The state of Illinois has been without a budget for the last six months, throwing state finances into chaos, adding to the budget deficit, and causing several departments to reduce services as they’re forced to work with skeleton staff.
Governor Bruce Rauner is standing firm, looking to reform the broken pension system, balance the budget, and pay off some state vendors who have been waiting for their money three years or more. The Democrats are balking at Rauner’s proposed cuts to the university system, to Medicaid and other public health programs, and what they perceive as an attack on public unions.
But in the midst of the wrangling, the city of Chicago and the Chicago public school system are in a fiscal crisis rarely seen in local government. The CPS is short a whopping $500 million and is looking to issue $850 million in worthless bonds to make up the shortfall (banks have downgraded CPS bonds to below junk level). Failing that, the CPS and the teachers’ union are demanding a state bailout with no future financial oversight to make sure it won’t happen again.
Governor Rauner announced a plan that would remove the school board, take control of the school system, and allow CPS to declare bankruptcy. The plan also calls for a fiscal oversight board for the city of Chicago.
Needless to say, Democrats, who control the legislature, pronounced the plan dead on arrival.
“Gov. Rauner hopes to use a crisis to impose his anti-middle class agenda,” Madigan said in a statement. “Republicans’ ultimate plans include allowing cities throughout the state to file for bankruptcy protection, which they admitted today would permit cities and school districts to end their contracts with teachers and workers — stripping thousands of their hard-earned retirement security and the middle-class living they have worked years to achieve.
“When Detroit was granted bankruptcy protection, retirement security was slashed for employees and retirees. That is not the path we want to follow in Illinois.”
As described by the GOP leaders, the legislation would allow the Rauner-appointed State Board of Education to remove the current Chicago Board of Education and create an independent authority to run CPS until it is determined the district is no longer in financial difficulty. The leaders said the change would add CPS to a state financial oversight law that it is exempted from but that applies to all other Illinois school districts.
Another measure would allow school districts like CPS to declare bankruptcy, which could allow it to void union contracts. Rep. Ron Sandack, R-Downers Grove, acknowledged that’s a possibility under the bankruptcy option.
“We didn’t come to this lightly, but the track record of Chicago and its public school system is abysmal,” said Senate Republican leader Christine Radogno of Lemont.
House Republican leader Jim Durkin of Western Springs said “the goal here is to provide the tools to right the ship.”
Cullerton outright dismissed the plan, saying it “is not going to happen.”
“It’s mean-spirited and evidence of their total lack of knowledge of the real problems facing Chicago Public Schools. The unfair treatment of pension systems by the state is the immediate cause of CPS’ financial problem,” Cullerton said in a statement. “That situation ought to be addressed rather than promoting this far-fetched notion that the state is somehow in the position to take over Chicago schools. This ridiculous idea only serves as a distraction from the state’s problems that these two state leaders should be focusing on.”
CPS is shelling out 10 times the interest rate that normal school districts pay, making a mid-year meltdown all but a certainty. Every dollar CPS spends on debt service cannot be spent on classrooms, teachers, books — education. Thousands of employees and teachers will be laid off in the next few weeks unless something is done.
Rauner is trying to leverage a bailout of CPS to wring concessions from Democrats on his government and fiscal reforms. It’s a fool’s dream. Democrats have been fighting these battles in Illinois for decades and they’ve won every time because the Republican governor ends up giving in.
But Rauner is made of sterner stuff. Although his approval ratings have tanked largely because the public disagrees with the education and healthcare reforms he has proposed, he appears to be unmoved. As further evidence of that, Rauner just broke off negotiations with AFSCME for a new contract. In the middle of a fiscal crisis, the union wants pay increases of 3.8% a year. Dan Proft, a prominent Illinois political analyst, refers to this as Rauner’s “Moment of Truth.”:
AFSCME has been unwilling to give on its demands for annual salary step increases of 3.8 percent in addition to annual general wage increases. The step increases alone represent a raise of more than seven times the rate of inflation in 2015. AFSCME has been unwilling to give on payment of overtime after 37.5 hours of work in a week.
The lowball estimate of the cost of what AFSCME demands is $1.6 billion. That’s $1.6 billion more from Illinois families, who pay the highest property taxes in the nation, who are already on the hook for $8.5 billion in unpaid state bills and $111 billion in unfunded state pension liabilities.
The fiscal reality of the state was not lost on unions that represent smaller groups of state workers. The Teamsters, representing nearly 5,000 state employees, agreed to a four-year general wage freeze, a four-year freeze on step increases and starting overtime compensation after 40 hours of work.
This is not an attack on public sector workers. This is not an attack on public sector unions. The Teamsters, and many rank-and-file AFSCME workers with whom I have spoken, have proved eminently reasonable.
This is a story of the funding arm of the Illinois Political Ruling Class that preaches fairness but enjoys being downright spoiled by those it has bought, paid for and sent to Springfield. AFSCME has always gotten what it has wanted — no matter the price. It likes it that way. And it’s not particularly keen on changing the cozy arrangement it’s had with both parties for generations.
With all sides digging in their heels, disaster seems unavoidable and imminent. In the end, don’t bet against the Democratic political establishment that has set the ground rules and had their way for decades.