In what many are considering to be a step in the right direction, two bond rating agencies have given thumbs up to the recent Illinois school funding formula, with reservations but praise nevertheless. S&P Global Ratings “revised the outlook on the Chicago Board of Education’s junk credit rating to stable from negative on Tuesday, citing a boost in state and local funding for the cash-strapped school district,” reported Reuters.
“The outlook revision is based on our view of the district’s higher state aid revenue as a result of the state’s new funding formula, and lower pension costs, with the state now picking up more of the employer pension contribution, and the district’s ability to extend a higher property tax levy to support the pension contribution,” S&P analyst Jennifer Boyd said in a statement.
Last Friday, Fitch upgraded the Chicago Public School bond rating from B-plus to BB-minus, again attributing the new funding formula as the reason and also stating that Chicago Public Schools will still be very dependent on borrowing money; a fact that swells the deficit due to high interest payments.
They also stress that while they feel that the upgrade is warranted, but the “potential volatility of state aid,” is still a factor, and as S&P Global notes will still be “dependent on external cash,” as Fitch noted, even as critics bemoan the specter of even further tax increases despite the historic property tax, that was passed, last year under the administration of Mayor Rahm Emanuel.
Others are sanguine such as Civic Federation President Laurence Msall who also notes that the rating is still beneath investment grade.
Earlier during the year it was announced that CPS would need even more money, $269 million to be exact, which of course meant more taxes. As CPS noted in its October statement: “The initial FY18 budget also included $269 million in local resources to address the district’s budget gap. As a result of both the new funding law and management efficiencies taken by CPS, the district now requires significantly fewer resources from the city and will fully resolve the budget gap through the following steps:
-$130 million increase to CPS’ property tax levy for Chicago teachers’ pensions
-$80 million in City of Chicago funding for school security and student safety costs
-$55 million in debt refunding savings and purchasing savings
-$4 million in additional state aid above the amount assumed in the original budget”
-$130 million increase to CPS’ property tax levy for Chicago teachers’ pensions
-$80 million in City of Chicago funding for school security and student safety costs
-$55 million in debt refunding savings and purchasing savings
-$4 million in additional state aid above the amount assumed in the original budget”
As we noted before, “Expected is a tax increase of $130 million per year, yet CPS officials claim that they always want to separate pension expenses from operating, but that is still under discussion.
All in all, Chicago property owners can expect to see an addition to the already $543 million in taxes, they currently pay. Not to mention, the phase in of the burgeoning contributions to police and firefighters pension fund, pegged at 10 percent, and those living in the North and South Suburbs can see a surge of 6.5 and 3.9 percent.
These are part of four-year increases set to expire in 2019, but more will continue when the ARC payments begin; these are formally known as Actuarially Required Contributions, which require payment from the city to the pension fund while the city sets aside enough money for future payments.”
Critical opinion is divided over whether or not the good outweighs the bad, that is the very high price tag that Illinois, and especially Chicago residents, who are now on the hook for even more, and that does not include the $75 million dollar tax break given to the wealthy, under the guise of scholarships, but that as most define it as a voucher program.
The hold harmless provision, while pleasing to liberals, has become anathema to conservatives, especially those those seething that Gov. Bruce Rauner signed what they are calling a bailout for CPS.
In a recent blog post the conservative Illinois Policy railed at it in a litany of abuse, and called for more school closings for what they say are underutilized buildings. Here is what they are saying:
“It’s easy to see how some of those bailout elements are playing out by looking at CPS’ annual enrollment. The new formula forces state taxpayers to pay for CPS’ inefficient and underutilized schools.
CPS is shrinking. Its student enrollment is projected to fall by another 8,000 this year, according to the Chicago Tribune. That’s on top of last year’s loss of nearly 11,000 students.
In fact, CPS’ student enrollment fell 13 percent between its last peak in 2002 and 2016 – a loss of over 57,000 students. And with the city’s overall population declining as well, there is no reason to believe the loss of students won’t continue.
A decline in the number of students should logically result in a smaller amount of total state aid for the district. But thanks to the state’s new education funding formula, CPS won’t lose a dime in state funding, no matter how many students it loses.
That’s because of the “hold harmless” rule in the new funding formula that says no district can ever get less money from the state than it did the year before.”
Others, especially the Chicago Teachers Union, feel that the new budget proposal from Emanuel takes away from the education of black and brown students, who are its majority, and adds further to the debacle of the 50 school closings by Emanuel, four years ago, in their neighborhoods.
CPS is shrinking. Its student enrollment is projected to fall by another 8,000 this year, according to the Chicago Tribune. That’s on top of last year’s loss of nearly 11,000 students.
In fact, CPS’ student enrollment fell 13 percent between its last peak in 2002 and 2016 – a loss of over 57,000 students. And with the city’s overall population declining as well, there is no reason to believe the loss of students won’t continue.
