Mayor Rahm Emanuel on Wednesday played poker with his plan to tax downtown businesses and high net worth individuals to put the broke Chicago Public Schools on solid financial footing, despite pressure from the City Council’s Progressive Caucus.
Emanuel said he would wait until the Illinois General Assembly adjourns its spring session before identifying a local source of revenue to generate the $400 million to $600 million in annual revenue CPS desperately needs.
In other words, the mayor doesn’t want to show his hand too soon and let Springfield off the hook.
“If you think in the final seven days that I’m gonna tell Springfield everything I’m gonna do while they’re negotiating an education budget, you’ve got to get yourself another negotiator. That would be the dumbest thing you could do,” the mayor said.
“I’m supposed to … give them a road map of how to take them off their responsibility, which is in the [state] constitution, to fund education? The state of Illinois that is dead-last in funding education? The state of Illinois that is dead-last in actually paying their bills once they make their pledges? The state of Illinois that has one of the worst formulas [for] funding education for poor kids? I’m supposed to tell them what I’m gonna do so they don’t do their job? Not a chance.”
The mayor’s game of political poker did not work with the 11-member Progressive Caucus.
They demanded that top mayoral aides provide a “full accounting” of city finances to determine whether there is a viable alternative to Emanuel’s plan to authorize a $389 million “payday loan” to CPS secured by late block grants owed by the state.
The “order” introduced at Wednesday’s City Council meeting would compel Chief Financial Officer Carole Brown, retiring Budget Director Alex Holt and City Treasurer Kurt Summers to appear before aldermen to talk turkey about several pots of money that could potentially be used to reduce the loan, if not eliminate it.
Those sources are: the “rainy day fund” created by former Mayor Richard M. Daley with proceeds from the sale of the Chicago Skyway; “tax-increment-financing revenues and holdings”; “any and all investment returns identified by the treasurer’s office, including any recent windfall; and other “undedicated or expended revenue sources” under the city’s control.
“Taxpayers are being asked to underwrite a payday loan for the Emanuel administration as it borrows hundreds of millions at exorbitant interest rates to keep CPS afloat,” Ald. Scott Waguespack (32nd), chairman of the Progressive Caucus, was quoted as saying in a press release.
“If there are funds in these accounts that can be tapped, now is the time to tap them.”
Ald. Susan Sadlowski-Garza (10th), a longtime educator and one of the Chicago Teachers Union’s staunchest City Council supporters, noted that the Emanuel administration has known “for months or even years” that CPS was on the brink of bankruptcy.
“But instead of pursuing common sense, progressive revenue options, [the mayor] waited until our backs were against a wall to take action,” Garza was quoted as saying.
“If worse stewardship of our tax dollars is possible, it’s hard to imagine.”
The decision to add $389 million to the $950 mountain of short-term debt the broke school system already owes will allow CPS to make it through the school year and still make a $721 million payment to the teachers pension fund due on June 30.
The source of the borrowing has not yet been determined, nor has the interest rate. That must wait until the borrowing goes out to bid. The maximum interest rate allowed by state law is nine percent.
Brown has said the short-term loan will be limited to $389 million because the school system’s “lending partners” were willing to finance only about 85 percent of what the city is owed in state grants. The rest will come from savings generated by mid-year budget cuts, Brown said, with a hazy explanation that raised more questions than it answered.
Under fire for authorizing a “payday loan,” Emanuel has defended the plan as the least offensive of many options — all bad — that CPS has to solve a financial crisis caused by years of skipped pension payments made worse by Gov. Bruce Rauner’s veto of a bill that would have provided $215 million in state pension help already built into the CPS budget.
“You have a situation … created by the state of Illinois to create a maximum amount of pressure on the public schools, specifically Chicago,” Emanuel said.
“It’s a short-term solution to a short-term problem created consciously, woefully by the governor to create political pressure. That’s how we’re handling it. That’s the most appropriate way to deal with it.”