Another 'Manufactured Crisis'... Historical amnesia leads to hysterical reporting as Chicago Public Schools faces the demand to pay the pension payment by June 30...

To read the headlines and most of the "news" stories covering the fact that by month's end, the Chicago Board of Education is supposed to pay a large amount of money to the Chicago Teachers Pension Fund (CTPF), many readers might think that this whole thing is a surprise, or at least a problem of recent origin. But an examination of the history of the Board of Education's manipulation of the media regarding its pension obligations shows otherwise. For more than a decade, the leaders of public education and politics in Chicago have deliberately lied about the situation in their budget in order to focus undue attention exclusively on the pensions of teachers (the CTPF) and to a lesser extent the other people who work for CPS.

Beth Swanson has been in the news several times in 2015, although she has refused to speak directly with reporters and instead has chosen to speak through her attorney. In 2015, Swanson was working as Mayor Rahm Emanuel's liaison with Chicago Public Schools, a job she had begun in 2011 when Emanuel created his novel schools governance "team." But eight years ago, Swanson was the "Budget Director" for Chicago Public Schools. On June 5, 2007, she presented the proposed budget for the 2007-2008 school year at three public hearings (above). At the time (see chart below), CPS officials began creating the manufactured crisis facing the schools because, they said, the pension costs were too high. From 2007 through June 2015, the officials of CPS, under six "Chief Executive Officers" -- Arne Duncan, Ron Huberman, Terry Mazany, Jean-Claude Brizard, Barbara Byrd Bennett, and (currently) Jesse Ruiz -- regularly proclaimed that the pensions were the problem, not revenues, not a tax system that favors the rich, and certainly not CPS budget priorities that created the largest, most expensive, and most dysfunctional bureaucracy in the history of the city's public education system. Substance photo by George N. Schmidt. As to the "crisis"? At few times in recent history has the ruling class been more consistent in creating what more than 20 years ago was dubbed "The Manufactured Crisis" in a book still worth studying.

But with facts few and hyperventilations increasing by the day, at least some people have to examine the pension payment problems created by Chicago's rulers and then demand that years and years of irresponsible rhetoric end. If a child were doing what the Board has been doing, that child would be disciplined. It's a temper tantrum. So warn the child once to stop, and then move to stop it.

But that's not how the game has been played in Chicago for the past decade, as the leaders of the city and the schools (one and the same, since "mayoral control" has evolved into this kind of dictatorship) have been playing a game of "Chickie" with the public and the unions, a game at which they have succeeded, as the news reports on June 8, 2015, the day I write this, demonstrate.

Begin with the hysteria in the headlines: THE PENSION CRISIS.

The CRISIS, they've been screaming, maybe not in all caps.

Above, one of the pages from the Power Point presentation given during the three public hearings on the Chicago Board of Education's proposed FY 2008 budget. The claim that CPS would face ruinuous pension costs by 2011 was a drumbeat, with most of the press ignoring the fussy details of a $5 billion budget or relying on the "He said -- She said" versions of reality that pass for news reporting in the 21st Century. Photograph of the pension page of the budget presentation by Substance reporter George N. Schmidt.But actually, the people who run Chicago and Chicago's schools -- City Hall and the members and top executives of the Board of Education -- have created the crisis by insisting that their own incompetence and corruption be ignored, while public frenzy be whipped up against public worker unions and pensions. Yet the city's ruling class continues to proclaim the success of the "mayoral control model" and corporate versions of "school reform" despite the massive historical record that shows the opposite.

While the editorial writers and some reporters in Chicago still talk about the mayoral control model and the so-called "business model" of public school governance makes sense, an actual look at Chicago's schools shows the opposite to be true. CPS is a mess by design, and the designers are the mayor, those the mayor has appointed to run the city's schools, and the ideologues of austerity behind the scenes, including many of the city's wealthiest people. Take just one example of the created chaos at the nation's third largest school system: To management. Supposedly, stable management and executive leadership lead to better (what they call) "outcomes." Whether this be true or false, the fact is that over the past eight years, America's third largest public school system has had six -- SIX -- chief executives:

FACT: From 2007 through June 2015 Chicago's public schools have tried to exist under six "Chief Executive Officers" -- Arne Duncan (through January 2009, when he became the nation's top "educator" as U.S. Secretary of Education), Ron Huberman (2009 - 2010), Terry Mazany (2010 - 2011), Jean-Claude Brizard (2011 - 2012), Barbara Byrd Bennett (November 2012 - June 2015), and (currently) Jesse Ruiz (2015). All of them regularly proclaimed that the pensions were the problem. Not revenues. Not a tax system that favors the rich, and certainly not the churning leadership that makes it almost comic as close observers have to ask "Who's on first?" running CPS.

