The Fiscal Insanity In Chicago Continues…

Authored by Ted Dabrowski and John Klingner via,

The fiscal insanity at Chicago Public Schools continues.

Officials there plan to hire another 2,000 part-time and full-time workers this coming school year, never mind the district has racked up the biggest pension debt of any school district in the country. Moody’s already puts CPS’ pension shortfall at $22.8 billion, more than any other school district in the country. More workers mean more salaries and even more pension debts. 

To make matters more insane, those same officials warn the school district could lose up to 100,000 students this coming school year – about 29% of the district total – as a result of the multi-pronged crises facing Chicago.

Those student losses would be on top of the 95,000 the district already lost between 2000 and 2021.

It’s madness any way you slice the numbers, making it clear Mayor Lori Lightfoot and city leaders either don’t understand or don’t care about Chicago’s finances.

March 2019 Moody’s report laid out for Lightfoot just what a mess she was inheriting when she took over as Mayor. That report showed City of Chicago debts consumed more of city revenues than any other major city in the country, by far. About 32% of the city’s budget was consumed by fixed costs including debt repayments, retiree health obligations and pension contributions – and 57 percent when Moody’s added in the additional amounts Chicago should have been contributing to pensions, called the tread water gap, simply to keep its debts from getting larger that year.

And the city has long been drowning in debts, with CPS’ finances similarly dire. It’s why the city’s credit got junk rated in 2015, making Chicago the only major city in the country besides Detroit to be rated junk. It’s also why CPS got a triple-notch downgrade to land in junk territory in 2015

Those kinds of debts and credit ratings should have had the mayor and any one in charge of finances quaking in their boots, but not here in Chicago.

Instead, hiring new staff in the face of falling enrollment was part of Lightfoot and CPS’ game plan even before the pandemic hit. When Lightfoot negotiated the new teachers contract with the Chicago’s Teachers Union in 2019, the district promised to pay for hundreds of new employees of all kinds over the following five years. Lightfoot called it the “most generous offer in CPS history.” For details on the contract, click here.

Today, Chicago officials are even more confident in hiring and spending since the city and CPS are both being bathed with billions in federal cash. 

A second factor contributing to the spree is Moody’s recent one-notch upgrade of CPS. Somebody forgot to tell district officials that the rating barely improved from “highly speculative” to “speculative” – still three notches deep into junk territory. Even with the upgrade, CPS only caught up with the rating of the Detroit Public Schools.

What’s fascinating about the hiring move is just how blatantly opposed to common sense it all is.

Even before the virus invaded Chicago, the school district was bleeding children. In 2000, the district had 435,000 students. By 2021, the total had fallen to 340,000. Now the district is warning of another 100,000 loss in students as a result of COVID and other factors.

That potential loss in enrollment hasn’t slowed the hiring train at CPS, however. The district’s $9.3 billion budget adds the 2,000 new workers, half of which will be supervisors for classrooms for educators who are teaching remotely. For sure, many of the new employees are supposed to be part-time, but their hiring brings to mind the Milton Friedman quote: “Nothing is so permanent as a temporary government program.” 

CPS’ total staffing will grow to over 41,700 employees with those new hires. The last time CPS had so many employees was in 2010 – back when the district had 70,000 more students than it had last school year.

CPS was already headed towards fiscal disaster before the pandemic. The massive windfall the district got from the feds has delayed the reckoning a bit, but the question remains, what happens when the federal spigot runs dry?

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Read more about Chicago and CPS’ financial crises: