Chicago Public Schools budget shortfall: a manufactured crisis

Chicago Public Schools budget shortfall: a manufactured crisis

What’s worse is that the city has the funds to shore up its budget, but that money is tied up in a slush fund called a TIF. The value? $1.35 billion.

Illinois Policy April 2017

Chicago Public Schools is faced with the possibility of closing school early while Chicago sits on massive property wealth.

With a current budget gap of $215 million, Chicago Public Schools, or CPS, has threatened to close three weeks early if it doesn’t get a cash infusion soon, leaving Chicago students and their families uncertain about when school will end this year.

CPS finances are a mess and they have been for years. But rather than enact the reforms needed to get the district back on track, Mayor Rahm Emanuel and CPS CEO Forrest Claypool are looking for a bailout.

What’s worse is that the city has the funds to shore up its budget, but that money is tied up in a slush fund. The value? $1.35 billion.

That money comes from hidden property wealth, which is siphoned into a political slush fund via a mechanism called tax increment financing, or TIF. TIF districts are special economic zones that were created to help cities and towns improve “blighted” neighborhoods.

City and village governments with TIFs use a portion of the property tax revenues generated in the special economic zone to give tax incentives to private developers located in these districts.

But the establishment of a TIF drains the amount of property tax revenue that a school district has available for education.

According to the Cook County Clerk, Chicago TIF districts ended 2015 with $461 million collected in new revenues. The city also has over $1 billion in TIF accounts that has been earmarked for “future redevelopment.” At a minimum, the annual revenues from TIF would cover the annual taxpayer cost of Chicago teacher pensions, and would defray the costs of retiree health care for the Chicago Teachers Pension Fund, which were approximately $202 million.

However, Mayor Emanuel and the aldermen don’t want to give up their slush fund. Ald. Walter Burnett, 27th Ward, noted: “I work hard in my community to build my TIF up, to make things happen in my ward … and now that I’ve built it up, I’ve got to give it to everybody else? It’s just not fair.”

Ald. Jason Ervin, 28th Ward, has claimed, “Robbing Peter to pay Paul is not the solution.” Indeed, taking money from one source to benefit another is not the solution to budget crises. Yet, that is what TIF does.

On April 28, Judge Franklin Ulyses Valderrama will issue a ruling on a lawsuit that contends there is racial discrimination in the state educational funding system. CPS is counting on a favorable ruling to balance their budget. However, the city needs to stop crying poor to the state while playing a financial shell game with taxpayer dollars. The money is available to help CPS. The City Council needs to step up to eliminate the slush fund that has helped cause this crisis by ensuring the future of developers over the future of students. Until it does, CPS will continue to face yearly shortfalls and budget crises that the state can’t afford.

TAGS: Chicago, CPS: Chicago Public Schools, CTPF: Chicago Teachers Pension Fund, education, Forrest Claypool, Rahm Emanuel, TIF


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