Illinois Senate’s education finance bill bails out Chicago, fails at reform

John Klingner

Policy Analyst

John Klingner

Ted Dabrowski

Vice President of Policy

Ted Dabrowski
June 2, 2017

Illinois Senate’s education finance bill bails out Chicago, fails at reform

Senate Bill 1 provides a $215 million annual pension bailout and other carve-outs worth hundreds of millions of dollars to CPS.

The Illinois General Assembly has passed a new education finance reform bill, Senate Bill 1, which requires the state to adopt an “evidence-based” funding program. The bill rewrites the education funding formula and calls for billions more to be spent on education over the coming years.

The new formula, however, has proved ineffective in other states and is not a good deal for Illinoisans. But what’s sure to trigger the most interest in the bill is its massive bailout of Chicago Public Schools, or CPS. SB 1 provides a $215 million annual pension bailout and other carve-outs worth hundreds of millions of dollars more to CPS.

Gov. Bruce Rauner should reject the bill when it reaches his desk.

SB 1 is a distraction from the real reforms Illinois can enact to improve education. Illinois spends more per student than any other state in the Midwest, yet too much of that money never makes it to the classroom.

Lawmakers should reform pensions and encourage district consolidation to free state dollars from Illinois’ expensive, growing education bureaucracy, rather than make downstate taxpayers bail out a mismanaged Chicago school district.

How SB 1 bails out Chicago

SB 1 gives more special carve-outs and bailouts – worth hundreds of millions of dollars in state funding – to CPS. State lawmakers are forcing downstate taxpayers to bail out Chicago after more than 20 years of district mismanagement, skipped pension payments, excessive borrowing and unaffordable teacher contracts.

  • Under SB 1, CPS is partially exempt from the new “evidence based” formula to which every other district is subject. It gets to keep most elements of its special block grant, which no other district receives. That provides CPS with $250 million more from the state than it otherwise would get.
  • The bill also gives CPS the pension bailout Chicago officials have demanded. SB 1 requires the state to give the district $215 million a year for CPS’s annual pension and health care costs – the additional benefits Chicago teachers earn every year – every year going forward.
  • Even more, the bill bails out CPS from the 10-year pension holiday it took in the 2000s. (For nearly a decade, CPS failed to put any money in its pension plan, instead using money that should have gone to pensions primarily for salary increases.)
    Under the bill, the district is allowed to look “poorer” than it actually is when applying for education state aid. CPS does that by subtracting the cost of its legacy pension debt from its local revenues. That means the district will get more state aid than they otherwise would. No other district will get to do that.
  • Chicago will also benefit from SB 1’s “hold harmless” provision. “Hold harmless” ensures that a district cannot receive less state aid funds than it did the previous year. The provision protects a district’s state funding even if it experiences changes in demographics (e.g., a drop in student attendance that would have otherwise led to less state funding).

Don’t bail out CPS – cut bureaucracy instead

Rauner should apply a healthy dose of skepticism and reject the latest expensive formula promising to fix education. Increasing inputs – the funds Illinois spends on education annually – by billions is not the automatic solution to the education crisis.

Nor is a bailout of CPS.

CPS doesn’t deserve its own special block grant. And rather than pay CPS’ pensions, the state should stop paying for the pensions of any Illinois school district.

Teachers are not state employees. The responsibility for paying the employer’s pension contribution for teachers should be shifted back where it belongs – local school districts.

Current law encourages misbehavior. Districts dole out higher pay, end-of-career salary hikes, and perks that spike pensions, knowing the state will pay the pension costs.

This has to end. Districts will only moderate the perks they dole out when they are required to pay for them.

In addition, making sure more of the money Illinois already spends on education actually makes it to students can help improve education in Illinois.

Lawmakers can enact several common-sense reforms right now – highlighted in the Illinois Policy Institute’s report on education finance – that would ensure funding reaches Illinois students, all without demanding more from struggling taxpayers who already pay the highest property taxes in the nation.

Lawmakers would do well to start with freeing up the billions of education dollars consumed in pensions, the state’s nearly 900 school districts and the executive pay for those bureaucracies.

Until then, lawmakers shouldn’t hit up taxpayers for more – especially to bail out CPS.

Instead, they should focus on getting better outcomes with what Illinois, the biggest education spender in the Midwest, already puts into education.

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