59 Comments - Anonymous - Thursday, Apr 23, 15 @ 12:20 pm: The deficit can be cured with future spending limits and tax increases. It may not be popular but welcome to reality. - Anon. - Thursday, Apr 23, 15 @ 12:21 pm: No. Chicago can raise taxes and can stop diverting funds to TIFS and other uses. Make Chicago make the choices, not the bankruptcy court. - VanillaMan - Thursday, Apr 23, 15 @ 12:24 pm: Bankruptcy is not an option. Any elected official suggesting it should immediately resign from office. - Chicago Publius - Thursday, Apr 23, 15 @ 12:26 pm: There’s no need for the General Assembly to do anything. Rahm is a financial genius — just ask the editorial boards of the Tribune and the Sun-Times, who gave him a pass on financial management during the mayoral election. - Liberty - Thursday, Apr 23, 15 @ 12:27 pm: Illinois has a bad enough reputations as it is. Tough decisions ahead, make them. - Belle - Thursday, Apr 23, 15 @ 12:27 pm: No. I’m with VM on elected officials need to either stand up and resolve the problems or resign. The TIF funds are the path to resolution of many of the City’s financial issues. - Anonymous - Thursday, Apr 23, 15 @ 12:32 pm: How this has become a serious question is beyond me. Is this what we’re paying top dollar for Rauner’s “superstars” to do, discuss bankruptcy? Top notch, folks. Must be bursting at the seams with talent in that office. - Democrat Grrrl - Thursday, Apr 23, 15 @ 12:33 pm: Any time the Ilinois Policy Institute describes something as “the only sensible option,” you should slowly but surely back away from that option because you know it will hurt many, many people. - Annon3 - Thursday, Apr 23, 15 @ 12:34 pm: I voted no but believe there will be considerable pressure from downstate and suburban munis over underfunded police and fire pensions for that remedy. - Jorge - Thursday, Apr 23, 15 @ 12:36 pm: Anytime the IPI suggests a policy that involves how a unit of government should spend it’s revenues should be ignored. - Mens Wearhouse - Thursday, Apr 23, 15 @ 12:39 pm: What are ‘belt and suspenders’ protections? - RNUG - Thursday, Apr 23, 15 @ 12:42 pm: Voted no. Slippery slope. Possible first step to being able to negate any and all state and local government debt. - RNUG - Thursday, Apr 23, 15 @ 12:44 pm: == Is this what we’re paying top dollar for Rauner’s “superstars” to do, discuss bankruptcy? == Yep. It’s the only option that Rauner and his bust-out crew know how to successfully do … - Wordslinger - Thursday, Apr 23, 15 @ 12:47 pm: No. Chicago hasn’t even begun take the steps to get the schools’ fiscal house in order. Take a look at that property tax base and rates and tell me they have no other options. Bankuptcy is just another union-busting scam from Rauner and IPI. It sure was swell of the governor to shoot his mouth off and claim CPS had to go bankrupt the day before the district sold bonds in the muni market this week. What a statesman, what a smart businessman. What do you call that, the Ty Fahner Misanthrope School of Leadership? - Walter Mitty - Thursday, Apr 23, 15 @ 12:48 pm: Voted No… That does not mean it won’t happen… Let’s not start a list of bad legislation… What is scary is, the rhetoric against unions that is probably poll tested well by moderate people. What if this concept polls well? I don’t think it’s right. But this state is a mess a very long time in creation. The only reason is ALL of our elected officials have brought us here. I see this as a very easy way out. They have taken the easy road every other time… Why will this be different? - forwhatitsworth - Thursday, Apr 23, 15 @ 12:49 pm: Totally agree with Anonymous and RNUG. It’s sad, but true. This is the only business model that Rauner knows! - Toure's Latte - Thursday, Apr 23, 15 @ 12:52 pm: Voted no. Bankruptcy is a crutch. Raise taxes to pay the piper, and see about getting some of that TIF slush fund the city has accumulated. Good schools attract people and business — TIF dollars used on school buildings also good business? - Norseman - Thursday, Apr 23, 15 @ 12:52 pm: Bankruptcy is the lazy choice for elected officials. There are options that can and should be implemented to address the