The backdoor CPS bailout

Chicago Public Schools cannot erase its $1 billion budget deficit alone – it’s going to need some help. Chicago Mayor Rahm Emanuel and the school board know the situation is dire. This is why they have proposed closing 120 schools next year, a move that could save $500,000 to $800,000 per school closed. But, to...

Chicago Public Schools cannot erase its $1 billion budget deficit alone – it’s going to need some help.

Chicago Mayor Rahm Emanuel and the school board know the situation is dire. This is why they have proposed closing 120 schools next year, a move that could save $500,000 to $800,000 per school closed. But, to accomplish this, officials are going to have to overcome some tough obstacles – namely, an energetic teachers’ union that wants a moratorium on school closings.

Chicago voters also overwhelmingly approved a nonbinding ballot measure on Election Day that would transfer Chicago teachers’ pensions to the state. It is unlikely to go anywhere, however, as Illinois residents outside of the city are unwilling to take on the burden of additional pensions.

The sad fact is that even in an ideal world, where all of these cost-cutting measures were easily passed and implemented, CPS would still not generate enough revenue to make up for  the four-year pension contribution holiday that it took to cover its’ operating expenses.

So, what will CPS do to cover the rest of its costs? They’re likely to look to Springfield for help.

It’s doubtful that the help will come in the form of a bailout – such a move would draw the ire of residents across the state. Instead, it is likely to come through changes in the state’s complex and convoluted General State Aid for Education (GSA) budget.

The $4.8 billion GSA is the largest piece of education funding from the state. Its primary objective is to make sure districts have enough resources to provide a sound education for their students.

Unfortunately, understanding the formulas that the state uses to calculate how much funding districts should receive requires classes in advanced mathematics.

This lack of transparency makes it ripe for manipulation.

In fact, a forthcoming policy brief from the Illinois Policy Institute shows that the GSA has already been used to benefit certain districts during the past 10 years. It used to be that money went to the districts with the most demonstrated need. Now the money moves in ways that favor politics rather than children.

No one has benefited more from those changes than Chicago.

Because the city has a cap on property taxes, the state’s GSA funding formula assumes that Chicago has less property value within its borders than it actually does. This year, the state assumed Chicago had $51.9 billion worth of property; 38 percent less than it actually has. That means that Chicago receives hundreds of millions of dollars more because of the changes in the formula.

Chicago’s total property value is also driven down by its use of tax-increment financing (TIF) districts – an economic development tool that was supposed to help blighted areas grow, but is now being used to pay off big businesses that come to Chicago.

According to a Civic Federation report, dissolving all TIFs in 2004 would have brought in an additional $41.5 million in property tax revenue to the city in that year alone.

Essentially, taxpayers across the state have been paying for Chicago’s use of TIFs and the cap that has been placed on how much revenue it can collect from property taxes.

Chicago’s high low-income population also allows it to receive more money than most other districts. Poverty Grants are given to districts based on the number and concentration of low-income children in the community. Cities like Winnetka, with a small low-income population, receive a small grant per student –$355. Yet, if the low-income count grows, they receive more once they reach certain thresholds.

Because 91 percent of students in the CPS system are considered low-income, Chicago receives $2,994.25 per pupil. This entitles them to $796 million from the state – almost 50 percent of total Poverty Grant funding.

It is clear that there needs to be less convoluted and more transparent way of funding education in Illinois. The Illinois State Board of Education (ISBE) even admits drastic reform is needed.

We need to embrace reforms that ensure that education dollars follow students rather than going to districts with strong political connections. Not only is this the right thing to do morally, it has already generated positive results in other states and it will ensure that schools run more efficiently and effectively in the future.