Illinois Senate Overrides Rauner’s School Funding Veto; Will House Save New Equity Plan?

School finance in somebody else’s state seems like the ultimately irrelevant, boring, and “in-the-weeds” kind of topic. Except that what is happening in Illinois ought to interest us all because it is a microcosm of today’s ideologically driven, rancorous and dangerously divisive state politics.

In Illinois, discord between the General Assembly—both houses dominated by Democrats—and the far-right Republican Governor, Bruce Rauner, has left a statewide school funding crisis looming over the beginning of the school year. In July, the legislature overrode Rauner’s veto of the state budget, but then on August 1, Rauner vetoed part of the school funding distribution formula on which the budget was based. Gov. Rauner has the power in Illinois to veto or amend parts of a piece of legislation, and he used his “amendatory veto” on the school funding formula.  Rauner also showed his true political priorities right after the Democratic legislature overrode his budget veto when he fired key officials in the Governor’s office and replaced them with a staff from the Illinois Policy Institute, an ALEC-affiliated, far-right think tank.

But there are new developments this week. On Sunday, August 13, the Illinois Senate overrode the Governor’s school funding veto. The outcome in Illinois now depends on the House, which begins a special session today to try to resolve the crisis. It is expected that a veto-override will be harder to arrange in the Illinois House.

Here is some background on the school funding crisis threatening the wellbeing of children in Illinois as the 2017-18 school year begins. Until the first week of July, an ideological impasse between Rauner and the legislature had left the state without a budget since Rauner’s election two and a half years ago.  The funding crisis had undermined universities, health care, and social services along with public education. In June, after Rauner vetoed a state budget passed by both houses of the General Assembly, lawmakers finally came together on July 6 to override his veto. But the budget stipulated that school districts would not be able to access their state funds until the Governor approved an “evidence-based” school funding formula, passed by both houses of the legislature, but not yet sent to Rauner for his signature.

Then on August 1, Rauner vetoed that school funding formula. Illinois law permits Rauner to impose what the state of Illinois calls an “amendatory veto”—the right to veto part of a bill—in this case the part of the school funding plan that Governor Rauner called  “a bailout” for the Chicago Public Schools. (Here is an explanation of some of the complexities of Illinois law and the current school funding mess.”)  After Rauner vetoed parts of the school funding formula, the Chicago Tribune explained: “Rauner’s veto sets the stage for weeks—and potentially months—of uncertainty, kicking the issue back to Democrats who control the General Assembly. The senate now has 15 days to consider the veto, then the House gets another 15 days.”

This past Sunday, August 13, the Illinois Senate voted, 38-19, to override Governor Rauner’s amendatory veto of the school funding plan. Here is Tina Sfondeles for the Chicago Sun-Times: “The Illinois Senate on Sunday moved quickly to override Gov. Bruce Rauner’s amendatory veto of a school funding measure he’s declared a Chicago bailout…. The Illinois House has 15 days to act on an override…. State aid payments to school districts were to be sent out on Aug. 10—but the state needs an ‘evidence-based’ school funding formula approved before it can release those funds, per an agreement Democratic leaders inserted into a budget package. The vote came a day after the Illinois State Board of Education released an analysis of the veto that found Chicago Public Schools would receive $463 million less in funding this next school year under Rauner’s funding plan than the measure approved by the Democrat-controlled Illinois General Assembly.”

The Chicago Sun-Times recently reported that the city of Chicago, whose mayor controls the nation’s third largest public school district, has said it would deliver an additional $269 million to the Chicago Public Schools “from the city of Chicago government to balance its $5.79 billion operating budget for the coming year, school officials announced Friday… The $269 million in local funding would be in addition to state money that school officials are hoping will arrive through school-funding legislation that’s been the subject of yet another ongoing political battle in Springfield.”  The Chicago school district has been experiencing a funding crisis for years, closing schools, cutting staff, and borrowing until its bond rating has collapsed. Like other school districts across the state that serve concentrations of very poor children, Chicago has suffered for years from a statewide system that fails to recognize disparities across school districts in local taxing capacity and the enormous needs of school districts in poor areas.

