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Looking for a solution in Chicago

Monday, Jun 22, 2015

* Sun-Times

The Chicago Public Schools will “run out of cash as early as this summer” and be unable to meet payroll, pension and debt payments without “third-party intervention” or a significant “cost deferral,” according to a new consultant’s report commissioned by the school system and obtained by the Chicago Sun-Times.

The firm Ernst & Young is suggesting the Chicago City Council approve two property-tax increases for the school system. It says the twin increases would be necessary even if CPS makes drastic budget cuts and gets the pension relief and greater state funding it’s seeking in Springfield.

One of the tax hikes it’s recommending would be a “separate levy” of $50 million to bankroll school construction and pay off old projects. CPS has had the authority to impose a “capital improvement tax” for more than 20 years but “never activated” it, according to sources who told the Sun-Times it appears likely Mayor Rahm Emanuel will do so.

The second tax increase — in the range of $100 million to $400 million — is far less likely to be passed. According to the consultants, it would “effectively replace general state aid” siphoned from operations to pay off school construction debt.

It’s debatable whether that second tax hike could be approved by the city council without prior Statehouse authorization. If the maximum tax increases are passed, it would cost the owner of a $250,000 home about $450 a year, according to the article.

* Tribune

But even if CPS wins concessions from the City Council, state lawmakers and the CTU, the district won’t be able to close its annual $1 billion budget gap, according to the May 22 report by Ernst & Young, which spent four weeks meeting with school finance officials and analyzing budget documents. The report shows that even with a capital improvement tax, a separate, even-larger property tax increase, additional state aid, increased state funding of teachers pensions, concessions from the CTU and $150 million worth of budget cuts, CPS would still face an annual $350 million shortfall.

Sheesh.

* And

Potentially worsening the situation are unexpected bank penalty payments, the costly legacy of a series of complex financial deals masterminded by school board President David Vitale. Those deals fell apart earlier this year as the district’s credit deteriorated, meaning CPS could be forced to pay $228 million if the banks demand their money. The district has set aside only $174 million to cover such costs.

* At least the CTU realizes the problem

“They absolutely are deep in an imminent crisis,” CTU Vice President Jesse Sharkey said. “Maybe they won’t be able to open, and maybe the state of schools when they do open is going to be miserable.” […]

“Right now, the district needs us,” Sharkey said. “The politics of Rahm Emanuel going to Springfield are a lot different than the politics of Rahm Emanuel and Karen Lewis going to Springfield.”

- Posted by Rich Miller        

95 Comments
  1. - Lakefront Liberal - Monday, Jun 22, 15 @ 9:45 am:

    If Rahm was actually the “tough leader” that he purports to be he would have done something to increase revenues (like a property tax increase or creating a city income tax like New York has) when he FIRST got into office so that we would not have spiraled into this mess. But he has the same problem as our state leaders — he is so concerned about the political backlash of raising taxes that he will put our finances in the toilet rather than pursue the most obvious solution.


  2. - Chris - Monday, Jun 22, 15 @ 9:47 am:

    ““They absolutely are deep in an imminent crisis,” CTU Vice President Jesse Sharkey said.”

    Two weeks ago, CTU was claiming that there wasn’t a crisis…


  3. - PublicServant - Monday, Jun 22, 15 @ 9:48 am:

    Where’s the Governor’s quote on his solutions to this problem? And, specifically, how much money will each of his solutions save?…now…this year, not at some ill-defined point in the future.


  4. - old-pol - Monday, Jun 22, 15 @ 9:51 am:

    The City is broke and Rahm is touting free Community College - What’s he thinking? How about we fix K-12 before you give away freebies.


  5. - anon - Monday, Jun 22, 15 @ 9:53 am:

    PS, certainly the governor didn’t cause this massive problem. Your party did. Own it.


  6. - Cassandra - Monday, Jun 22, 15 @ 9:54 am:

    It’s a fake crisis if it could be resolved by a substantive property tax increase. Perhaps this is about getting the rest of the state to put up some cash for Chicago schools first. After all, Emmanuel just won a second term. This is the time for tax increases, when you are farthest away from the next election. It might not work (Quinn?)
    but it’s his best chance.


  7. - PublicServant - Monday, Jun 22, 15 @ 9:56 am:

    anon, how can you say that when Rauner requested that the legislature not act extend the 5% tax rate, whose expiration is the cause of our current deficit?


  8. - Steve - Monday, Jun 22, 15 @ 9:57 am:

    To - Lakefront Liberal -

    A city income tax would have to pass the state legislature. Plus, it would have to be a flat tax on everyone who the tax applied to . Those are tall orders. Taxing suburbanites who work in the city would be one difficult vote to get through. Although, some Republicans probably would go along with city income tax if it applied only to city residents thus making Chicago less competitive with everyone else in the state.


  9. - Astro the Dog - Monday, Jun 22, 15 @ 9:58 am:

    There was an odd reference to Chicago’s 2014 cell phone tax hike being used to pay the City’s pensions. Is the City now paying back due pension debt with dollars earmarked for public safety?

    “The mayor has not said how he intends to cover the $50 million increase in city payments to the Municipal Employees and Laborers pension funds in the second year, when the phone tax hike would fall short.”


  10. - Anonymous - Monday, Jun 22, 15 @ 9:58 am:

    === But he has the same problem as our state leaders — he is so concerned about the political backlash of raising taxes that he will put our finances in the toilet rather than pursue the most obvious solution. ===

    Not apologizing for Rahm here, but at some point people need to realize that the citizens of the City of Chicago are partially responsible for the blame attached to this issue. Property taxes in Chicago are extremely low when compared to other Illinois municipalities. People were outraged when schools were closed. People were outraged that the City skipped paying its pension obligations. People were outraged when programs got slashed. But when it comes to raising the revenue necessary to solve these issues, people get outraged.

