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14 months of revenue for a 12-month budget

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Illinois

* I missed this Phil Rogers story from the other day. Wow…

Ten months after the biggest realignment in CPS history, the stage is set for a cataclysmic budget debacle, which could top $1 billion.

“It’s completely nuts,” says Chicago Teachers Union vice president Jesse Sharkey. “And unless we do something about it, we’re going to be facing a billion dollar budget crisis.”

At issue is a board plan to take 14 months of revenue for the coming 12 month school fiscal year, essentially borrowing money from the 2015-2016 school budget. School board president David Vitale did not dispute the number.

“It does allow us to avoid laying off thousands of teachers,” Vitale said. “It will lead to a serious problem a year from now, but the alternative is not very pretty, and it’s our judgment that we should do everything we can to maintain the quality we can for our kids.”

The CTU says it sees a more sinister motive for the budget sleight of hand.

“They don’t want to do it during a mayoral election,” said Sharkey. “So they’re kicking it to the following year.”

Man, oh, man.

posted by Rich Miller
Wednesday, Jun 18, 14 @ 10:04 am

Comments

Mind boggling.

Comment by Shemp Wednesday, Jun 18, 14 @ 10:08 am
You think Quinn is calling his budget guy right now?

Comment by OneMan Wednesday, Jun 18, 14 @ 10:13 am
See? All the problems in the Chicago Public Schools are the teachers’ fault.

If only a sharp businessman ran the school board, and a legendary (in his own mind) politician was mayor…..

Comment by wordslinger Wednesday, Jun 18, 14 @ 10:16 am
Similar though less transparent moves being undertaken by Chicago for 2015.

Comment by Brilliant Wednesday, Jun 18, 14 @ 10:18 am
I thought the headline was referring to the State budget.

Comment by walker Wednesday, Jun 18, 14 @ 10:19 am
From a April 23rd Reboot article…
http://www.rebootillinois.com/2014/04/23/editors-picks/billmorris/placate-illinois-taxpayers-fix-chicago-public-schools-looming-budget-crisis-2015/7111/?utm_source=daiytip_20140423&utm_medium=email&utm_content=&utm_campaign

Comment by PhoenixRising Wednesday, Jun 18, 14 @ 10:20 am
The IL General Assembly helped create this CPS problem by granting Mayor Daley virtually total control over CPS. Why wouldn’t Mayor Emanuel use the CPS lever of power to grant various constituencies perks, like the massive expansion of selective high schools and the cost of many millions of dollars, or the expansion of overcrowded elementary schools in both poor and middle class communities, or air conditioning, and on and on. None of these things CPS can afford to do given the situation with the pension fund and the low property tax rate in the city.

The Il General Assembly and ISBE do not want to take responsibility for CPS and therefore handed it off to the Office of the Mayor of Chicago who appoints every member of the school board by state law. There is no popular vote for school board members in the city.

Both the ISBE and the General Assembly are now reaping the fruits of political control over the largest school district in the state. If CPS blows up, the state will have to create the bail out framework just as it did in 1979 which is the last time the district went belly up.

Comment by Rod Wednesday, Jun 18, 14 @ 10:31 am
More budget tricks to kick the can farther down the road.
CPS has some issues when it comes to management. The way the board is appointed, the one study where something like 40% of CPS teachers w/ kids sent their own kids to private schools, and on and on.

Add on top of that that the Chicago population is not growing and they are seeing a shrinking number of kids. Yet costs aren’t changing.

How to fix? no simple solution. But its politically expedient to kick the can down the road and more than likely not have to pay politically for it. Its illinois. Why expect any different.

Comment by RonOglesby Wednesday, Jun 18, 14 @ 10:33 am
So, Mr. Banker, here is my plan.
I was able to get a 16% wage increase for next year, because I’m now adopting a 14 month calendar.

And next year, I’ll likely be able to give myself an even bigger raise!!!

Comment by Downstate Wednesday, Jun 18, 14 @ 10:38 am
14 months for 12 = 10 months for 12 next year. Whoever proposed this ought to resign.

Comment by Mason born Wednesday, Jun 18, 14 @ 10:38 am
14 months for 12 = 10 months for 12 next year. Whoever proposed this ought to resign.

No, they are going to just keep ‘paying it forward’ then in 2021 There is going to be a great new ‘everyone home school for a year’ program

Comment by OneMan Wednesday, Jun 18, 14 @ 10:51 am
What David Vitale is also praying for is that the national economy doesn’t fall into to a recession. This slow recovery started in June 2009. If the economy should go into a recession in the next 24 months things will be much more “challenging”. CPS doesn’t have enough of a reserve fund or a backup plan for the next recession. This isn’t a small issue. Lastly, who else but the public sector could get away with such “kinky” accounting?

Comment by Steve Wednesday, Jun 18, 14 @ 11:10 am
There ought to be a law against this, or course, they would just ignore it.

Comment by Downstate Illinois Wednesday, Jun 18, 14 @ 11:17 am
==Lastly, who else but the public sector could get away with such “kinky” accounting?==

Not real in tune with the corporate world are you. They’ll get away with it for a while until the bill comes due. Same thing happens in the corporate world. They’ll get away with accounting gimmicks for a while, and then they’ll turn into the Enron’s of the world.

Comment by Demoralized Wednesday, Jun 18, 14 @ 11:19 am
OneMan: Hilarious!

Comment by Yellow Dog Democrat Wednesday, Jun 18, 14 @ 11:22 am
It’s a win-win for Emanuel — but only him, not citizens, students, teachers, etc.

Kicks the can down the road until after the election, then he can use the “crisis” he created to take revenge on the teachers who beat him like a rented mule during the strike.

Nice to see such sold “leading” citizens on the board enabling this selfish and petty fiasco.

Comment by wordslinger Wednesday, Jun 18, 14 @ 11:22 am
@Demo
Yes, but in Enron and other cases people get prosecuted (or should). Will any of that happen here? probably not. As I mentioned above the only recourse is political and in Chicago there is no recourse.

Comment by RonOglesby Wednesday, Jun 18, 14 @ 11:23 am
- Demoralized -
No company listed on the NYSE could keep the books that CPS has for years and years without the SEC knocking on there door. Pension plans in the corporate world have to be at least 80% funded, those that aren’t have legal consequences.

Comment by Steve Wednesday, Jun 18, 14 @ 11:27 am
Dude, hinky accounting in the private sector is the American way.

If you’re privately held, you hide as much as you can from the tax man and run as many personal expenses as you can through the business to knock down profits and benefit yourself.

Comment by wordslinger Wednesday, Jun 18, 14 @ 11:27 am
If this is true, Rahm is not running for reelection. This is a poison pill for the next mayor.

Comment by a drop in Wednesday, Jun 18, 14 @ 11:35 am
This is a shock? DHS has done the same thing in past years when some programs started running out of cash in March.

Comment by zatoichi Wednesday, Jun 18, 14 @ 11:36 am
@word,
But a publicly held company cannot to that and pass an audit/SEC scrutiny without fines and possible charges depending on the actual violation. I think the thing that gets people here is that those in charge think it is just fine and many (even here commenting) seem to be ok justifying because some others may get away with it.

Comment by RonOglesby Wednesday, Jun 18, 14 @ 11:40 am
–Pension plans in the corporate world have to be at least 80% funded, those that aren’t have legal consequences.–

Consequences being walking through bankruptcy court to shed pension, laying off liabilities on the PBGC, then going back to business like nothing happened.

Comment by wordslinger Wednesday, Jun 18, 14 @ 11:43 am
Its the same problem Springfield faces - no one wants to be accountable for choosing between:

A. More revenue

B. Devastating cuts

Thus, “magic tricks” and denial have become standard operating procedure.

Comment by Bill White Wednesday, Jun 18, 14 @ 11:45 am
Any such plan is fiscally irresponsible. Appears to me to be a trick to put off telling people the ‘bad news’ until after the next election.

Comment by Hit or Miss Wednesday, Jun 18, 14 @ 11:47 am
In Rauner-world, looting private sector pension plans is old school stuff. And since most private sector pension funds have already been looted, its time to find new targets.

Comment by Bill White Wednesday, Jun 18, 14 @ 11:47 am
Ron, I’m not sure that the SEC is the barracuda some are making them out to be.

As far as the audit requirements, well, the outside auditors are in business to make money, too.

My sister ran a private pension and benefits fund and for a number of years. Arthur Andersen (the late Chicago company, not our paisan) would send out some kids, they’d take a cursory look at the books and then try to upsell her on “consulting service.”

They were more salesmen than auditors.

Comment by wordslinger Wednesday, Jun 18, 14 @ 11:49 am
“If this is true, Rahm is not running for reelection.”

Why? Seems like a classic ‘put off the bad news til after election day, then have 4 years to figure it out’ move.

Comment by Chris Wednesday, Jun 18, 14 @ 12:29 pm
Fire all the teachers, let the kids roam the streets for a year or two until the budget is balanced. CPS just like the state knew a day of reckoning would come and they just ignored it!! Let them take the fall!! Not the teachers!! Someone needs jail time!!

Comment by Union Man Wednesday, Jun 18, 14 @ 12:45 pm
@Steve:

We have been subject to consequences from the SEC for not disclosing our pension liabilities accurately in our bond sales.

I guess my point is no matter the gimmick, it will eventually come back to bite you in the rear end, whether you are a government or not.

Comment by Demoralized Wednesday, Jun 18, 14 @ 12:46 pm
Thanks for the clarification, word.

Pointing out (with heaping helpings of snark) the fiscal follies of Blagoworld was how this handle came to be, for those that don’t know.

Comment by Arthur Andersen Wednesday, Jun 18, 14 @ 1:07 pm
Enron & the SEC was the same old story it’s always been and is still today. The SEC wasn’t paying attention because the ratings agencies and independent auditors were giving the client what they wanted to hear. CPS really oughta just get in on that game.
http://usatoday30.usatoday.com/money/industries/banking/2002-10-06-sec_x.htm

Comment by Precinct Captain Wednesday, Jun 18, 14 @ 3:45 pm
==Nice to see such sold “leading” citizens on the board enabling this selfish and petty fiasco.==

I wonder if there was any dissent - does retired Northwestern University president / CPS board member Dr. Bienen really need to do whatever the mayor wants? http://www.cpsboe.org/bios/4

Comment by Robert the Bruce Wednesday, Jun 18, 14 @ 5:04 pm
In related news, there are calls to legalize insider trading:

http://www.cnbc.com/id/101766558

Yup, the SEC is a barracuda and 401(k) managers have our best interests at heart.

Comment by Bill White Wednesday, Jun 18, 14 @ 10:11 pm
===there are calls to legalize insider trading:===

One call. From an obvious moron.

Comment by Rich Miller Wednesday, Jun 18, 14 @ 10:22 pm