A decline in the number of students should logically result in a smaller amount of total state aid for the district. But thanks to the state’s new education funding formula, CPS won’t lose a dime in state funding, no matter how many students it loses.
That’s because of the “hold harmless” rule in the new funding formula that says no district can ever get less money from the state than it did the year before.”
Others, especially the Chicago Teachers Union, feel that the new budget proposal from Emanuel takes away from the education of black and brown students, who are its majority, and adds further to the debacle of the 50 school closings by Emanuel, four years ago, in their neighborhoods.
In her address to the Chicago Board of Education, President Karen Lewis said, “Rather than holding schools harmless, as the new state law does, the mayor’s and this board’s budgeting system punishes low-income schools and further attacks neighborhoods already subject to the wholesale elimination of affordable housing, widespread unemployment, and a surge in violent crime.”
“Mayor Emanuel’s budget address is built on fiction and spin instead of the hard facts. First, it’s fiction that Chicago’s public schools do better under this budget. In fact, Emanuel’s school budgets have cut hundreds of millions of dollars from neighborhood schools and angled to enact policies that short-change students—especially Black and Latino schools,” CTU noted in an earlier statement.
“The result has been extreme shortages of guidance counselors, school librarians, teacher assistants and school social workers at a time of record violence and ever-increasing demands on teachers and school staff. Emanuel’s school bosses, for example, worked secretly to rob special education students of support, deny them a federally guaranteed equal education and use bogus statistics as the basis for harsh attacks on our most vulnerable students,” said CTU Vice-President Jesse Sharkey”
Using corporate money, for education, and social services can be a risk, especially for Chicago, to address its huge pension deficits, and perhaps no where is this more clearly seen than in the decrease in funding for special education, that makes the improved bond ratings, and the new funding formula unhelpful.
CTU is referring to “A WBEZ investigation into that 2016 overhaul found officials relied on a set of guidelines — developed behind closed doors and initially kept secret — that resulted in limiting services for special education students, services like busing, one-on-one aides, and summer school. This overhaul was orchestrated by outside auditors with deep ties to CPS CEO Forrest Claypool. They had no expertise in special education.”
Lewis has said, “Even with all the school-level cuts embedded in this proposed budget, and with prior rounds of cuts remaining unaddressed, the budget still relies on more than $500 million in phantom revenue.
Even after accounting for additional funding CPS hopes to get from the state from the passage of SB1, their budget will still have a gaping hole. Duly noted. CTU can honestly state that “This fragile budget is also patched together by unsustainable short-term borrowing.”
Even after accounting for additional funding CPS hopes to get from the state from the passage of SB1, their budget will still have a gaping hole. Duly noted. CTU can honestly state that “This fragile budget is also patched together by unsustainable short-term borrowing.”
Here is a history of just that:
“In FY2015, CPS had a $700 million credit line, in FY 2016, CPS had a $1 billion credit line, In FY 2016, CPS spent $35 million just to pay the interest expense on maintaining their credit line, in FY 2017, CPS had a $1.5 billion credit line, in FY 2017, CPS spent $35 million just to pay the interest expense on maintaining its credit lines.”
“In FY2015, CPS had a $700 million credit line, in FY 2016, CPS had a $1 billion credit line, In FY 2016, CPS spent $35 million just to pay the interest expense on maintaining their credit line, in FY 2017, CPS had a $1.5 billion credit line, in FY 2017, CPS spent $35 million just to pay the interest expense on maintaining its credit lines.”
Looking at the present: “in FY 2018, CPS plans to rely on a $1.5 billion credit line,” and to make matters worse, “the district is already relying on short-term borrowing to open the school year, with $400 million in borrowing to cover delayed state grants from the last fiscal year.”
In addition, Lewis points out that “District high schools are again taking the brunt of the impact. High schools will lose nearly $15 million, or a 2.3 percent cut. District schools stand to lose a total of 1 percent, or more than $18 million in funding from their final FY2017 budgets, but this masks the steep declines that are happening across many schools.”
Especially hard hit are South Side schools, still recovering from “budget reductions of $6.8 million from their final FY 2017 budgets. The 10 high schools in those networks are losing $3.4 million overall, “ she continued.
Especially hard hit are South Side schools, still recovering from “budget reductions of $6.8 million from their final FY 2017 budgets. The 10 high schools in those networks are losing $3.4 million overall, “ she continued.
In light of the increased violence in these neighborhoods associated with economic impoverishment, and disinvestment, these reductions further disenfranchise those students that want a solid education to compete with their peers, for a better economic future.
As we’ve noted before, the new funding formula came with a very high price tag, and now a peek under the tent, shows a debilitating tax burden, that creates a hardship for specific neighborhoods, already under siege, both within and without.
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