    Once again, not apologizing for Rahm here, but at some point we need to stop blaming elected officials for our failures and start being part of the solution. You can’t get great schools or great services without paying for them. The sooner people recognize that, the better the City of Chicago will be.


  11. - Anonymous - Monday, Jun 22, 15 @ 10:03 am:

    City could save a fortune by giving vouchers to every child preschool through high school. Let the market decide and let competition into education. We would see schools targeting all levels os students: remedial, ADHD, austistic, behavioral, as well as those who are excelling. Stop pouring money into this mess.


  12. - Apocalypse Now - Monday, Jun 22, 15 @ 10:05 am:

    Liberals in Chicago ,and especially the progressive alderman and alderwomen, should be championing these tax increases. Oh, wait, not so fast. It impacts them and their white liberal voters.


  13. - Wordslinger - Monday, Jun 22, 15 @ 10:05 am:

    Gee, that Daley sure was the indispensable man. And check out the gravitas on Emanuel!


  14. - Bedbug - Monday, Jun 22, 15 @ 10:07 am:

    LL “If Rahm was actually the “tough leader” that he purports to be he would have done something to increase revenues (like a property tax increase or creating a city income tax like New York has)”

    I don’t think Rahm has the votes right now in City Council to hike taxes. The problem in gathering votes is they will be asking one generation of taxpayers shoulder the costs of the current operations of government (which will likely include pay and benefit hikes) AND catch up on all of the skipped pension payments. in essence, each “yes” vote on the city council will be voting for both very large tax hikes and cuts to services - at the same time. With rumors swirling that Rahm is gone when HRC takes over the White house, City Council members will be very hesitant to support this very possible career ending vote.


  15. - anon - Monday, Jun 22, 15 @ 10:09 am:

    PS, the city of Chicago should resolve the city of Chicago’s public school problem.

    But, lousy decisions by the dem mayors have caused deep financial problems. And, you know it.


  16. - Anon - Monday, Jun 22, 15 @ 10:10 am:

    @Anon @10:03am - You are very wise.


  17. - Downstate - Monday, Jun 22, 15 @ 10:12 am:

    —City could save a fortune by giving vouchers to every child preschool through high school.—-

    CTU would never go for that. This is a crisis, but CTU wants it resolved on their terms.


  18. - okgo - Monday, Jun 22, 15 @ 10:12 am:

    “the citizens of the City of Chicago are partially responsible for the blame attached to this issue. ”

    Why? Nobody has ever asked us if we wanted to pay more. Daley froze property taxes for years just because, not even allowing to cover the cost of inflation. If he hadn’t, CPS would have about $300-$400 million more now that it can never catch up on.

    Nobody has put a property tax increase referendum on the ballot.

    Nobody from City Hall or out in the wards has ever even floated the issue to gauge the public opinion on trade-offs between what would have been relatively small annual increases, compared to an all at once doomsday situation.

    My best guess? Because the people would say yes, but it would be the commercial and industrial buildings who would be paying the most of the increase.

    So Rahm and his friends in the city council have been protecting the big building tax bills at the expense of these cascading catastrophes.

    Talk about pigeons coming home to roost.


  19. - real estate - Monday, Jun 22, 15 @ 10:13 am:

    start by taking back. the TIf money ; Stop funding charter schools: Make the teachers. pay into SS and add a fee Income tax then and only them raise the taxes


  20. - Bedbug - Monday, Jun 22, 15 @ 10:15 am:

    Anon “Property taxes in Chicago are extremely low when compared to other Illinois municipalities.”

    Absolutely. Because of the low property taxes, Chicago’s real estate values are higher than they should be right now because the true costs of government services haven’t been paid in 40 years. Rahm and the City Council are very, very fearful of popping Chicago’s real estate bubble via large tax hikes and cuts to services designed to catch up Chicago on its pension debt. Falling real estate prices won’t be very good for Rahm’s or the City Council’s re-election chances if they “get it wrong” on property tax hikes and cuts. the good news is that Chicago has many other revenue sources besides property taxes and does have a strong argument that its citizens are being double taxed when it comes to teacher pensions. Hopefully new sources of revenue will be used instead of all property taxes - which could burst Chicago’s real estate bubble.


  21. - nixit71 - Monday, Jun 22, 15 @ 10:15 am:

    ==would have done something to increase revenues (like…creating a city income tax like New York has)==

    My understanding is that Chicago is a home rule municipality and, therefore, prohibited by law from collecting any taxes based on income. They would need the Legislature to change the law to do this.


  22. - Anonymous - Monday, Jun 22, 15 @ 10:20 am:

    === Why? Nobody has ever asked us if we wanted to pay more.===

    There has been extensive polling on this issue. For some reason, Chicago residents think that they are overtaxed when it comes to property taxes. There isn’t as much community support for a property tax hike as you think.


  23. - PublicServant - Monday, Jun 22, 15 @ 10:21 am:

    anon, what I know is that you, as usual, have no idea what you’re talking about. Everyone in your world is on their own, huh pal; market forces and all that right? You do realize how much net revenue from Chicago goes to the state as a whole dontcha? I’m pretty sure if we kept it all here in the city, we wouldn’t have the problems we have now. But I’m sure you know that. Own it.


  24. - Very Fed Up - Monday, Jun 22, 15 @ 10:22 am:

    If the democrats wanted to keep the income tax rate at 5% they had plenty of chances to. It was 100% on them to structure it to expire when it did, and not to extend it. At some point we need to face the reality that taxes will need to go up on all of us and pensions need to be changed to 401K for new employees.


  25. - DuPage - Monday, Jun 22, 15 @ 10:23 am:

    @real estate 10:13 =Make teachers pay into SS=

    Teachers in Illinois are not in SS. This saves the employer school districts from paying about 6 or 7 percent into the SS employer match.