In an interview for Alternet with Jennifer Berkshire, Dusty Rhodes, a reporter for NPR Illinois, explains the history of Illinois’ highly unequal school funding, something legislators tried to address in SB1, the bill that recently suffered Rauner’s amendatory veto: “Really what SB 1 is is a way of quantifying what kind of resources a school needs and coming up with what’s called an adequacy formula for each district.  Our current school funding formula just says,  ‘here’s how much it costs to educate a kid in Illinois: $6,119.’  Period. The current formula is also heavily dependent on property taxes, which means that areas with malls and fancy homes are able to spend considerably more on education. So we have a district that spends $32,000 a year per child and districts that spend $7,000.”

As if we couldn’t read the signs that the school funding fight in Illinois is part of the state-by-state, far-right assault on public services, last week we learned that Governor Rauner has been working with Cardinal Blasé Cupich, who leads Chicago’s Catholic Archdiocese, to push for the addition of tuition tax credits, a form of private school vouchers into the school funding mix. Rauner is implying perhaps he’ll compromise on the school formula if the Legislature will only insert private school vouchers into the school funding plan. The program Rauner proposes would start relatively small. The state would grant only $100 million in tuition-tax-credit vouchers the first year, but Rauner’s proposal would allow the private school voucher plan to grow rapidly year-by-year. The plan would make children in poor and middle class families eligible—children in families with income up to $113,775.  Tuition tax credit vouchers would significantly reduce the state’s general fund, of course—the pot of money from which public schools are funded.

Illinois exemplifies statewide politics as described by economist Gordon Lafer. State governments have become the focus of a fifty-state strategy by the far-right: “For three decades, beginning in the Reagan administration, authority over social and economic policy and programs has steadily moved from the federal to state governments. Unemployment insurance, welfare, food stamps, transportation, education and health care spending…. Fewer than one-quarter of adults are able to name their state senator or representative, and fewer than half even know which party is in the majority… For all practical purposes, these debates take place in a vacuum. Apart from labor unions and a handful of progressive activists, the corporate agenda on such topics encounters little public resistance at the state level because hardly anyone knows about or understands the issues.” (The One Percent Solution, p. 34)

Twenty-six states today are now dominated by far-right ideologues in both houses of the legislature and the governor’s mansion. Others are ideologically fractured.  Illinois, with a Democrat-dominated legislature and a far-right Republican governor, is the site of the kind of battle that is lacking in what are now 26 all-Red states, where, too often, taxes have been quietly slashed, school funding reduced, or vouchers, tuition tax credits or Education Savings Accounts passed without a fight. The far-right continues to transform state governments—through massive corporate lobbying and the influence of the American Legislative Exchange Council (ALEC) and its network of statewide think tanks like the Illinois Policy Institute.

Illinois is the perfect window through which we can watch the implications of this kind of fight.

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School Teachers and Union Unfairly Blamed for Financial Mess in Chicago Public Schools

Here are just some of the details of the financial morass in the Chicago Public Schools.

Back in 2003, David Vitale, a banker and then-CEO Arne Duncan’s recently appointed Chief Financial Officer, convinced the mayoral-appointed school board to begin using risky borrowing strategies.  The Chicago Tribune explains the results of a huge investigation it conducted in 2014: “Vitale, then the chief administrative officer at CPS, and other officials pushed forward with an extraordinary gamble.  From 2003 through 2007, the district issued $1 billion worth of auction-rate securities, nearly all of it paired with complex derivative contracts called interest-rate swaps, in a bid to lower borrowing costs.  No other school district in the country came close to CPS in relying so heavily on this exotic financial product. In fact, market data show the district issued more auction-rate bonds than most cities, more than the state of California… It involved issuing bonds at floating rates and entering into related interest rate swaps that could lessen the impact of cost fluctuations… By 2008 the district was carrying $1.8 billion in bonds that were subject to fluctuating rates, accounting for more than 40 percent of the district’s outstanding debt.”  Then, of course, came the 2008 financial collapse.  The Tribune updates the situation as of November 2014: “Over the life of the bonds, which won’t be fully paid off until 2034, the school district stands to spend $100 million making up the difference, according to the Tribune’s analysis. The extra costs add to the district’s crushing deb burden; last year, the school system’s debt payment was $338 million.”

Fast forward to 2016.  Facing crushing debt, the Chicago school district has unsuccessfully sought increased funding from Springfield, where Illinois’ new governor Bruce Rauner keeps threatening to take over Chicago Public Schools and force the district into bankruptcy, though Republican Rauner continues to be blocked by a super-majority Democratic legislature.