problem. Well said RNUG. - vibes - Thursday, Apr 23, 15 @ 12:52 pm: voted no. The budget scoring on that bill, if honest, would be astronomically high, as every potential bond buyer of every Illinois government unit would now know there is a finite possibility the rug could be pulled from underneath them. - Diogenes in DuPage - Thursday, Apr 23, 15 @ 12:53 pm: How can a taxing body be allowed to declare bankruptcy? Maybe the legislature would serve CPS better in addressing its debt by relaxing the property tax cap and let LOCAL taxpayers pay their fair share. This makes the local school board responsible for the problem it created — rather than bond holders, state citizens, employees, vendors and pensioners. - Judgment Day (on the road) - Thursday, Apr 23, 15 @ 12:56 pm: “Anytime the IPI suggests a policy that involves how a unit of government should spend it’s revenues should be ignored.” —————- Nice try. This isn’t about ‘how’ you should spend your money - it’s about ‘how’ CPS is going to fund what they are already fiscally committed to. And nobody did it for them - they did it to themselves. Btw, MMA is talking about the $295 mil (1 - $275; 1 - $20) CBOE bond issues. Here’s a little more detail: http://globaleconomicanalysis.blogspot.com/2015/04/the-chicago-penalty.html You don’t got to like the POV, but the guy knows the numbers. Unless you are saying the guy has the numbers wrong??? IMO, the political players better plan on some rather large school funding referendums for CPS in the very near future. Let’s see if they have the stomach for those. Or there’s always the course of legislation enabling local tax districts to file bankruptcy…. Choice, choices… - Anonin' - Thursday, Apr 23, 15 @ 12:59 pm: Anybody else wonderin’ if there is a derivitives/options market in CPS debt and if BVR’s “blind trust” is tradin’ in it? - JS Mill - Thursday, Apr 23, 15 @ 1:04 pm: Voted no- Ditto RNUG. Said it better than I can. - anon - Thursday, Apr 23, 15 @ 1:06 pm: “Fiscal responsibility” used to mean paying your bills. To modern Republicans, it means stiffing your creditors. They would rather stick it to al the creditors than raise property taxes to the average rate in the ‘burbs. - Chris - Thursday, Apr 23, 15 @ 1:06 pm: “The city’s 2015 budget kited two months of property taxes from the fiscal year 2016 budget” No, they kited them from the year at the end of time (or, of CPS’s time). The 2016 budget will get 12 months of property tax, but the ‘15 budget got 14 months. “Anybody else wonderin’ if there is a derivitives/options market in CPS debt” Why would anyone wonder? Of course there is, at some price point. It is publicly held debt; you can bet against any publicly held debt, if you pay enough to find a counter-party. “if BVR’s “blind trust” is tradin’ in it” If his blind trust is trading–directly, that is not via a mutual fund or hedge fund with independent management that is dabbling somehow–then he and/or his advisors should end up in jail. - Steve - Thursday, Apr 23, 15 @ 1:07 pm: I voted yes. Public education doesn’t work in big school districts. It’s time to face reality, Chicago voters have proven that public education has no long term accountability. - Wordslinger - Thursday, Apr 23, 15 @ 1:07 pm: JD, what’s the magic in Shedlock’s numbers? His whole “analysis” is just an ideological screed, the same as Rauner and IPI. Are big numbers supposed to be scary or something? Want to see some big numbers? Price some commercial or residential real estate in Chicago. And Mr. Knows the Numbers plays the Detroit card. Yeah, that’s brilliant… - Chris - Thursday, Apr 23, 15 @ 1:11 pm: From reading about chapter 9 bankruptcy here, it would seem that folks are pretty darn sure that any judge would simply bounce CPS or Chicago out of Court for a bad faith filing. So I don’t know what all the concern is… I voted ‘yes’, if nothing else to move BR along to the next apparently pointless thing. - Wordslinger - Thursday, Apr 23, 15 @ 1:12 pm: – Chicago voters have proven that public education has no long-term accountability.