  26. - Anonymous - Monday, Jun 22, 15 @ 10:28 am:

    === Hopefully new sources of revenue will be used instead of all property taxes - which could burst Chicago’s real estate bubble. ===

    If the maximum tax increases are passed, it would cost the owner of a $250,000 home about $450 a year, according to the article. I doubt that this would cause any perceived real estate bubble to burst.


  27. - vibes - Monday, Jun 22, 15 @ 10:28 am:

    RE:
    ==“Right now, the district needs us,” Sharkey said. “The politics of Rahm Emanuel going to Springfield are a lot different than the politics of Rahm Emanuel and Karen Lewis going to Springfield==

    … because the Governor can’t wait to break bread with Karen Lewis. Oh to be a fly on the wall …


  28. - okgo - Monday, Jun 22, 15 @ 10:29 am:

    The only poll I know what the one Rich did last year on this - it talked about “property taxes for pensions.” Particularly not teacher pensions, if I remember correctly.

    That’s a lot different than “property taxes to allow schools to open their doors.”


  29. - nixit71 - Monday, Jun 22, 15 @ 10:33 am:

    Chicago is currently being kept afloat by two people…Chad in Wrigleyville and Trixie in Lincoln Park. When Chad marries Trixie, they become DINKs (dual income, no kids) and continue to keep the city afloat. Then, when they lose their DINK status and their kids are school age, Chad and Trixie move to the suburbs and soak up those educational resources. They are then replaced by a new Chad and Trixie, and the process repeats itself over and over.

    So the question is…how much is Chad and Trixie willing to spend in rent and property taxes in Chicago? Will there always be a never-ending supply of young professionals, regardless of tax increases? Scare them away, and your most profitable and least resource intensive residents may flee for greener pastures.


  30. - Rich Miller - Monday, Jun 22, 15 @ 10:34 am:

    ===I’m pretty sure if we kept it all here in the city, we wouldn’t have the problems we have now===

    You’d be wrong. The city is about even Steven. Suburbs pay way more than they eat, Downstate eats far more than it pays.


  31. - PublicServant - Monday, Jun 22, 15 @ 10:35 am:

    The suburbs wouldn’t exist without Chicago, Rich…


  32. - Bedbug - Monday, Jun 22, 15 @ 10:37 am:

    Anon: “For some reason, Chicago residents think that they are overtaxed when it comes to property taxes. There isn’t as much community support for a property tax hike as you think.”

    Chicago has some great schools but it’s very difficult and/or expensive to access these great schools. Because there’s not enough good schools, Chicagoans are always looking at the suburbs as an alternative to CPS to educate their children. Chicago residents also deal with more crime issues and quality of life issues than folks in the suburbs. The whole graft thing (BBB is just the latest) and the kick the can down the road thing doesn’t help Chicagoans believe that their hard earned dollars spent on a property tax hike will be used to actually fix the shortage of good schools and deal with the City’s crime and quality of life issues. This is why a property tax hike, coupled with cuts to schools and public safety could be potentially devastating to Chicago’s property values and retaining a decent size middle class in the City. If the middle class will be asked to shoulder suburban taxes, they will ask for suburban schools and other services. If they don’t get them, it will cause some to move.


  33. - frustrated GOP - Monday, Jun 22, 15 @ 10:38 am:

    Tax rates for Aurora, Elgin, Rockford, Naperville, Joliet schools are 2 to 2 1/2 times CPS property tax rate, and none of us have the Willis tower, Hilton, Michigan ave, etc. Not sure what the issue is here, someone in the City needs to get the same fact that the State is dealing with, they spent too much and didn’t take in enough for decades.

    You can’t cut expenses enough to get out of the hole Madigan and Dailey dug the last 20+ years. We need to raise revenue.

    From the standpoint of someone in the burbs, maybe someone needs to raise some prop taxes in Chicago to start funding their schools with today’s dollars instead of tomorrows.


  34. - Sue - Monday, Jun 22, 15 @ 10:47 am:

    So Chicago really is in the toilet-what a shock. My only question to everyone looking to blame Rahm when ALL of this is due to Daley’s mismanagement starting with pension holidays and the great parking deal his current law firm employer assisted him in harming the City’s long term fiscal health


  35. - Rich Miller - Monday, Jun 22, 15 @ 10:51 am:

    ===when ALL of this is due to Daley’s mismanagement===

    It’s not that I totally disagree, it’s that this sort of thing isn’t very helpful. What we need are solutions. Finger-pointing gets us nowhere.


  36. - Badgergirl - Monday, Jun 22, 15 @ 10:58 am:

    ==Anon: “…could save a fortune by giving vouchers to every child preschool through high school.”==

    Vouchers/School-Privatization = Increased Cost

    “Vouchers end up costing taxpayers more- for administration and to pay the costs of students not formerly served in public schools.”
    http://www.nea.org/home/16970.htm

    Case in point in Wisconsin, per “NoVouchers Coalition” research data: “Our group calculated that the cost of funding vouchers for private school students just in Merrill, Wausau, Green Bay and Eau Claire could cost taxpayers – at minimum — an additional $25.8 million every year”, said group founder Pam Kobielus, adding that the annual cost of vouchers statewide has been estimated at $1.2 billion for the 2014-2015 school year.”

    http://bloggingblue.com/2014/10/novouchers-group-forms-to-stop-expansion-of-taxpayer-funded-vouchers-for-private-schools-in-ruralnorthern-wisconsin/

    https://www.facebook.com/pages/The-No-Vouchers-Coalition/650895521696178

    https://twitter.com/NoVouchersWI


  37. - From the 'Dale to HP - Monday, Jun 22, 15 @ 10:59 am:

    If we want to play the blame game here, then the suburbs deserve some blame too. They get all the benefits of Chicago but don’t have to pay for much of it. There is no [pick a suburb] without Chicago, yet forever these burbs haven’t been asked to help Chicago out. From schools to the RTA to highways and on and on, the suburbs have, for the most part, worked out a pretty nice deal over the last few decades. For many, work and make the money in Chicago, go to sleep and send the kids to school the often safer suburbs and only pay a fraction of the cost for doing so.


