Hard To Duplicate Illinois' 1980 CPS Rescue

Illinois lacks the leadership, the will and the resources to rescue CPS this year, like it did in 1980.

I still shiver when I remember January of 1980—covering the education beat for NBC 5 and freezing with the other reporters mustered outside the gates of the Governor’s Mansion in Springfield, while the power brokers, warm and cozy inside, negotiate the future of Chicago’s public schools.

CPS was in full-blown crisis mode—locked out of credit markets and unable to borrow $400 million to meet payroll and other expenses—after bond-rating agencies discovered school officials were regularly raiding debt service accounts to fund operations.  

That set off alarm bells in financial circles and prompted a credit freeze that left CPS virtually broke, with nowhere to turn.  

The result:  Layoffs, payless paydays, a teacher strike and an emergency intervention by then-Gov. Jim Thompson, who summoned school officials, bankers, union and legislative leaders, and City Hall operatives to a closed-door summit.   

The solution, announced several days later: Creation of the School Finance Authority—SFA—an oversight panel empowered to approve CPS budgets and union contracts.

The authority’s funding would come from a guaranteed portion of the CPS property tax levy, ensuring access to credit markets.

After lawmakers approved the plan, the SFA was able to borrow enough to ease the crisis and impose a reasonable level of fiscal discipline that lasted until 1995, when the state returned control of the schools to City Hall and authorized CPS to reduce pension contributions going forward so there’d be enough money for day-to-day operations.

Hindsight, which is 20-20, suggests that was a big mistake.

Today’s CPS crisis is much worse than 1980—a billion dollar shortfall caused by unchecked overspending on bureaucracy and union contracts, a gigantic pension bill finally coming due, and arguably insufficient state funding.

This time there’s apparently no viable rescue plan.

Governor Bruce Rauner suggested CPS consider bankruptcy, which City Hall rejected immediately, or accept a new version of a state takeover, which took a little longer to flame out.

A Springfield intervention actually made sense in 1980—Illinois was in decent shape financially—but today the state can’t pass a budget, pay its bills or solve its own pension crisis, and its credit rating, like CPS and the City of Chicago, is in the toilet.

That prompted one wag to compare the takeover flap to a child custody battle between two dysfunctional parents—pity the children.

Not surprisingly, Rauner’s plan died before the comedy riffs intensified. 

First, the attorney general’s office said Chicago schools are exempt from a state takeover.

Then, state education officials determined CPS doesn’t merit intervention yet because short-term fixes and borrowing, at exorbitant interest rates, can probably keep the system afloat until 2019.

Meanwhile, state funding is still uncertain as lawmakers and the governor battle over a legislative plan that gives CPS additional money and a Rauner budget that cuts the allocation. 

The Chicago Teachers Union is proposing new taxes but Springfield’s not listening.

So last week CPS threatened draconian cuts as high as 40 per cent in next year’s local school budgets.

It’s beyond ugly, and it makes me long, wistfully, for another Mansion summit, with a savvy governor summoning flexible stakeholders willing to compromise on a new plan that reflects the new realities.

June is nicer than January, so I’d even wait outside the gates again for the outcome.

But as I said before, that was then—when Illinois had the leadership, the will and the resources to confront big problems—and this is now, when we’re painfully short on all three.