– Those are words in a sentence. Put them all together in that order and they mean……..? - the Other Anonymous - Thursday, Apr 23, 15 @ 1:12 pm: No. While property taxes are high in Chicago, relative to other places in Illinois they are low for the same assessed value. There is plenty of revenue that is not being accessed. More to the point, the State of Illinois has never lived up to its constitutional requirement of funding schools. Again, the reason is that politicians don’t want to raise the revenue. Municipal (or any local government) bankruptcy should not be an option unless the unit truly has exhausted its revenue potential. In this case — despite how much everyone loves to complain about taxes — we’re not even close. - Cook County Commoner - Thursday, Apr 23, 15 @ 1:15 pm: I voted No. It’s time Chicago voters stepped up to the plate and understood there’s a cost to leaving things in what seems the unfettered control of the vested players. Increased taxation and reduction in services should get their attention. The municipal BKs I’ve looked at seem to create a profit center for the lawyers and a heavy cost to the bond holders and pensioners. I would re-visit the issue if and when the government pensioners start calling for a BK. Then you know for sure the coffers are almost empty and there’s little hope of a fix from from further cuts and increased taxation. - Oswego Willy - Thursday, Apr 23, 15 @ 1:24 pm: I voted “No” “Why?” Looking at the fiscal house of the CPS, and it’s revenues, and liabilities, I don’t see bankruptcy is the next step warrented. Others above crystalized the realities better of what public bankruptcy means, and the ramifications of it, without truly looking for answers outside the “simple” move of bankruptcy. Had I known being an “expert” in leading all decisions to a bankruptcy end, I, too, could have been a “superstar”. Oh well. Voted “No”. - MrJM - Thursday, Apr 23, 15 @ 1:27 pm: No. We can revisit this crack-pot idea after Chicago raises taxes, and reforms their TIFS slush-funds. – MrJM - walker - Thursday, Apr 23, 15 @ 1:36 pm: This is indeed a “crackpot” idea, among many delivered to us by national ideological PACs and “Institutes.” It expresses a fundamental, almost religious, hatred of government and public services. It is not vulnerable to rational argument. - Gooner - Thursday, Apr 23, 15 @ 1:38 pm: Voted no. I think a better option would be for the State to start paying its fair share of Chicago teacher pensions. I’m a bit tired of people downstate calling Chicago residents irresponsible, while we pick up the tab for their pensions but they don’t do the same for Chicago’s. - Cheryl44 - Thursday, Apr 23, 15 @ 1:43 pm: Absolutely not. If Rauner wants to join Emanuel is his war against the teachers, he’s going to have to fight out in the open where we can see what he’s doing. - zatoichi - Thursday, Apr 23, 15 @ 1:45 pm: Bankruptcy is the no-effort form of leadership. What happens to the vendors owed part of those $1.6B. Just too bad for them? Chicago is a rich city with a taxing body that got themselves into this mess. There are many options that should be completed before bankruptcy is even remotely considered. Allowing this in Chicago will create the 800 pound monster for every municipality in the state. - Salty - Thursday, Apr 23, 15 @ 1:46 pm: No. At least not yet. CPS’s tax rate is 3.671% last year. Here in Springfield, the school district’s tax rate is 5.0184%. School districts in the suburbs have rates of at least 7% (unit districts) and some are in the double digits… Raise their taxes to a comparable level first. - Aldyth - Thursday, Apr 23, 15 @ 1:48 pm: Every reason I voted “no” has already been mentioned. - walker - Thursday, Apr 23, 15 @ 1:48 pm: You sure IPI? You might want to rethink this one. Bankruptcy is government regulation and intervention in the “free market.” - Judgment Day (on the road) - Thursday, Apr 23, 15 @ 1:50 pm: Word: You don’t have to like his ideological viewpoint. But it is all about the numbers. And CPS is going to have to come up with a pretty substantial amount of money in the very near future - and not one-time revenues. And those revenues are likely to have to be referendum centric, unless the Chicago Democrats can come to some sort of agreement with Governor Rauner. Secondly, looking into