  38. - From the 'Dale to HP - Monday, Jun 22, 15 @ 11:03 am:

    @nixit71, I guess you’ve never been south of Roosevelt or west of Ashland…


  39. - Very Fed Up - Monday, Jun 22, 15 @ 11:08 am:

    Rich is spot on, we can all agree on the same few in this state who have been at the top of the list for the downfall but does nothing to solve the problems now.

    Taxpayers need to come around to paying more for less services and public unions need to get used to receiving less. It’s a painful reality but the longer both sides fight it the worse the problems will get.


  40. - Taxpaying parent - Monday, Jun 22, 15 @ 11:12 am:

    ===It’s a fake crisis if it could be resolved by a substantive property tax increase.===

    The City faces a billion dollar plus crisis of its own, the result of years of Daley’s deficit spending and the sudden need to pony up for pensions after the Illinois Supreme Court decision. Rahm is going to need all his property tax capacity–and a lot of cutting and union concessions– just to cover the municipal sins of the past.

    Only Springfield can save the schools, although all parties are going to have to sacrifice to be part of the solution.


  41. - Judgment Day - Monday, Jun 22, 15 @ 11:20 am:

    “…What we need are solutions.”
    ———-

    IMO, there’s really only three basic solutions that exist.

    Option #1: Don’t open. If there’s no money, then there’s no money. Just don’t open the doors and let the courts make decisions. Be an utter, complete fiasco in virtually every way possible, but “never let a good crisis go to waste”.

    Wasn’t it somebody we know who said that?

    Option #2: Pass legislation enabling local tax districts to file for federal bankruptcy protection. First, looks like this option is off the table. It has already had the proverbial “line in the sand” drawn (option for CPS to file for federal bankruptcy protection). So that’s a non-starter - for now.

    Option three is a property tax hike. Guess where we are - now the only question is how big, and when. Plus, remember that even a RE tax hike passed today won’t be extended until March/April, 2016, with first distributions of money occurring in Summer/Fall of 2016.

    What are you going to do until then? Pass TAW’s? (Tax Anticipation Warrants)?

    Then there’s a few other more marginal options:

    Borrow from all the City TIF Districts? That will be interesting, not to mention all the legal headaches that will instantly create.

    State has got no money to kick in.

    MORE bonded indebtedness? That will get very interesting. You have to really watch out for the optics on doing this.

    Create some type of new taxing authority (say, a school district income tax)? Apart from the fact there doesn’t seem to be any legislative authority to enact such a tax, how you going to do it in a timely manner so it’s actually provides revenue on a timely basis?
    ————-

    There’s really 2 issues here:
    1) What are you going to do?
    2) When’s the money going to come in the door?


  42. - Bedbug - Monday, Jun 22, 15 @ 11:20 am:

    FTDTHP: “I guess you’ve never been south of Roosevelt or west of Ashland…”

    You mean Chiraq? You are correct in pointing out that there’s two Chicago’s. I’m certain that Chicago will survive if nixit71’s Chad and Trixie won’t live in the City because of high rent or property taxes (or more likely because their jobs have relocated to the suburbs because more of their employers have left Chicago or never came to the City). That said, without Chicago’s gentrified areas continuing to prosper and grow through good schools (that compete with suburban schools) and low crime, I’m not sure how Chicago can catch up on all of its pension debt via property taxes and continue to maintain its current spending on government. Chicago needs Chad and Trixie to raise their kids in Chicago to pull off paying off all of the accumulated debt. That magic trick will not be achieved via cuts to education and public safety that impact Chad and Trixie.

    Not sure we can do that and keep all of the folks South of Roosevelt and west of Ashland happy…


  43. - nixit71 - Monday, Jun 22, 15 @ 11:21 am:

    @From the ‘Dale - I’ve spent plenty of time in all parts of Chicago. Enough time to know that all those young professionals - from the high rises in the South Loop up to the greystones of Buena Park to the gentrifyers in Logan Square - are net givers in the Chicago property tax system, not takers. They are low maintenance. As long as they are willing to absorb the increased cost of city living (at no benefit to them, mind you), things will be the same as it ever was.


  44. - RNUG - Monday, Jun 22, 15 @ 11:25 am:

    == does have a strong argument that its citizens are being double taxed when it comes to teacher pensions. ==

    Not when you factor in the extra money sent to Chicago by the school formula because they took over the pension system. As Rich said above, pretty much even for the city.

    == For some reason, Chicago residents think that they are overtaxed when it comes to property taxes. ==

    Chicago residents need a dose of reality in the form of a bucket of ice water over their heads. I pay about twice as much for a house valued much less.


  45. - Formerly Known As... - Monday, Jun 22, 15 @ 11:30 am:

    ==In the past, City Hall has found ways to help CPS meet its financial obligations. Past assistance has included declaring surpluses in special taxing districts, with more than half of the money going to public schools; using money collected in those taxing district funds for school construction; and subsidizing the cost of police service at city schools.==

    How much money does Chicago have in those TIFs at the moment? Is it still around $3B as Ben Joravsky with the Chicago Reader reported a couple years ago?

    Or is that ==top secret==?


  46. - Carhartt Representative - Monday, Jun 22, 15 @ 11:33 am:

    =City could save a fortune by giving vouchers to every child preschool through high school. Let the market decide and let competition into education. We would see schools targeting all levels os students: remedial, ADHD, austistic, behavioral, as well as those who are excelling. Stop pouring money into this mess.=

    The city is paying $697 million per year for charter schools, while paying for expensive special ed, bilingual, and speech services out of it’s general budget. In many cases, these charters are right down the block or even right across the street from a neighborhood school. You don’t create competition buy building two franchises right across the street from each other and paying to operate both.


  47. - Hit or Miss - Monday, Jun 22, 15 @ 11:33 am:

    Chicago residents pay the lowest property tax rates in Cook County. An increase in the property tax will help solve the problems of the CPS.

    As to the possibility of “concessions from the CTU” I think that this has almost no chance of taking place. The CTU wants a new contract this year but I doubt that they will be offering any concessions.


  48. - Formerly Known As... - Monday, Jun 22, 15 @ 11:35 am:

    ==Where’s the Governor’s quote on his solutions to this problem? And, specifically, how much money will each of his solutions save?…now…this year, not at some ill-defined point in the future.==

    And as for the Mayor of Chicago? The person in charge of the city facing this problem? Care to hear his ==solutions== first?


  49. - Sue - Monday, Jun 22, 15 @ 11:46 am:

    Richard-the solution(other then massive tax hikes) is to afford municipalities the bankruptcy option so that a mayor could impose some fiscal sanity on the competing interests and force appropriate solutions. The threat of bankruptcy is a pretty big club where as now the unions,banks and everyone else can sit back and point fingers at everyone else.


  50. - Zainesville - Monday, Jun 22, 15 @ 11:48 am:

    I think the fix for CPS (and Chicago, Cook County, the CTA, the Park District, etc), should be as follows:

    1. A fair mix of revenue from property taxes, new revenue from other than property taxes and new revenue from the state (if Chicago fails, the state will fail);

    2. Cuts/freezes to some current government operations that do not heavily impact Chicago property taxpayers until pension funds are clearly on the path to full funding;

    3. Expansion and improvement of Chicago’s K-12 schools and educational opportunities for its children; and

    4. Reduction in crime in all Chicago neighborhoods.

    The revenues should be large enough and sustainable so businesses and households can have some certainty on what it will cost to do business and live in Chicago for the next 5-10 years. This will help grow Chicago’s population and provide new revenues for both the City and the State. It would be nice to have Rauner and Rahm focus their energies on using the nation’s drought (or the region’s many benefits or simply lack of dysfunction) to lure businesses to Illinois rather than annually fighting over whether CPS is insolvent.

    Constructive criticism or reform ideas are welcome…


  51. - Midway Gardens - Monday, Jun 22, 15 @ 11:54 am:

    Options:

    Guess the Casino isn’t coming along. Any option requiring the State (Casino, vouchers, bankruptcy, tax increase over caps, pension reform, income tax) are beyond our dysfunctional State Government. Interesting that one of the major strengths Illinois has is an educated workforce. Let’s burn that to the ground too.

    The Tribune has reported that the max property tax the schools could impose under State caps was $50 M. State intervention needed to go beyond.

    The TIF pot of gold isn’t there.

    Apparently we need a crisis to get even potentially get any resolutions. One more hit on the State’s reputation even if we come through it.

    Judgement Day, schools could still open if the pension payment was skipped / reduced. Let the lawsuit commence but it’s another kick the can option for a while. The schools being able to open in August is already going to be an issue due to the budget impasse.


  52. - BB - Monday, Jun 22, 15 @ 11:54 am:

    A history lesson: Chicago used to have a stand-on-its-own property tax levy for the teacher’s pension fund and it kept the pension system fully funded for decades. As part of the sweeping Chicago School reform package of 1995, the General Assembly eliminated that special levy and combined it with the main CPS tax. The GA and Chicago Board of Ed didn’t see the need for a dedicated tax to fund the CPS pension system because it was awash in cash — why not combine the levies and let the board spend the tax dollars as they see fit? Maybe skip a pension payment or two if the fund is at a 100 or 90 percent funding level, or so the logic went.

    Of course, the Board then chose to stop funding the pension system all together (with the GA providing legislative authority) for almost all of the next two decades, creating the mess we have now.

    The GA should undo the mistake they made 20 years ago and place that special pension levy back on Chicago property tax bills…and it can’t carve up the current level (as HB 3695 proposes.) It has to be in addition to the current levy. This will allow CPS to work around its property tax cap and get the rest of their financial house in order.

    And it could provide a model for the solution to the statewide TRS pension problem (which, BTW, is still unsolved.) Shift the TRS employer contributions from the state to the local school districts, phase it in over 10 years, and give the districts the authority to set up a special pension tax levy if they want. You could even put the question on a special pension levy on the ballot with a referendum in each district.


  53. - PublicServant - Monday, Jun 22, 15 @ 12:00 pm:

    So, let’s see; Suburban property taxes are 2-3 times as high as Chicago, and those are some pretty highly rated schools out there in suburbia. In Chicago, we’ve got a large population of low income students, who cost much more per student to teach, and with, on average, much less progress on the academic front, due to the massive societal problems they have to overcome just to show up for class. Those societal problems don’t begin and end at Chicago’s borders. Much of the educational disparities in this state are due to the preponderance of local funding for schools through property taxes. This is a state problem, no matter how much suburbanites would like to limit it to the borders of Chicago, and that’s why I’d like to hear Rauner’s (and, yes FKA, Rahm’s) proposals on how to address this issue statewide.


  54. - okgo - Monday, Jun 22, 15 @ 12:01 pm:

    Here’s the other problem Rich -

    The city is just going through its triennial reassessment from Cook County this year (2015).

    Many areas of the city saw 30% or more increases in their assessed value, and now face comparable increase in total bills.

    This after 2012 and 2009 saw big pushes to keep assessments low due to the recession.

    So people will see a double-whammy: huge assessment increases and catching the city up to the suburbs who have had their upward re-assessments the past two years; and then a tax hike on top.

