Friday, March 22, 2013

Both Chicago and the State of Illinois are Broke ... The Problems Associated with Closing Chicago Schools and Funding Pensions for Teachers are Huge

Statement of the Problem

The people of Illinois have many financial issues to solve, but two of them are especially huge:

(1) The city of Chicago .... Chicago city officials have just announced plans to close 53, or 11% of its elementary schools and one high school as well. The same thing is occurring elsewhere in cities across America. Of course, teachers unions don't like the plan one little bit; and

(2) The state of Illinois ... Illinois has approximately $100 billion in unfunded pension benefit obligations, and the state's political officials are finally seeking ways to repair the nation's most unaffordable and unfunded public sector pension plan. And of course, teachers unions don't like what the state legislature is doing one little bit.

So on one hand, in Chicago we have kids and their parents, as well as taxpayers and teachers, being impacted by school closings. And on the other hand, throughout Illinois the state's taxpayers and teachers will necessarily be impacted as needed solutions are found to the $100 billion 'problem' of unfunded pension liabilities.

And meanwhile, what do the teachers unions want to be done? Well, they are demanding that the schools remain open and that the pension obligations be paid in full. And by the way, they want more teachers to be hired as well.

Solving the Problem Requires Collective Action

Here's my take on the leadership of the teachers unions. If they're not going to be part of the solution, and obviously they have no intention of doing do, then they're just another part of the problem and should be ignored by parents and teachers, the public, politicians of both political parties and taxpayers. That's just the plain truth of the matter.

But with respect to all this, the rubber is hitting the road all across America, and it's not going to be a pretty sight to see. But when there's no money, there's no money, and then it's time to change the way things have always been done. And that's where things sit today. There's no other choice. Can kicking is all over but the shouting, and one thing we can be sure of is that there will be lots of shouting before the solutions are found.

Discussion and Analysis

Chicago Moves to Close 11% of Elementary Schools in Fall tells about the proposed school closings:

"CHICAGO—School officials here said Thursday they plan to close 53 elementary schools and one high school, one of the largest mass school closings in the nation's history, as Mayor Rahm Emanuel seeks to fill a gaping budget hole. . . .

The move to close about 11% of the 472 elementary schools in the nation's third-largest school district this fall sparked anger from the teachers union, some elected aldermen, parents and neighborhood groups who vowed to fight the move. The Chicago Board of Education, appointed by Mr. Emanuel, a Democrat, must approve the final plan.
The threat of school closings has hung over the city for months and played a role in the two-week teacher strike last fall, as union and city leaders battled over contract rules for teachers displaced by potential closings. . . .

District officials said the closings would save the district $560 million over 10 years in capital costs and $43 million annually in operating costs.

Karen Lewis, the head of the Chicago Teachers Union, said Mr. Emanuel is sending the district into "utter chaos," and that closings are unnecessary, won't save money and would expose students to academic and safety concerns. The "school-closing policies put our students at real, not imagined, risk," she said. . . .

Philadelphia announced earlier this month plans to close 23 schools. Kansas City shut 40% of its 64 campuses in 2010, and Detroit closed about 14% of its schools in 2006. But several experts said Chicago's announcement might represent the largest number of schools closed at once. . . .

Larry Cuban, an education historian and professor emeritus at Stanford University, said . . . "The battle to close that many schools will be terrific," he said.

Chicago is not unaccustomed to school closings, but Thursday's decision is fraught with political danger for Mr. Emanuel. He already faces a burgeoning budget deficit, a much-publicized crime rate and tense relationships with the police union and the teachers union. Shutting down schools—no matter how low-performing—engenders anger, especially in minority communities, which will bear the brunt of closures. . . .

Mr. Emanuel said that closing schools is challenging, but that the decision to do so was "delayed for a decade, and it's our children and our city that have paid the price for inaction."

About 350,500 Chicago students are enrolled in district-run schools this school year, compared to 405,500 in the 2005-06 school year, according to the district's website. The number of students in charters ballooned from about 15,000 to nearly 53,000 in that same period. . . .

Chicago officials said closing under-used schools will help close next year's projected $1 billion deficit. They have spent the last few months in tense meetings around the city whittling the closings list down from 129.

