By: Mark Glennon*
Chicago’s struggling public school district and its pension fund are the easiest pieces of Illinois’ financial crisis to fix. Michigan showed us how with Detroit’s schools, and the Chicago Public School System is particularly suited to the same approach.
But what are the political chances for implementing the obvious solution? Zero. Think of this as an illustration of how detached Illinois’ political establishment remains from reality.
First, by way of background, the Chicago Public School System is a wreck, despite ever increasing financial help from the state. Its bonds are rated deep junk. Its pension is just 48% funded with a $12 billion unfunded liability, or $25 billion per Moody’s more realistic numbers. For more details, see our recent summary of the situation linked here.
And now the Chicago Teachers Union, CTU, is kicking off negotiations for a new contract with intransigence and some 200 new demands. “Our militancy is not dictated by who sits on the fifth floor of City Hall” – that was their message to Lori Lightfoot upon her election as Chicago’s mayor. New demands reportedly include affordable housing for teachers, higher salaries, increased benefits, guaranteed sanctuary status for undocumented students in classrooms and hiring more support staff.
Here’s what Springfield should authorize Lightfoot to say to CTU’s socialist president, Jesse Sharkey:
“You will drop all your demands and accept what we offer. If you so much as blink, we will start from scratch with a new school district and run it as it must be. The old school district will be gone, you with it.”
It’s called “reconstitution.” Here’s what it would include:
– Creating a new school district, or maybe a number of them, perhaps bringing in the private sector where that’s the best option.
– Terminating funding for the old CPS from all sources and redirecting that funding to the new system. Transferring needed assets – only those really wanted — to the new system, probably in exchange for assumption of certain bonded debt.
– Ceasing all funding to the Chicago Teachers’ Pension Fund and, instead, funding a new, affordable retirement plan designed to supplement the loss to retirees who need it. Letting the old pension bleed out or distributing its assets to members.
– Terminating all CPS employees and rehiring the good ones.
– Paying unsecured debt left in the old CPS, including unfunded pension liabilities, pro rata out of what assets remain and what the city elected to put in, although impaired pensioners would be helped by the new retirement plan.
Reconstitution is what Michigan did with Detroit schools in 2016. Today, the new system is on its way to financial independence. Starting a new entity to replace a broken one is commonly done in the private sector, too. That’s how the GM and Chrysler turnarounds were structured after the Great Recession – new corporations were formed and operating assets transferred over. CPS could probably be reconstituted without any bankruptcy proceeding, but if any legal obstacles arose the old CPS could be put through a Chapter 9 process and that federal law would supersede any state law issues.
All of that would have to be authorized by the General Assembly and signed by Governor Pritzker, which is why it will never happen. Public unions are running unchallenged in Springfield. Maybe Lightfoot wouldn’t go for it, either, but we don’t really know.
Another benefit of reconstituting CPS, if the political will were there to do it, would be ending CTU, which should be a priority. They perpetually threaten strikes for endless demands, oblivious to the city’s financial plight. They teach contempt for the very economic system into which they are supposed to be teaching kids to function. They practice the most extreme brand of tribal politics to inflame racial divisions they exploit. They’ve been a blight on government at all levels by exerting exceptional influence on many elections, notwithstanding the recent loss of their machine favorite, Toni Preckwinkle. They teach hatred, at a personal level, toward the folks who create the wealth they want to seize for their endless demands.
I know, I know. Dream on. This is Illinois.
*Mark Glennon is founder of Wirepoints.
Read more about CPS and the City of Chicago’s fiscal situations:
- What Mayor Lightfoot needs to know to take on the Chicago Teachers Union
- Chicago’s pension funds looking more like a collapsing Ponzi scheme
- Chicago leaders’ hypocritical stance on school choice
- Chicagoans, pensioners: Beware a stock market shock
- A more likely reason Rahm Emanuel dropped out: the Chicago time bomb
- Illinois taxpayers bailed out Chicago Public Schools so the district could do what?