    I don’t know whether that means it is a good time to do this (to hide it within the larger assessment increase), or a bad time (you get blamed for the whole increase).


  55. - Steve - Monday, Jun 22, 15 @ 12:07 pm:

    Since Alderman Ed Burke has been Chairman of the Finance Committee for most of the last 30 years shouldn’t he step down in the name of doing something different? A solution can begin with new leadership. At least the Chicago is honest about things on their website.
    https://www.cityofchicago.org/city/en/about/wards/14/alderman_burke_sbiography.html

    Edward M. Burke, 63, the Dean of the Chicago City Council, has served as Alderman of Chicago’s 14th Ward for more than three-and-a-half decades. A recognized expert on city budget matters, Alderman Burke is the Chairman of the City Council Committee on Finance.

    A master parliamentarian, Alderman Burke entered politics by following in the footsteps of his father, Joseph P., and became Democratic Committeeman of the 14th Ward in 1968 and Alderman in 1969. Alderman Burke was a Chicago Police Officer, serving from 1965 to 1968.

    As Chairman of the City Council’s powerful Committee on Finance, Alderman Burke holds the city’s purse strings and is responsible for all legislative matters pertaining to the city’s finances, including municipal bonds, taxes and revenue matters. Alderman Burke became Chairman for the second time in 1989. He previously served from 1983 to 1987. He also serves as a member of the Chicago Plan Commission.

    But, lastly, Rich is correct solutions are called for. Public education is just too expensive in its’ current form with the numbers of students in the system. More schools will have to close. Chicago make have to lead America in MOOC education . Internet classrooms are one way out for Chicago students and taxpayers.


  56. - anon - Monday, Jun 22, 15 @ 12:09 pm:

    I agree finger pointing does no good. Neither does posts from people like PS, blaming a governor who has been in office all of 5 months. But, the is the MO of PublicServant.


  57. - Enviro - Monday, Jun 22, 15 @ 12:11 pm:

    Chicago could have increased property taxes enough to pay for public education and pensions many years ago. Then they wouldn’t be facing the high costs of borrowing all that money now. The city government of Chicago and the Chicago School Board messed up.

    If we don’t understand what caused this problem we will not understand how to solve the problem. Raise tax revenue to pay down the debts. Problem solved.


  58. - Ben Franklin - Monday, Jun 22, 15 @ 12:15 pm:

    It’s not a party problem. It’s a people problem, primarily apathetic Illinoisans who don’t care about anything, but their Starbucks, their Mutual Funds, and Little League schedule until something affects them personally. GLUTTONS We’ve earned this and now the chickens are coming home to roost.
    Quit Whining, be a Responsible Citizen and pay more taxes to pay what we owe. It’s really THAT simple.


  59. - Ben Franklin - Monday, Jun 22, 15 @ 12:17 pm:

    ANON at 10:03 am.
    Riiiiiight. Let’s make education a capitalist venture, it’s done WONDER for our healthcare, and made us the worst of the developed nations in that service.


  60. - Striketree - Monday, Jun 22, 15 @ 12:20 pm:

    “anon, how can you say that when Rauner requested that the legislature not act extend the 5% tax rate, whose expiration is the cause of our current deficit?”

    And, of course, the legislature is required to follow a request of a Governor who was not even sworn in at the time. No, the Dems own this.


  61. - PublicServant - Monday, Jun 22, 15 @ 12:26 pm:

    anon, I’m certainly not blaming the governor for the problem, but he ran for governor and was elected. The honeymoon’s over, bud. He needs to weigh in on an issue weighing on the economic engine of this state, which Chicago most certainly is. And you, my friend, lessen the value of your comments by attempting to attack the positions of individual commentators on this board. It impedes and distracts from the issue being discussed. Try changing your MO, and we’d all be a lot better off.


  62. - Keyser Soze - Monday, Jun 22, 15 @ 12:26 pm:

    Is it true that Chicago teacher’s average salary is on the order of $100,000 per year and that retirement is in the vicinity of 80% of salary?


  63. - anon - Monday, Jun 22, 15 @ 12:31 pm:

    Yeah okay PS. Maybe look in the mirror and be accountable. That would be a start.

    Your party owns this. Is the honeymoon over for you guys or does it just continue forever?


  64. - Formerly Known As... - Monday, Jun 22, 15 @ 12:36 pm:

    ==Those societal problems don’t begin and end at Chicago’s borders==

    Well said, PS.


  65. - PublicServant - Monday, Jun 22, 15 @ 12:39 pm:

    anon, unfortunately, we all own it. The only way to solve our problems is to work together to solve them. But, if it makes you feel better, blame the dems. See how far that gets you.


  66. - Formerly Known As... - Monday, Jun 22, 15 @ 12:45 pm:

    ==Guess the Casino isn’t coming along==

    The Casino has been tied elsewhere to the $550 mill police pension payment that is coming due. There may not be enough to cover both payments, and even if there is the casino will not be built overnight.

    These police and teacher pension payments have been planned for years. Have Rahm or the city taken any steps to prepare for these payments?


  67. - Apocalypse Now - Monday, Jun 22, 15 @ 1:02 pm:

    =The suburbs wouldn’t exist without Chicago, Rich… =
    I wonder how those suburbs in Detroit made it all these years?


  68. - PublicServant - Monday, Jun 22, 15 @ 1:04 pm:

    Chicago isn’t Detroit dude. No matter how often you try to link them.


  69. - Truthteller - Monday, Jun 22, 15 @ 1:06 pm:

    Not to point fingers, but to respond to the Republican partisans, please note that the removal of the designation of the levy for the Pension Fund was accomplished with Republicans in control of both houses of the legislature and the governor’s mansion.Fortunately, they held control only for two short years, but managed to do much damage in a short period of time


  70. - Demoralized - Monday, Jun 22, 15 @ 1:12 pm:

    anon - Monday, Jun 22, 15 @ 12:31 pm:

    The third graders comment section is down the hall. Go there. Thanks.