Critics of the plan point to research that shows school closures rarely result in dramatic savings and often push students into similarly low-performing schools. They note that, in Chicago, some previous school closings were followed by a spike in violence as students were forced to cross gang boundaries to get to new campuses."


Now let's look at the progress being made on solving the state's pension funding shortfall. 

Illinois House approves major pension reform bill has this to say about the state's pension liabilities and a partial legislative solution to adequately fund them:

"SPRINGFIELD — After years of debating how to deal with the most underfunded public employee pension system in the nation, the Illinois House voted Thursday to sharply curb automatic cost-of-living increases to retirees that helped drive up the state's retirement costs.

The House passage, sending the bill to the Senate, marked the most significant action taken by lawmakers to slow the growth in taxpayer-funded pensions for retired state workers, lawmakers, university employees, and suburban and downstate teachers.

The 66-50 vote was a rare display of bipartisan cooperation between Republicans and ruling Democrats.

Rep. Elaine Nekritz, D-Northbrook, who sponsored the measure, said it was needed to demonstrate "shared sacrifice" after taxpayers saw their income taxes increase and recipients of state services were hit by funding cuts.

"This is another sacrifice that we all have to make in the spirit of shared sacrifice in order to right our state's fiscal ship and get us headed in the right direction," Nekritz said. "This will not solve the problem, but it will put us on a trajectory where we actually can solve the problem."

Dan Montgomery, president of the Illinois Federation of Teachers, called the vote "disastrous" because teachers, who generally don't get Social Security, would see a decrease in purchasing power. Montgomery also dismissed estimates of savings with the legislation because the bill is "blatantly unconstitutional" and will be thrown out in court, meaning the state will "save nothing."

The measure would affect current and future state retirees, except judges, and is estimated to save as much as $100 billion in taxpayer dollars over 30 years owed to the pension systems and to immediately cut the unfunded liability by as much as $20 billion. But its fate remains questionable in the Senate. . . .

Still, the move by the House may have marked the beginning of a political sea change in dealing with the state's $97 billion unfunded pension liability — an issue that many lawmakers have long avoided. The worsening pension problem has resulted in downgrades of the state's credit rating and forced more and more tax dollars each year to be earmarked for ever-increasing retirement costs at the expense of funding for education and other social services.

Gov. Pat Quinn issued a statement complimenting the House and saying the Senate's action indicated that there is support for major change in both chambers.

"There's much work to do, but I'm pleased to see progress being made," Quinn said. "I will continue working with the leaders and members of both houses and both parties to get comprehensive pension reform legislation on my desk so that I can sign it into law."

Under the House measure, the state would end one of its most generous retirement perks — an automatic 3 percent annual cost-of-living increase on pensions, which compounds every year.

Instead, the measure would limit a cost-of-living increase to the first $25,000 of a retiree's pension income — ending the compounding effect that had ballooned pension payments to workers in their later years. It also would require a worker to be retired for at least five years, or turn age 67, to be eligible for the smaller cost-of-living increase. . . .

Nekritz said the issue of curbing compounded cost-of-living increases was "the most difficult component part" of solving the pension mess."

Summing Up

The problem with our system of public education in America is a profoundly simple one. In most of our nation's big cities, the system is both of poor quality and is much too costly at the same time.

That said, the already huge problem is made even more difficult by the involvement of public sector unions who are neither able nor willing to come to grips with the reality of the situation, both educationally and financially.

But it's really as simple as 1-2-3: (1) Our kids and their parents deserve good schools, (2) their teachers deserve good pay and properly funded retirement benefits, and (3) we taxpayers deserve to get our money's worth.

 Nevertheless, all three of the above 'deserves' are currently in serious jeopardy in both Chicago and Illinois, as well as in many other American cities and states as well.

Accordingly, it's time for our elected officials and We the People to face the issues squarely and stop pandering to the leadership of the public sector unions.

And it's also time for all of us to come together and begin serious efforts to fix our overall system of public education and our many cities', states' and federal governments' other severe financial problems as well.

To repeat, the problems are simple but their solution will not be easy. Thus, let's get going.

That's my take.

Thanks. Bob.

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