State rep. suggests Chicago Public Schools should declare bankruptcy

Monday, June 8, 2015

State rep suggests CPS declare bankruptcy

Chicago Public Schools faces a deficit of over $1 billion and a state representative is proposing bankruptcy as a solution.

CHICAGO (WLS) -- Chicago Public Schools, the third-largest school district in the nation, faces a deficit of more than one billion dollars leaving many to wonder how a big pension bill will be paid at the end of June.

Within a few days of the end of the spring semester next week, decades of CPS fiscal problems will come to a head. The school district, which has no reserve fund, faces a projected $1.1 billion deficit, including a $634 million pension payment due by June 30. And CPS is desperate for new revenue.

"This knee jerk reaction to always say 'let's just raise taxes," said Republican State Rep Ron Sandak, of Downers Grove. "That's where a bankruptcy can actually be helpful."

Sandack has introduced a bill in Springfield to allow Illinois' in-over-their-heads local governments and school districts to file Chapter Nine bankruptcy petitions. If granted, a federal court could either erase or restructure their debts including pension obligations and get taxpayers off the hook.

"We can't tax our way out of this problem," said Sandak. "We need additional, broader relief."

But some union leaders say the Sandack bill is a backdoor attack on public worker contracts and pensions. Chicago Teachers Union Vice President Jesse Sharkey says he believes a federal bankruptcy judge would respect what the State Supreme Court has ruled on pensions.

"Financial crisis is no reason to go back on what basically was a promise made to people who taught the last generation of school children," Sharkey said.

But Sandack believes otherwise.

"Some restructuring of that obligation I believe can occur at the federal level under a Chapter Nine construct," Sandack said.

Bankruptcy could be embarrassment for elected officials like Chicago mayor Rahm Emanuel. Despite having no answer for CPS' fiscal woes, the mayor said a Chapter Nine filing, if allowed, would be a distraction:

"We should not allow the finances to undermine all the educational progress our principals and teachers are making," Emanuel said. "Because what you don't want to do is put the system into a process that could actually distract away from the educational things."

Supporters say the bankruptcy bill could also help suburban and downstate towns overwhelmed by their pension obligations. Right now, the bill is stalled in a House committee.