters are going to have to scoop out all the sludge of words that CPS has inserted between the facts and the public. And that in itself is an interesting story about how this CAFR has become public latest and has been stuffed with more words than ever in history.

The most impressive thing about the (finally released) FY 2013 CAFR is the lengthy explanation of the finances by the CPS "Chief Financial Officer." It is a tour de force in doubletalk, trying to explain away what the final balance sheets actually show later in the audited reports. This is the first time the members of the Board of Education have noticed their latest "Chief Financial Officer." Usually, in a standard corporate power structure, the CFO is one of the four or five main officers of the corporation. The others are the CEO, the CIO (Chief Information Officer), and the COO (Chief Operating or Operational Officer).

Chicago is "corporate city." Just ask Rahm and all those corporations who have gotten tax breaks and TIF benefits to hang out here "creating jobs" until (think, for example, Motorola Solutions) until those jobs (a) never really appeared, (b) were based on a pack of lies, or (c) have now disappeared.

But back to what a corporation is supposed to look like. With the CFO one of the four or five "officers" reporting directly to the Board, or possibly through the CEO.

But here in Chicago's public schools, our CFO reports to a guy whose title is "Chief Administrative Officer" (CAO), a job that NO OTHER CORPORATION in Chicago has. Except CPS. At CPS, the first CAO was a guy named David Vitale. The CAO stuff began back in the Arne Duncan days. Vitale back then was a millionaire banker and neighbor of Arne down in that hive of Atlas Shruggism, Hyde Park -- down the street from the Milton Friedman building). That job then went to a recycled Motorola guy named Tim Cawley, whose most recent stop on the corporate yellow brick road had been as an executive at an outfit called AUSL (that's the "transubstantiation" corporation, er., "Turnaround" outfit...).

So in Chicago Public Schools, the CFO reports to the CAO to the CEO to the Board.

As they used to say, OIC -- Only in Chicago.

For months, everyone at the Board meetings would notice that the CFO didn't even have a seat among the Elect. Behind the railing. Until February 26, 2014, when the CFO was brought back into the fold, just in time for all that prose about the CAFR -- unprecedented by the way.

Still, though, the delivery of the latest attack on unions, the privatization of custodial workers under ARAMARK, was delivered at the February 26 Board meeting not by the CFO but by the (you guessed it), the CAO.

Chicago's Chief Administrative Officer Tim Cawley luridly described how a try hump "Zamboni", brought to Chicago by another privatization scam, was going to make the schools not just CLEAN (he had to admit that most schools are already clean, despite cuts in the custodial budgets) but CLEANEST.

Yes, ARAMARK and its dry humping Zanbonis would bring UBER CLEAN to every corner of every school. As long as all that work was privatized, according to Cawley's Power Point and breathless, almost prurient, narrative.

So while the Board members reprised their carefully rehearsed queries on behalf of more privatization, and nobody asked why the CFO was out of the loop in the administrative chartings, Cawley cooed about privatizing custodial work in another one of those over-rehearsed and under sourced Power Point thingies that they cling to like some 13-year-old's Playboy.

Cawley, of course, was quickly trumped by a simple engineer, the president of the engineer's union. He pointed out that if the purpose was to get the custodial work out of the beleaguered hands of the principals (part of Cawley's hyperventilating was about how overworked the principals are, leaving out that they were put in charge of the custodians because (a) they demanded it and (b) it was part of "reform" until (c) this week, when it was no long really "reform" because ARAMARK was today's "reform" flavor of the month...

But Bill Iacullo got up and reminded the Board that the engineers, who are already in the buildings, could more readily manage the custodians -- like they had for 100 YEARS BEFORE 'REFORM' PUT THAT JOB IN THE JOBS OF THE PRINCIPALS. Of course, the Board members tried to keep Iacullo from speaking. Then, after all their cooing about ARAMARK and some other stuff earlier during all that lengthy POWER POINTING, the Board members sat stony faced and not one of them asked a question of Iacullo.

Because the whole point of this latest foray by the Mortoola guy, Cawley, is privatization. Not CLEANEST SCHOOLS. And this cuy, Cawley, is the guy who did a lot of the scrubbing of the "narrative" in the CAFR, so that each of the lies about the surpluses was carefully weasel worded. Which is another qualification for being a "Chief Administrative Officer" -- whether your name is David Vitale (when Arne was still around) or Tim Cawley (since Chicago got revolving out of town CEOs and Vitale became Board President).

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