using all those city TIF districts as a CPS ‘piggy bank’, well, there’s probably going to have to be some legislation. Couple of reasons why, but basically when the original/current TIF legislation was setup, the laws govering the TIF process ‘broke’ the taxable value of individual properties within each TIF district into 2 categories: (a) TIF Base, or ‘Frozen’ value, and (b) TIF Increment value. The ‘TIF Base’ value is included in the overall tax extension base for the tax district, and used to develop a tax rate for each non-TIF tax district and their fund(s). The ‘TIF Increment’ value is NOT included in the overall tax extension base for the tax district. It is NOT used to develop a tax rate for each non-TIF tax district and their fund(s). It (TIF Increment) IS multiplied times the composite tax rate (then divided by $100) to establish the amount that property (parcel) pays into the TIF district. County Treasurer and Collector calculates tax bills, issues tax bills, collects money, and then distributes the money to the tax districts (including each TIF district). That’s a very, very simplified explanation of how TIF districts get their money. Problem: There are no provisions for TIF districts to break out the TIF Increment amounts by tax districts, and only distribute part of the money to the TIF district, and other parts of the money back to the base tax districts. If you don’t make the breakdown at the front end, it’s just about impossible to do it at the back end, and reconcile the numbers. Honestly, if the city started doing that breakdown where they give money back to just CPS, there’s likely going to be some issues. Along the lines of, “If doing it for one, why not all?”. Also, if there’s TIF district bonds, there would likely be some issues from the holders of the bonded indebtedness. Just sayin - it’s more complex than most people realize. - SAP - Thursday, Apr 23, 15 @ 1:50 pm: No way. I want the CPS as well as all other units of government in Illinois to be able to issue bonds in the future. - RNUG - Thursday, Apr 23, 15 @ 1:54 pm: == I’m a bit tired of people downstate calling Chicago residents irresponsible, while we pick up the tab for their pensions but they don’t do the same for Chicago’s. == - Gooner - People in Chicago asked for that swap of CPS picking up the pension funding in exchange for a more generous school funding formula from the State. Instead of being responsible with the extra money and putting some / most of it in the pensions, it was used to keep the property taxes down. Chicago got what it asked for; too bad they messed it up even worse than the State did. - Demoralized - Thursday, Apr 23, 15 @ 2:06 pm: Voted no. They need to exhaust every option. They haven’t done that yet. - anonlurker - Thursday, Apr 23, 15 @ 2:07 pm: No. Shallow BS. Other options are available as many have pointed out. - From the 'Dale to HP - Thursday, Apr 23, 15 @ 2:16 pm: No way. IIRC, CPS is the third largest budget in the state after the state itself and the City of Chicago. Let CPS fail, and you’re all be saying everything should be able to fail. Who’d wanna invest in a state where everything could be declared bankrupt? Which leads to this question: why does Rauner and IPI want CPS to declare bankruptcy, what’s the upside? What’s the long term gain there? Kids have to be educated, so if a lot of families pull their kids out of CPS, where are they going to go? Why are they so eager to cut off nose to spite face? Why do they want Illinois to be Michigan and Chicago to be Detroit so badly? Is there some twisted or cynical logic that I’m missing? - Anonymous - Thursday, Apr 23, 15 @ 2:17 pm: - Democrat Grrrl - Thursday, Apr 23, 15 @ 12:33 pm: ==Any time the Ilinois Policy Institute describes something as “the only sensible option,” you should slowly but surely back away from that option because you know it will hurt many, many people.