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 Illinois lawmakers are on the verge
of forcing state taxpayers to pay for a bailout of Chicago Public Schools, which
wants hundreds of millions a year in new state dollars to pay for its teacher
pension and health care costs.
The bailout is part of a new education finance reform bill, Senate Bill 1, which
both the Illinois House of Representatives and Senate passed in May.
SB 1 requires Illinois to adopt a funding system that’s been proven ineffective
in other states. It also rewrites the state’s education funding formula and
calls for $3.5 billion-$6 billion more to be spent on education over the coming
years.
Those additional billions would have to come out of taxpayers’ pockets. That
means even higher taxes in addition to the $5 billion income tax hike that
lawmakers just approved in their no-reform 2018 budget.
Also embedded in the bill is a massive bailout of CPS. SB 1 provides a $215
million annual pension bailout and other carve-outs worth millions to CPS.
Gov. Bruce Rauner has said he will veto the bill when it arrives on his desk.
This bill would be unfair to taxpayers – who are facing a newly passed 32
percent income tax hike – by forcing them to pay for years of financial
mismanagement by CPS officials, while demanding no district reforms in return.
And it’s 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 much of that money never makes it to the classroom. Much of it is swallowed
by Illinois’ excessive number of school districts, costly administrators and
unaffordable pensions.
State taxpayers shouldn’t be forced to bail out Chicago’s mismanaged school
district. Instead, lawmakers should reform pensions and encourage district
consolidation to free state dollars from Illinois’ expensive, growing education
bureaucracy.
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.
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The bill gives CPS the pension
bailout Chicago officials have long demanded. SB 1 requires state taxpayers
to give the district $215 million a year for CPS’ “normal” pension and
health care costs – the additional benefits Chicago teachers earn annually –
every year going forward.By forcing state taxpayers to pay for CPS pensions,
lawmakers are bailing out CPS from the 10-year pension holiday it took
starting in the mid-1990s. 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.
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Under SB 1, CPS is partially
exempt from the new “evidence-based” formula to which every other district
is subject. It gets to keep the early childhood education portion of its
special block grant, which no other district receives. That will provide CPS
with millions more from the state than it would otherwise get.
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Under the bill, the district is
allowed to look “poorer” than it actually is when applying for education
state aid. CPS will get to subtract the cost of its old retirement debt from
its local revenues. That means the district will get more state aid than it
otherwise would. No other district will get to do that.
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Chicago will also benefit from
SB 1’s “hold harmless” provision. The “hold harmless” 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 (e.g., a drop in student attendance that
would have otherwise led to less state funding).
A majority of Chicago’s
special block grant funding will be folded into the hold harmless
provision. That means, even under the new formula, Chicago will
continue to receive hundreds of millions more from the state, which
no other district is entitled to.
Don’t bail out CPS – cut bureaucracy instead
Rauner is right to promise a veto of SB 1 when it arrives on his
desk.
It’s just the latest expensive formula promising to fix education.
But increasing the funds Illinois spends on education by billions is
not the solution to the education crisis.
Nor is a taxpayer bailout of CPS.
CPS doesn’t deserve special carve-outs or state payment of its
pension costs.
Instead, the state should stop paying for the pensions of all
Illinois school districts.
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 districts to grant higher pay, end-of-career
salary hikes, and perks that spike pensions, knowing the state will
pay the pension costs. School 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.
Those reforms can be done without demanding more from struggling
taxpayers, who pay the highest property taxes in the nation and who
are facing a $5 billion tax hike.
Lawmakers would do well to start by 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 demand taxpayers spend billions more
on education – 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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