State board: CPS not in bad enough financial shape for takeover

Gov. Bruce Rauner’s bid to take over Chicago Public Schools appeared to suffer a fatal blow Friday as his own State Board of Education said CPS’ finances were bad, but not bad enough to legally justify a takeover.

That’s according to documents ISBE prepared and posted to its website in anticipation of a monthly board meeting on Wednesday, which noted that CPS failed to meet “any of the criteria” financially for a takeover.

“The district has not realized two consecutive years of negative operating fund balances, nor is it forecasted in this model,” ISBE wrote in the report.

The state’s board of education, headed and governed by Rauner appointees, launched a financial investigation over the winter into CPS’ finances. Through that probe, it determined that CPS didn’t meet criteria for the certification of financial distress necessary for ISBE to commandeer financial control.

CPS faces a $1.1 billion deficit in the new fiscal year starting July 1, and has been hoarding cash to make a massive pension payment on June 30. It passed last year’s budget with a $480 million gap and has been begging Springfield to help ever since, borrowing hundreds of millions at sky-high interest rates in the meantime. The district has also argued it is exempt from ISBE oversight and has been lobbying for a change to the state funding formula for schools.

CPS cut costs by $116 million through three unpaid furlough days and other budget cuts, ISBE noted. The district also plans to cut another $120 million in the new fiscal year starting July 1 but did not provide further detail, according to the report.

CPS “will need continued monitoring,” ISBE found, adding that Chicago school officials did not provide all the financial information it had sought.

“It’s clear in our analysis CPS has financial challenges and a spending problem,” said ISBE spokeswoman Laine Evans. “However, at this time they do not meet the criteria for certification of financial difficulty, as defined per statute.”

CPS spokeswoman Emily Bittner issued this statement Friday night:

“This decision demonstrates that Gov Rauner’s attempts to drive CPS into bankruptcy are misguided and wrong. While CPS faces a $1 billion budget deficit next year, it can be solved if we all work together, as we are committed to doing.”

The revelation about the board’s finding, first reported Friday afternoon by Reuters, comes at a time when the governor and Democratic legislators, long stuck at an impasse, are hashing out details of how to fund the schools.

In February, when the investigation was announced, Rauner said “The state’s going to be ready to come in and take action.”

Blaming CPS’ spending woes on its contracts with the Chicago Teachers Union, he continued, “I believe a state takeover is appropriate.”

He even began looking for a superintendent to replace CPS CEO Forrest Claypool.

Gubernatorial spokeswoman Catherine Kelly pointed on Friday to CPS’ ongoing “financial distress”, saying, “You don’t need an actuary or an accountant to know CPS has financial problems, otherwise the district wouldn’t be repeatedly asking the state for an additional half a billion dollars.”

She would not further comment on ISBE’s findings.

ISBE Report