The Chicago Sun-Times of June 8, 2015, is just one example:

Under the front page headline 'CUPS' MATH PROBLEM' the Chicago Sun-Times has proclaimed a number of 'facts' that have not been proven, many of which are simply not true and all of which are now being reported out of historical context.

The story reads:

The Chicago Public Schools are staring down the barrel of impossible choices with its cash reserves depleted, the Springfield budget stalemate dragging on and three weeks to go before a $634 million teacher pension payment is due.

Although the pension payment was built into a school budget balanced by an accounting sleight of hand, CPS is now facing a liquidity crisis that would make the payment difficult to make.

When the CPS bond rating dropped to junk status, the district was forced to renegotiate $220 million in outstanding swap agreements and pay penalties and higher interest rates on a massive refinancing.

That made a cash crunch that was bad enough with a $1.1 billion budget shortfall infinitely worse.

How they meet payroll and make the pension payment at the same time is the magic question. Thats what theyre trying to figure out, said a mayoral confidant, who asked not to be named.

Civic Federation President Laurence Msall said CPS has only three options, all of them lousy.

Cut the budget enough to make the full pension payment, even if that means layoffs and program cuts.

Miss a pension payment required by state law for the first time in history and risk a union lawsuit and another bond rating drop that could deprive the school system of its ability to borrow money.

Or seek an emergency fix from the Illinois General Assembly even as the broader power struggle between Republican Gov. Bruce Rauner and Democratic legislative leaders drags on including a wildly unpopular request to lift the property tax cap so CPS can help itself./li>

If the stalemate isnt resolved and CPS doesnt have the liquidity to make the pension contribution, they will be faced either with enormous cuts in staffing and changes to school budgets or the possibility of violating the law and not making the contribution, Msall said.

That would be uncharted territory. Unlike police and fire pension funds, the teachers pension fund does not have the ability to intercept state school aid if a pension payment is missed.

Msall said CPS could make a partial payment but that would likely trigger an adverse reaction from Wall Street. The system could also try and borrow enough money to make a full payment, but the enormity of the financial crisis and the uncertainty of help from Springfield could make borrowing difficult or cost-prohibitive, he said.

Illinois House Majority Leader Barbara Flynn Currie, D-Chicago, underscored the point about the Springfield uncertainty.

Mayor Rahm Emanuel has long demanded an end to the dual taxation that forces Chicago taxpayers to pay for the pensions of city teachers and for teachers outside the city.

But until the stalemate over Rauners demand for pro-business, anti-union reforms is resolved, Flynn Currie said the mayor is on his own.

Its a terrible, terrible problem. But, I dont see light at the end of the tunnel if the end of the tunnel is Springfield. I dont see the General Assembly saying, Open Sesame, Chicago. You can have more state aid, Flynn Currie said.

We passed a bill to address the police and fire pension problem and it didnt get any Republican votes. The governor wouldnt sign it. Should the Legislature send him a [teacher pension] bill, would he sign it? I dont think he would.

The governors office did not respond to questions about the impending teacher pension payment or what, if anything, Rauner was prepared to do to help Chicago if the larger budget stalemate is not resolved by June 30.

Emanuel met privately last week with Rauner, who has repeatedly raised the possibility of CPS declaring bankruptcy. The mayors office refused to say what the two old friends and former business associates discussed.

CPS Chief Financial Officer Ginger Ostro did not return repeated phone calls. District spokesman Bill McCaffrey declined to answer questions about CPS finances.

The district has never missed a pension payment. Nobody thinks its a good idea to start doing that. There are consequences to that. The goal is to figure out a way to make that payment, said another Emanuel confidant.

Maybe they can recalibrate the state education formula to recognize districts with high concentrations of poor students. Theres also no education budget yet for the entire state, the second confidant added. At some point, there will be a breaking point. Those schools need to know what their budgets are. Hopefully in the next couple of weeks, the pressure will start to mount outside Chicago.

