PolitiFact fumbles fact-check: Education funding proposal is a CPS bailout

Ted Dabrowski

Vice President of Policy

Ted Dabrowski

John Klingner

Policy Analyst

John Klingner
August 2, 2017

PolitiFact fumbles fact-check: Education funding proposal is a CPS bailout

Analysis from PolitiFact Illinois and the Better Government Association misreads or ignores Chicago Public Schools bailout provisions within Senate Bill 1.

PolitiFact Illinois and the Better Government Association, or BGA, have botched their fact-checking of Senate Bill 1, a bill that bails out Chicago Public Schools as part of a rewrite of Illinois’ education funding formula.

The groups reject the idea that SB 1 is a CPS bailout, rating the claim “false,” even though the bill is laden with clauses and funding that specifically benefit the school district. Under SB 1, CPS receives funding that no other district in the state gets.

SB 1 has garnered controversy as many, including Gov. Bruce Rauner, have said the bailout is unfair to all the other districts in the state. In fact, Rauner issued an amendatory veto of SB 1 on Aug. 1, stripping the Chicago bailout provisions out of SB 1.

Politifact and BGA have simply misread the original bill or have ignored very clear language that favors CPS. Either way, their fact-checking is flawed.

It’s a bailout 

SB 1 prioritizes CPS in several ways. Taken together, these special items constitute a bailout of the mismanaged district:

  • CPS gets to keep $200 million in block grant funding
     
    The funding formula grandfathers in $200 million in funding for the unique annual “block grant” CPS has received for 20 years – a grant no other district in the state gets. CPS will continue to receive that extra $200 million in funding every year going forward. That amount is locked into the district’s base funding amount under the new formula and protected by the bill’s “hold harmless” provision.
  • CPS can use its pension debt to appear poorer, entitling the district to even more aid
     
    SB 1 allows CPS to appear poorer than it actually is when applying for state aid, granting the district even more funding. No other district gets to do that.Currently, CPS contributes about $500 million annually to pay down its unfunded pension liability. The new funding formula allows CPS to deduct that $500 million from its local resources for education when it applies for state aid. That makes CPS look poorer and helps ensure the district gets more money from the state than it should.

CPS also will disproportionately benefit from these additional elements in SB 1:

  • CPS can continue to hide property wealth, entitling it to more state dollars
     
    SB 1 allows Chicago to benefit from a set of rules that allow select school districts to undervalue their property wealth so they look poorer than they actually are.
     
    Districts whose revenues are affected by local property tax caps (Property Tax Extension Limitation Law, or PTELL) and special economic zones (tax increment financing, or TIF) are able to underreport their available property wealth when applying for state aid under the new SB 1 formula, just as they can under the current formula.
     
    Chicago has a large percentage of the state’s PTELL- and TIF-affected property, so it benefits from this provision disproportionately. Again, this makes CPS look poorer and helps ensure the district gets more money from the state than it should.
  • CPS’ state funding will be locked in despite its falling enrollment
     
    Chicago will also be a major beneficiary of SB 1’s “hold harmless” provision. This provision ensures that a district cannot receive less in state aid funds than it did the previous year. The provision protects a district’s state funding even if it experiences changes in demographics, such as a drop in student attendance that would have otherwise led to less state funding.
     
    While many districts may be experiencing student population loss, CPS is certainly in a major decline. The district has lost more than 40,000 students since its peak in 2002. In 2016, the Chicago Tribune reported the district had lost 11,000 students from the previous year.
     
    As Chicago’s enrollment continues to drop, the “hold harmless” provision will ensure the district gets more money than its enrollment says it should.

In addition to all of the above, the state will begin paying CPS’ normal pension costs going forward. SB 1 requires state taxpayers to give the district at least $215 million for CPS’ “normal” pension and health care costs – the additional benefits Chicago teachers earn annually – every year going forward. This puts the district on par with other districts around the state.

On the whole, SB 1 favors CPS over every other district in the state. That’s what makes it a bailout. 

What PolitiFact and BGA get wrong

In their piece, PolitiFact and BGA ignore most of the carveouts CPS gets under SB 1. They don’t mention CPS’ ability to deduct its pension debt from its local resources. Or its ability to continue to underreport its property wealth through PTELL and TIF.

And what they did highlight, they got wrong.

PolitiFact and BGA claim the block grant – the extra $200 million a year the state grants Chicago – will be discontinued after 2018.

But that’s not true.

Under SB 1, CPS’ $200 million in extra block grant funding is folded into the base funding guaranteed to the district under the new formula. That base guarantee is protected by the bill’s “hold harmless” provision, meaning the state can never give CPS less than that amount.

So not only will CPS get at least $215 million in annual pension dollars from the state every year going forward, but it will also continue to receive the $200 million in “block grant” funds that no other district receives as well.

SB 1 gives CPS a bailout it doesn’t deserve

CPS’ financial woes are of its own making. Chicago officials have spent 20 years mismanaging the district, skipping pension payments, borrowing excessively and agreeing to unaffordable teacher contracts.

Despite 20 years of failure, CPS has yet to learn from its mistakes. District officials still refuse to consider enacting any structural or financial reforms.

And why should they? Illinois lawmakers have a long history of bailing out CPS at the expense of other districts. SB 1 is just the latest example. State lawmakers are determined to bail out CPS with state taxpayer dollars.

PolitiFact and BGA should get their facts straight. SB 1 is a CPS bailout.

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