Last week, Chicago Public Schools borrowed again, selling $725 million in bonds to try to make it through this school year.  But with its bonds reduced by several rating agencies to junk status, the school district was forced to scale back its intended borrowing to $725 million from $875 million and forced to offer an 8.5 percent interest rate to buyers, rather than the 7.75 percent interest rate that would have been possible only weeks ago.  According to the Sun Times, Mayor Rahm Emanuel blames the diminished borrowing climate on Rauner’s threat to take over the system and force it into bankruptcy.

Chicago’s school district and its teachers’ union have been engaged in contract negotiations after the current contract expired last June.  Last week, the school district offered the teachers a contract, and the union rejected the offer.  The school district responded by blaming the teachers and announcing mid-year cuts of $100 million.  Later, Catalyst-Chicago explains, the district reduced the threatened cuts to $75 million.

Where will the cost reductions come from?  According to Catalyst, “CPS… announced that after 30 days have passed, the district would stop paying the so-called ‘pension pickup’ for teachers—a longstanding agreement in which CPS pays 7 percent of the 9 percent union members are required to pay into their pensions.  The district estimates this will save $65 million by the end of the school year.” According to Catalyst-Chicago, the district will also reduce immediately the funds awarded to schools on a per-student basis by 4.3 percent and also eliminate some programs funded through the federal Title I program. While the district has already begun cutting central office administrators and while the mayor and Forrest Claypool, the current CEO of Chicago Public Schools, claim they will protect cuts that will directly affect the classroom, it is clear that cuts will affect each school.

But the reason for the union’s rejection of the recent contract offer is more complicated.  Sarah Karp, long a highly regarded reporter at Catalyst-Chicago and now reporting for Chicago’s Better Government Association, explains: “(T)teachers were offered a pay raise, but there was a big catch: CPS educators would essentially be paying for the salary increase by sacrificing the most experienced members of their teaching force. An early-retirement buyout program was the linchpin of the Board of Education’s since-rejected offer—and it’s one of the main reasons why Chicago Teachers Union representatives voted down the deal, according to union officials. The board was offering $1,500 per year of service to teachers of retirement age and $750 to support staff to leave…. If at least 1,500 teachers and 700 other staffers took advantage of the buyout offer, the contract would stand…. But if not enough employees signed up for early retirement, then CPS could reopen the contract….” Karp interviews Robert Bruno, a professor of labor relations at the University of Illinois, who defends the union’s rejection of the contract because “taking a deal that would allow the district to crack back open the contract would be a huge risk for the union.”

There is also the matter of which teachers would be affected by such a buyout and the implications of their distribution across particular neighborhoods and schools. Karp quotes CTU President Karen Lewis: “No. 1 it would have pushed out 2,200 of our seasoned, experienced educators, disproportionately impacting African American and Latino educators.” Karp elaborates:  “Fifty-four percent of teachers with more than 20 years experience are black or Latino, whereas only 22 percent of new teachers are…. New teachers make about $48,000 a year, while those with 20 years or more experience make an average of $88,000.”  Karp reports that, according to Jim Cavallero, a special education teacher at Chicago Academy High School, a majority of the teachers qualifying for the buy-out work in schools on Chicago’s south and west sides in schools that serve black and Latino students.  Cavallero explains: “It would be problematic if these schools—many with poor students—were left with mostly new and inexperienced teachers. ‘Schools need a balance of experienced teachers and new ones… We cannot allow these teachers to be pushed out when they are needed most.'”

Although Chicago Public Schools blames the union for its members’ refusal to accept the proffered contract and failure to accept shared sacrifice, teachers view the financial crisis very differently.  Chicago Teachers Union Vice President Jesse Sharkey is reported by Progress Illinois to have “said the issue boils down to the school district needing new revenue. ‘Unpaid debt on pensions and unpaid debt on bondholders and charter schools are the three drivers’ of the district’s financial issues…  You’re not gonna solve that by cutting frontline educators.'”  Last week the teachers union launched a formal protest of banks’ taking advantage of the school district during the years’ of toxic interest rate swaps by closing the Chicago Teachers Union’s account at Bank of America and moving $726,000 to Amalgamated Bank, which never peddled risky financing practices to the school district in the years leading up to the 2008 collapse.

The Chicago Teachers Union has voted to strike if necessary, though teachers explain that a strike is definitely not something they want.  There is a financial crisis in the Chicago Public Schools, and also a lot of politics and a lot of blame.  What is clear is that there is no easy solution and that as usual in such situations, the teachers and the children will continue to try to conduct school in conditions that are far from ideal.