Whether the heat gets turned up outside Chicago, one thing is certain: a Chicago Teachers Union that went on strike in 2012 and has threatened to walk out again this year expects the $634 million pension payment to be made on time.

There is no option. The Illinois Supreme Court said these are vested benefits. They must make the payment. Under the Illinois Constitution they must honor the law, said CTU spokeswoman Stephanie Gadlin.

The larger question is what will they do after they make the payment? CPS is broke on purpose. Will they run to Springfield and ask for a state take over of their finances so they can impose their will on the district? That wont be good for educators, administrators or the students.

In dropping the CPS pension crisis in Springfields lap, Emanuel has pointed to a series of pension holidays authorized during the 22-year reign of his predecessor and political mentor, former Mayor Richard M. Daley.

Emanuel has noted that, between 1995 and 2004, CPS made no payments at all to the teachers pension fund and made reduced payments from 2009 until he took office.

Im not laying this at Springfields doorstep, but you could read it that way, the mayor told the Civic Federation last month.

Ald. Will Burns (4th), is a former state representative now chairing the City Councils Education Committee.

Weve got [three weeks] to go to come up with a comprehensive solution. If this was June 29, this could be a very difficult conversation. But Ive seen things move very quickly when the leaders come to an agreement, Burns said.

The preference would be to come up with a comprehensive solution. But if push comes to shove, CPS will figure out a way to make the payment. My understanding is its in the budget. The resources are there.

State Rep. William Davis, D-Hazel Crest, chairman of the House Appropriations Committee on Elementary and Secondary Education, predicted that CPS would, at the very least, make a partial payment and continue to work with the General Assembly on a long-term pension fix that includes new revenue.

Maybe they can afford half the payment, he said.


June 8, 2015 at 11:18 PM

By: Neal Resnikoff

Support Chi teachers. Rally Tuesday at 5

Support Chicago teachers. Rally Tuesday at 5, State of Illinois building

Chicago Teachers Union is organizing an important rally on Tuesday at 5 p.m. at the State of Illinois building, 100 W. Randolph. Please join in if you can.

This is a rally "for a fair contract and a just Chicago." "Teachers' working conditions are students' learning conditions." The rally leaflet points out that "CPS is broke on purpose." "Politicians have diverted taxpayer money intended for Chicago's public schools to fund their pet projects." "As teachers, we stand for quality public education because every teacher wants to be an effective teacher."

The CTU, and its bargaining committee of 45 teachers and other staff, are bargaining to renew their contract, which expires June 30. They need and ask for the support of all parents and others in the city.

So let us all join in the rally on Tuesday, June 9, at 5 p.m. at the Thompson Center, 100 West Randolph.


Here is a leaflet from Albany Park, North Park, Mayfair Neighbors for Peace and Justice on the facts of the situation, against the lies of the Mayor's Board of Education that the Board is broke, and where to get more revenue by getting it from the rich...Make the Rich Pay!



What's going on?

The Chicago teachers fight for a fair contract is not just their fight: All working people in Chicago have the right to a humane society with the highest quality public education. We want equal education for all children in neighborhood schools, which are pillars of communities. We must have these, not privately-owned charter schools drawing money into the pockets of hedge fund operators--while more than 50 schools with mainly Black and Latino students are shut down. The demands of the Chicago Teachers Union are designed to save and improve public education for all. So their fight is our fight.

On the other side of the fight are Mayor Emanuel and his appointed-- not elected-- Board of Education(BOE), which features bankers and executives for big corporations and those who serve the rich in various ways.

The Board has the nerve to produce only one proposal so far in contract negotiations--to cut teachers pay. Of course, they say nothing about cutting class sizes or improving teaching and learning conditions. As the CTU says: Teachers working conditions are students learning conditions.

The Board tries to justify all their vicious cuts to public education and social services by claiming that there is no money. But the CTU tells us straight up that the Board is BROKE ON PURPOSE, and is publicizing facts proving it.

The BOE agenda is to continue privatizing public education, cut millions of dollars from public school programs, hand out bloated contracts to unscrupulous vendors, arrange toxic loans which enrich the banks while they bankrupt the schools, and destroy the union.