  71. - Bedbug - Monday, Jun 22, 15 @ 1:22 pm:

    PS “Chicago isn’t Detroit dude. No matter how often you try to link them.”

    I agree. Chicago’s property taxpayers have not been overwhelmed like Detroit’s and Chicago’s public school system is still being used by the middle class. Change those factors too much and I’m not sure so sure the two cities are all that dissimilar. The political dysfunction of both towns are remarkably similar. Keep in mind that Detroit tried to pay its pensions via property tax hikes and other tax hikes, cuts to schools and policing until it was just a shadow of its former self. Pensions were 90% funded when Detroit finally ran out of stuff to tax that had any remaining value (who the he#$ is going to live in an $80K house and pay $10-15K a year in property taxes?). Does Chicago have to repeat Detroit’s mistakes to end this debates? Property tax hikes, like most anything, are only good in small doses. Unfortunately, Chicago now needs to catch up from a long, long history of skipped payments so that means alternative revenues - in addition to property tax hikes - are necessary along with other cost savings measures to avoid repeating the mistakes that Detroit made in destroying itself.

    However, just parroting “Chicago is not Detroit” - while true - does not prevent other from seeing some pretty legitimate parallels between the two cities - especially if Chicago starts making the same bad decisions as Detroit.

    In other news, Wayne County is now on the verge of a fiscal crisis, fyi.

    http://www.detroitnews.com/story/news/local/wayne-county/2015/06/17/wayne-county-financial-emergency/28886293/


  72. - Carhartt Representative - Monday, Jun 22, 15 @ 1:23 pm:

    =The GA should undo the mistake they made 20 years ago and place that special pension levy back on Chicago property tax bills…and it can’t carve up the current level (as HB 3695 proposes.) It has to be in addition to the current levy. This will allow CPS to work around its property tax cap and get the rest of their financial house in order.=

    That would really help.

    =Is it true that Chicago teacher’s average salary is on the order of $100,000 per year and that retirement is in the vicinity of 80% of salary?=

    No, a teacher with maximum experience and maximum degrees still doesn’t get to $100,000.


  73. - Formerly Known As... - Monday, Jun 22, 15 @ 1:23 pm:

    ==Not to point fingers==managed to do much damage in a short period of time==

    Not like the Dem mayor and Dem city leaders who are the ones who actually chose to short the CPS pension payments bear any responsibility in all this, right? /s


  74. - Formerly Known As... - Monday, Jun 22, 15 @ 1:48 pm:

    CPS teachers do not make an average of $100,000, but they are the highest or second highest paid. CBS Chicago

    ==Salary figures provided by the Chicago Public Schools show teachers here have the highest average salary of any city in the nation. But, according to the Chicago Teachers Union’s calculations, Chicago teachers would rank second behind New York City.==


  75. - Rich Miller - Monday, Jun 22, 15 @ 1:48 pm:

    ===until it was just a shadow of its former self===

    Yeah, that’s what did it.

    Decades of economic free-falls and horrific governance and it was the taxes that made it a shell of its former self.

    Detroit was a hollow shell of its former self 40 years ago.


  76. - Wordslinger - Monday, Jun 22, 15 @ 1:58 pm:

    What’s fascinating about the “another Detroit” weirdos is that they clearly do not know a thing about Detroit or Chicago, past of present.


  77. - Sue - Monday, Jun 22, 15 @ 2:05 pm:

    If the City had the courage to take on its Union relationships- quite a bit could be accomplished- There are thousands of positions now being performed by higher paid union folks performing unskilled labor which could be subcontracted saving 100’s of millions in annual payroll-for starters think garbage collection and school custodians- The mayor has to start somewhere and this would be low-hanging fruit


  78. - Bedbug - Monday, Jun 22, 15 @ 2:14 pm:

    RM “Decades of economic free-falls and horrific governance and it was the taxes that made it a shell of its former self.”

    I agree with you - Chicago has much more strengths than Detroit right now and it better managed to avoid middle class flight in the 1950’s than Detroit. Chicago’s current renaissance, however, is built, in part, on not paying the full cost of government. Re-introducing the full costs (catching up on pensions) improperly might cause Chicago’s real estate bubble to burst. Chicago’s can kicking might even one day be seen as “horrific governance” if real estate values drop and the middle class starts to look for an exit strategy.

    I guess I just don’t get the unwillingness to have an open debate on Chicago policy when it mirrors some of the things that wreaked havoc in Detroit? Typically, policy is not black and white and I’ve grown to mistrust those who won’t seriously debate an issue because they are usually wrong in the end.


  79. - Bedbug - Monday, Jun 22, 15 @ 2:15 pm:

    Wordslinger: “What’s fascinating about the “another Detroit” weirdos is that they clearly do not know a thing about Detroit or Chicago, past of present. ”

    What do I have wrong about Detroit or Chicago?


  80. - Rich Miller - Monday, Jun 22, 15 @ 2:18 pm:

    ===I guess I just don’t get the unwillingness to have an open debate on Chicago policy when it mirrors some of the things that wreaked havoc in Detroit? ===

    Because, in a nutshell, it is the local government version of Godwin’s Law https://en.wikipedia.org/wiki/Godwin%27s_law


  81. - Sue - Monday, Jun 22, 15 @ 2:24 pm:

    Chicago/Detroit- In all actuality Chicago presently has a worse debt and pension problem then Detroit ever had- the difference is that Chicago has a more diverse economy and tax base- Raising taxes to what is required to deal with the deficit and pension issues would unfortunately result in a likely change for the worse in what is already a not so great business environment- The solutions to this mess are substantial real estate tax increases and a major reduction in costs- What is really needed is a change in Springfield in terms of the legislature so that the reforms being presented had a chance of implementation- That is not likely to occur so plan on a major reduction in services on July 1 and the possible inability to start the CPS school year


  82. - Wordslinger - Monday, Jun 22, 15 @ 3:03 pm:

    –What do I have wrong about Detroit of Chicago.–

    Gee, I don’t know Einstein. You might want to start with the unique circumstances regarding the rise of the combustion engine, the buildup of the Arsenal of Democracy, the post-war consumer explosion and the fact that we stopped bombing the stuff out of Japan and Germany in 1945.

