Tuesday, September 11, 2012

Chicago Teachers Strike ... A Teachable Moment for We the People ... It's All About the BILLIONS of Dollars That ALL AMERICAN Taxpayers Will Be Asked to Pay

Although we're hearing otherwise, the Chicago teachers strike is all about money, and something about protecting underperforming teachers as well. We'll address the money issues herein.

Specifically, it's about taxes and how much taxes will need to be increased to satisfy the teachers union and other public sector unions. We'll begin with Chicago and go from there.

Chicago schools are running fiscal deficits. Nothing new there.

Chicago's Teaching Moment fills in the relevant details:

"On Sunday night, Chicago Teachers Union President Karen Lewis promised that her 25,000 members would walk the picket line until they have a "fair contract," and she called the battle an "education justice fight." Nice to know they're thinking of the kids at the start of the school year.

Middle-class parents and two-earner households scrambling for child care may not sympathize. According to the union's own figures, the average Chicago public school teacher makes $71,000 a year in salary, and that's before pensions and benefits generally worth $15,000 or more a year. Senior teachers make much more. That's not a bad deal compared to the median household income of $47,000 for a Chicago worker in the private economy.

Ditto working conditions. Union leaders have bellyached mightily about Mr. Emanuel's decision last year to extend the Chicago school day to seven hours from five hours and 45 minutes (the shortest among the country's 10 biggest cities). The longer hours are one reason the union says teachers need a 29% pay raise over two years. The average Chicago teacher works 1,039 instructional hours per year—roughly half the time logged by the average 40-hour-a-week working Joe.

When Mr. Emanuel came to office last year, the Chicago Public Schools were already facing a $700 million deficit. Over the next three fiscal years amid mounting salaries and pensions, the Chicago system will be $3 billion in the red. Mr. Emanuel's negotiators still offered a 16% pay raise over four years, but the union walked away.

Summing Up

Illinois is $83 billion underfunded with respect to its public pension sector liabilities. At the minimum, amortizing that unfunded debt would cost taxpayers and/or teachers at least $5 billion each year. Assuming Chicago represents ~50% of the Illinois total, that would represent an annual cost of at least $2.5 billion for taxpayers.

When we add the $2.5 billion to the acknowledged $700 million deficit for Chicago schools, we get $3.2 billion. By so doing, we can thereby easily see the forest and stop looking at the trees.

Now let's go from Chicago and Illinois to America as a whole.

In other words, what will be done about all these unfunded public sector pension liabilities which amount to an estimated $3 trillion throughout America? And on top of that, what is to be done at the national level about the estimated $100 trillion of similar unfunded entitlement promises for things like Social Security and Medicare?

Nobody's talking much about how to address these unfunded obligations in Chicago, at the state of Illinois level, or even in the presidential campaign.

Now let's return to Chicago.

So what happens in the negotiations with Chicago's teachers union? The city offers a 16% pay raise over four years, and the union turns it down. In one sense, I guess it doesn't make any difference. What's another 16% in compensation expense, or even $700 million or more in annual operating deficits, when we're willing to ignore the billions in unfunded liabilities?

This says a whole lot to We the People about a whole lots of things if we're willing to see the forest and not just the trees.

It's a wonderful opportunity for a nationwide "teachable moment" where we can reflect on what the Chicago dispute is telling us about the broader issues of entitlements, taxes, government and public sector unions. I hope we're all paying close attention.

To the extent the unions and their big spending government allies prevail, the taxes on our "middle class" will of necessity increase greatly over time, perhaps doubling or more,

That would mean less MOM for We the People to keep and more OPM for the government knows best gang and their union pals to spend.

And as our taxes increase, our nation's economic growth will struggle even more than it is already. And that will means fewer jobs, less pay and so forth for We the People, including public sector employees and Chicago's teachers.

So in the end, what's going on in Chicago is a big deal. A very big deal.

And not just for the city of Chicago, the Chicago teachers union, Chicago's school children and their teachers. It concerns the state of Illinois, other states and the country as a whole, too

We'll get more into that later today.

Thanks. Bob.

No comments:

Post a Comment