And the BOE is pushing a program of education initiated by top U.S. corporations. Common Core and its required PARCC tests were designed to train our children to be unquestioning employees and soldiers who obey orders without considering the morality of what they are doing. It is humiliating for teachers to be ordered to follow such a program which they know hurts students. Check out the CTU website for resolutions against this latest attempt to shape public education for the benefit of the rich (


What are the facts? Facts show the Board of Education is broke on purpose:

--Every year the School Board claims there is a billion-dollar deficit. This is a fiction created by CPS officials who deliberately overestimate their future expenses and underestimate their future revenues. This has been pointed out in George Schmidts SubstanceNews.Net (5.12.15) and also by the Union statement that the Board of Education is BROKE ON PURPOSE.(5.5.15). The BOE ends up with a large reserve fund of cash at the end of each year.

--The School Board has long claimed it needs to raise property taxes, which means taking money out of the pockets of home owners and people who rent. Why should the people cover the Boards manipulations?

The rich and their corporations have plenty of money. But they often pay little or no taxes in Illinois.

Two out of three corporations in Illinois pay NO income tax to the state according to Crains Chicago Business ( This is one place to look to get billions in revenue.

The wealthiest taxpayers do not pay as high a percentage of their incomes in taxes as the poorest and middle-income wage earners, as pointed out by The Institute on Taxation and Economic Policy (

--The Board of Education cut funding for traditional schools in the 2014-2015 school year by $72 million, while boosting spending on privately operated charter and contract schools by 12%, to a total of $11 million. It's time to reverse this revenue flow!

--Half of the property tax monies that are supposed to go to the schools now go to the mayoral slush fund known as TIFs (Tax Increment Financing districts). This means a good $250 million is diverted from our schools. Lets get this money back for public education.

--CPS pays private vendors to do the work that school employees have always done. CPS spending on vendors has gone up by $1.4 billion in the last ten years, and, at the same time, CPS saved approximately the same amount of money from the pay of teachers and staff who were eliminated. (See John Kuglers article in 4/20/15 CORRUPTION CPS). It's time to stop mis-using our tax money.

--School Board members refuse to renegotiate high-interest financing that costs CPS $290 million per year. They should file a law suit to recapture the money. The CTU has been calling for this since 2010. And, last November, a Chicago Tribune series found that a loan deal pushed by School Board president David Vitale may cost CPS as much as $100 million. Lets hold these robbers accountable for getting the money back.

What else must be done?

--One CTU demand is to ensure that the Board ends all current contracts and seeks no further contracts with financial institutions engaging in predatory financial deals such as toxic interest rate swaps, auction-rate securities, capital appreciation bonds, high-interest loans and bonds, bid rigging, manipulating interest rates, inadequate disclosure of risks, overuse of fees and overcharging for financial services. ( in Broke on Purpose.)

--Stop the privatization of public education through charter schools. This would save millions.

--CPS has been giving some charter schools sweetheart lease deals at $1 per year, while paying an average of $10,000 a month to some favored real estate interests and churches to relieve overcrowding (John Kugler in 5/27/15, Board Agenda).

--CPS spends $10 million annually on high stakes tests, which are notoriously invalid and mainly reflect the socio-economic status of the students. The tests waste hundreds of hours that should be spent in instruction. The PARCC tests push narrow Common Core standards and fail 70% of the students, making them feel like losers.

--There are reliable estimates that a $1-to-$2 tax levied on each financial deal at the Chicago Mercantile Exchange and the Chicago Board Options Exchange could raise up to $12 billion a year.

--We should demand that the federal government provide more funds to the states for education. Transfer the 62 cents of every federal tax dollar that now goes to the Pentagon-- with lucrative contracts to military corporations and the maintenance of at least 800 military bases around the world. Its not in the interests of working people to have any more illegal and unjust wars of death and destruction. Money for Education, Not for War and War Preparations!

There is very little doubt that the corporate-dominated city government will try to raise property taxes or taxes on services or use some other device that will mainly impact working people. We must say NO to this. Why should we pay one more dime in Chicago, Cook County, Illinois, or federal taxes? Make the Rich Pay!

How will increased funding enhance the quality of education for our students?

--Reduce class size so teachers can spot problems and provide the needed support for every student.

--Provide enriched programs to promote critical thinking, creative activity in arts and music, mastery of new languages, top notch physical education. libraries with librarians, and support from nurses, counselors and teacher aides.

Who has the right to decide how best to use public funds? ---Not the representatives of the rich, but professional educators, parents, teachers and community members working together to figure out what will advance public education.


This leaflet is from Albany Park, North Park, Mayfair Neighbors for Peace and Justice: 773.250.3335;

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