=== Agreed, and the vote is no. Abandoning public education for the likes of CPS sends a dangerous message that we collectively give up. ISI and the like are all too willing to put the reins in the hands of private charter schools. We must make public education work for all, even CPS. - pundent - Thursday, Apr 23, 15 @ 2:28 pm: The suggestion of CPS filing for bankruptcy is floated purely for shock value and to draw comparisons to Detroit (a city which has had it’s tax base decimated. IF CPS or any municipality were able to simply avoid its obligations by filing for bankruptcy without looking at new sources of revenue (taxes) it would absolutely obliterate confidence in the municipal bond market. The people that most frequently float this idea know this. After all they’re the ones that reap the tax advantages of muni’s. - Judgment Day (on the road) - Thursday, Apr 23, 15 @ 2:39 pm: “No way. IIRC, CPS is the third largest budget in the state after the state itself and the City of Chicago. Let CPS fail, and you’re all be saying everything should be able to fail. Who’d wanna invest in a state where everything could be declared bankrupt? Which leads to this question: why does Rauner and IPI want CPS to declare bankruptcy, what’s the upside? What’s the long term gain there? Kids have to be educated, so if a lot of families pull their kids out of CPS, where are they going to go? Why are they so eager to cut off nose to spite face? Why do they want Illinois to be Michigan and Chicago to be Detroit so badly? Is there some twisted or cynical logic that I’m missing?” —————- One upside is that the timing might just be so impractical (going to referendum for property tax rate increases) that there’s no other alternative. Remember, the soon-to-be delivered property tax bills are for 2014 pay 2015 - last year’s budget submitted by CPS. The money collected won’t even get started being distributed (normally) until mid 2015, with much of it being distributed in the Sept-December 2015 range. When is the next Citywide election scheduled? 2016? That might be the next real opportunity to put a CPS school referendum on the ballot. Potentially a long time to wait for new additional money - and that’s assuming the referendum passes. What do you do if something goes wrong? What’s your plan? - Pot calling kettle - Thursday, Apr 23, 15 @ 2:48 pm: ==It sure was swell of the governor to shoot his mouth off and claim CPS had to go bankrupt the day before the district sold bonds in the muni market this week. What a statesman, what a smart businessman.== ==Which leads to this question: why does Rauner and IPI want CPS to declare bankruptcy, what’s the upside? Is there some twisted or cynical logic that I’m missing? == The twisted, cynical logic is that it benefits Rauner’s investor friends who can charge more interest if the load is riskier. Was this on purpose or just the habits of someone who has always been on the creditor side and forgot he is now on the side of the debtor? I don’t know. - Earnest - Thursday, Apr 23, 15 @ 3:11 pm: Voted ‘no.’ The unspoken assumption for bankruptcy is that taxes can never be increased anywhere or in any way. The Rauners of the world favor this, as it will insulate them from paying more in taxes. I’d change the rules for corporations as well. The standard for their bankruptcy should be the same as for students looking to get out from under huge student loan debt. - D.P.Gumby - Thursday, Apr 23, 15 @ 3:36 pm: Bankruptcy by vulture capitalists like Brucie and his crew is like the old medical practice of bleeding a patient…it does no good for the patient except help to kill him faster and earns the bleeder huge rewards. It is the direct opposite of what bankruptcy is intended to do for the individual or small business person struck by a disaster. It is not and never should be an option for a governmental body–was never intended to be just like 401(k) was never intended to be a pension that every worker was supposed to rely on for retirement! - Mama - Thursday, Apr 23, 15 @ 3:44 pm: If CPS declares bankruptcy, Rauner’s private charter schools can get free school buildings, etc. that the taxpayers purchased. He wants to get rid of all public schools and turn them into private for-profit schools with no benefits for teachers. - CapnCrunch - Thursday, Apr 23, 15 @ 3:45 pm: “Take a look at that property tax base and rates and tell me they have no other options. ” “No. While property taxes are high in Chicago, relative to other places in Illinois they are low for the same assessed value. There is plenty of revenue that is not being accessed.” “Voted ‘no.’ The unspoken assumption for bankruptcy is that taxes can never be increased anywhere or in any way.” “We can revisit this crack-pot idea after Chicago raises taxes, and reforms their TIFS slush-funds.” RealtyTrac is reporting today that 1 in 4 Chicago homeowners with a mortgage owe at least 25% more on the loan that the market value of the property. Raising property taxes in that environment would seem problematic. - Andy S. - Thursday, Apr 23, 15 @ 3:45 pm: No. As many of you have said, Chicago, like Illinois, needs to raise taxes. But wait, wouldn’t that cause a death spiral, whereby the local economy would contract, more and more people leave, etc.? Again, coming from someone who has actually examined empirical data, the answer is an unequivocal no! There is not a shred of evidence in either the domestic US or international economic data supporting the assertion that high tax burdens reduce economic activity. But don’t take my word for it, see for yourself. The Tax Foundation publishes data on the total state and local tax burden in each state relative to per capita income. They have done this since 1977. The link to the data is here: http://taxfoundation.org/article/state-and-local-tax-burdens-all-years-one-state-1977-2011 Over this 34 year period, Illinois’ tax burden ranking has fluctuated between 8 and 29, i.e. the state’s tax burden overall was only slightly above the national average. As the data also show, per capita income in inflation-adjusted terms increased from $31,450 in 1977 to $45,664 in 2011, which represents a compound annual average growth rate of 1.10%. How does this compare to high-tax states? New York had the highest tax burden in every year save one. Its annual per capita income growth rate was 1.61%. New Jersey has always had high taxes (ranking fluctuated from 2-6) and its per capita income grew 1.47% annually. Wisconsin also had a consistently high tax burden (ranking 1-7 depending on the year) and its per capita income growth was 1.10%. So, all of these states consistently had a higher tax burden than Illinois, yet all had income growth that was the same or higher. If you look closely, the same is true internationally. Once you adjust for our more rapid population growth and look at per capita GDP, which is obviously more strongly related to living standards, it turns out that US GDP growth since 1960 has actually been below France, Germany, the U.K. and many other countries which all have consistently had considerably higher tax burdens than we have. I think if we focus on the actual data, rather than on right-wing shibboleths, we see that both Chicago and Illinois would likely do just fine with higher taxes. One can only hope that a potential bankruptcy judge would look at actual historical data and reach a similar conclusion. - Mongo - Thursday, Apr 23, 15 @ 4:51 pm: That is a stupid idea. It is pushed by those who want to attack defined benefit plans and those who resent Chicago. On top of that, CPD is not an independent entity. It is a creature of the state but it is ruled by the City and ISBE and the US DOE. Would we let the Chicago Fire Department declare bankruptcy? Then why CPS? And while we are at it, thanks to the extreme right for making things worse by offering the threat of insolvency. - sunshine - Thursday, Apr 23, 15 @ 7:32 pm: This is tantamount to removing the keystone from the bridge of accountability/responsibility. Any entity within the public sector will feel they too can, and likely many will, follow suit. If it worked for them, why not us? - Jorge - Thursday, Apr 23, 15 @ 8:46 pm: Judgment Day, thanks for trying. Maybe next time your demagoguery will help you. - 47th Ward - Thursday, Apr 23, 15 @ 9:11 pm: ===What’s your plan?=== I would sooner repeal the property tax cap than allow bankruptcy. We’d allow our own public governments to skip out on their debts, but we won’t allow student loans to be discharged? Priorities people. The IPI and their donors are nuts and Rauner is carrying their water. Don’t buy it. Sorry, comments for this post are now closed.