    In 1948, half of the planet’s car engines were produced in Detroit. Did you think that was sustainable? Did muni fiscal decisions change that?


  83. - Carhartt Representative - Monday, Jun 22, 15 @ 3:04 pm:

    =If the City had the courage to take on its Union relationships- quite a bit could be accomplished- There are thousands of positions now being performed by higher paid union folks performing unskilled labor which could be subcontracted saving 100’s of millions in annual payroll-for starters think garbage collection and school custodians- The mayor has to start somewhere and this would be low-hanging fruit=

    The city has privatized its school custodians. Here are your cost savings:

    http://www.wbez.org/news/chicago-school-cleaning-contract-millions-over-budget-111949

    Privatizing just puts in a profit-driven middle man.


  84. - Bedbug - Monday, Jun 22, 15 @ 3:07 pm:

    Wordslinger: If you are making a point, you need to be a little more clear. Your friend, Albert Einstein.


  85. - Carhartt Representative - Monday, Jun 22, 15 @ 3:19 pm:

    It’s very hard to find teacher pay by city. It’s usually by state. However, there’s a very interesting report by the NCPA which ranks teacher pay by cost of living from last year. It shows CPS teachers with a median income of $55,640. This ranks 28th among the 60 urban districts in the study well behind Milwaukee.

    http://www.ncpa.org/pdfs/2014_Teacher_Pay_Report-NCPA_MacIver.pdf

    When compared, it finds Milwaukee had the highest adjusted median pay at $73,000. CPS was 44th out of 60 metro markets. This is a national report.


  86. - Sue - Monday, Jun 22, 15 @ 3:38 pm:

    Car hart-that is because the city undercounted the schools and had to increase payments when the REAL COUNT WAS UTILIZED


  87. - Formerly Known As... - Monday, Jun 22, 15 @ 3:51 pm:

    ==A Chicago Public Schools spokesperson said average pay for teachers, without benefits, is $76,000.== http://cbsloc.al/1N1PHC6

    ==Chicago school teachers make a median salary of $71,017.== http://wapo.st/1GvUWW1


  88. - Arthur Andersen - Monday, Jun 22, 15 @ 4:12 pm:

    Yes, this has to be fixed. Yes, the new management of the Chicago Teachers’ Pension Fund is taking the only responsible position when they say “we need a full check.”

    It bothers me a bit that the prior “management” of the CTPF, right after they lost that property tax levy, mysteriously started getting a $65 million State contribution to the fund for each of about the next 10 years thereafter and whizzed it away on (illegal) healthcare subsidies. If that money had stayed in CTPF and was properly invested, the Fund would have at least a couple billion dollars more in assets than they have now. CTPF, take a 50% haircut until you conclusively prove that you have made best efforts to clean up this mess, including pursuing breach of fiduciary duty claims against the responsible parties.

    Similarly, why in God’s name does David Vitale have anything to do with CPS’ finances after masterminding the toxic swap idea? He should be nowhere except on a list of defendants.

    Another guy who always turns up when there is public money to be made is Jim Reynolds. His 15 minutes are about up.


  89. - DuPage Dave - Monday, Jun 22, 15 @ 5:53 pm:

    I encourage everyone to read “The Shock Doctrine” by Naomi Klein. It’s full of examples from around the world where the upper class creates a “crisis” which requires a solution where the lower and middle classes pay more for fewer benefits, and the rich continue to get richer.

    If you read this you will see that Rauner and Emanuel are using the same playbook.


  90. - NoGifts - Monday, Jun 22, 15 @ 7:28 pm:

    What would happen if the city and the state switched to a pay as you go system, like social security?


  91. - lost in the weeds - Monday, Jun 22, 15 @ 7:40 pm:

    DETROIT

    I do not think that because Detroit crashed means that Chicago will.
    https://en.m.wikipedia.org/wiki/1967_Detroit_riot
    https://en.m.wikipedia.org/wiki/Detroit_race_riot_of_1943


  92. - Arthur Andersen - Monday, Jun 22, 15 @ 8:17 pm:

    No gifts, it would cost them more money. They still have to pay off their unfunded liabilities incurred over time, benefits accrued to date, and the costs of the new plan (plus Social Security for at least some workers.)


  93. - Carhartt Representative - Monday, Jun 22, 15 @ 9:49 pm:

    =Similarly, why in God’s name does David Vitale have anything to do with CPS’ finances after masterminding the toxic swap idea? He should be nowhere except on a list of defendants.=

    An excellent question.


  94. - Carhartt Representative - Monday, Jun 22, 15 @ 9:51 pm:

    =Car hart-that is because the city undercounted the schools and had to increase payments when the REAL COUNT WAS UTILIZED =

    It’s going to cost more than the CPS janitors ever did. Meanwhile the schools are disgustingly filthy now.


  95. - Ghost of Harold - Monday, Jun 22, 15 @ 11:36 pm:

    Just to remind folks who speak of the accumulated fiscal errors of past Chicago “mayors”: under Harold Washington, the CPS ran a balanced budget. (and the city did, too). If it’s mistakes you’re looking for, focus on Daley and Emanuel, who squandered Harold Washington’s stellar fiscal legacy.


Sorry, comments for this post are now closed.


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