CHICAGO – Over a billion dollars of taxpayer money will be diverted from Chicago’s school children to high interest loan payments to bankers over the next three decades as the result of an under-the-radar visit by Mayor Rahm Emanuel to Wall street where he quietly negotiated a bond deal.
Thousands of enraged teachers and their supporters deposited their anger at the banks lining LaSalle Street, this city’s financial district, last week during an evening march called by the Chicago Teachers Union to denounce plans to solve the district’s budget crisis by big cuts in their take home pay. More than a dozen protesters were arrested after sitting down in the lobby of Bank of America.
“Becoming a teacher and having the privilege of working in my own classroom with children eager to learn – that was my life’s dream,” said Rob Heise, 39, as he lowered his bullhorn. Heise, a substitute teacher in Chicago’s public schools, was under the Quincy St. station on the elevated Loop train directing his colleagues to the main march as they arrived by car, train and bus in this city’s banking center.
“That dream is being shattered now,” he said, “by a mayor and by a system that puts lucrative deals for banks ahead of our children.”
The role of LaSalle Street and Wall Street financial institutions in creating and sustaining the budget crisis the school system faces has been hushed up by both Illinois Republican Governor Bruce Rauner and Chicago Democratic Mayor Rahm Emanuel.
Emanuel’s administration has focused on wage and pension cuts as a solution to the half billion dollar budget shortfall, while Rauner, after denying aid to the school children with whose wellbeing he is entrusted, shocked Chicagoans by calling for a state take over of the school system.
This didn’t sit too well with Chicago parents, contemplating the poisoning of Flint’s children by a similar Republican governor’s takeover. “Will Rauner connect the schools’ water fountains to the Chicago Sanitary and Ship Canal to save a buck?” asked an anxious dad at the LaSalle Street protest.
“State takeovers planned by Rauner are not in the interest of the children,” said Bea Johnson, another teacher who had taken to the streets after she got off work that day. “I’ve been teaching 22 years and this is about the worse I’ve seen. I love the kids, that’s why I’m doing this. The Chicago public schools are the reason I was able to start out on a fabulous career as a teacher. I want the kids to have the same opportunity.”
Rauner’s plan for a state takeover actually made Mayor Emanuel’s deal with the banks worse than it originally was.
The rate for the $750 million in bonds the school district had to sell to meet its obligations ballooned to 8.5 per cent as the district’s credit rating dropped when the governor’s threat hit the headlines. The bonds, which have a 28-year life, will assign $43 million every year from the district’s budget to interest payments to the financiers, enough to buy a laptop every year for every one of Chicago’s school kids, or to put 1,000 laid off teachers back in the classroom.
Broke on purpose
“The problem is you have bankers in charge of the school system,” said Jackson Potter, staff co-ordinator of the Chicago Teachers Union. “This puts the system at great peril of making decisions to benefit their Wall Street pals at the expense of school children.” Chicago’s school board, which is appointed by the mayor, is chaired by a retired ComEd CEO and includes a retired BMO Harris Bank CEO, but no CPS parents or teachers union members.
Potter stated that without progressive taxation structures, public institutions have become increasingly reliant on what he called “predatory lending.” He pointed to “toxic swaps” finance deals exposed last year by the Chicago Tribune that lost the district half a billion dollars.
The previous vulturous Wall Street deals are the reason the district has to borrow now to cover its obligations, he said. Potter condemned the relationship that has developed between the school district and predatory financiers that has created a vicious circle of being addicted to debt.
While the mayor and governor point to teacher pensions as the cause of budget crisis, buried on page 17 of the District’s Fiscal Year 2015 budget is the fact that even before the current bond issue the District has been paying more than half a billion dollars a year, nine percent of its $5 ½ billion budget, on debt service.
This “Wall Street tax” equals the total core instructional budget for all the district’s high schools. The debt service number is also equal to the entire bill for teachers’ pensions. The solitary mention in the budget document of the cost of debt contrasts sharply with the highlighting teacher pension costs repeatedly on pages 1, 4, 5, 7, 8, 9, and 15 which support the mayor’s and governor’s agendas.
Rauner was elected last year on a program of slashing public employee pensions and smashing their unions. The New York Times reported in November that a group of 10 multi-millionaires were the major funders of his campaign. The richest man in Illinois, hedge-funder founder Kenneth G. Griffin, invested over $13 million. This sum eclipsed the total contributions of 244 of the state’s unions who together represent the interests of millions of the states workers.
Who are the loan sharks?
The buying and selling of public bonds is not a transparent process and it is entirely possible that Hedgefund Hog Griffen will make back more than his entire investment in Rauner’s candidacy if he partakes of the juicy high interest loan deal. This reporter, who is collecting .01 percent interest on her modest savings account, tried to find out how to get in on the 8.5 percent interest deal but was informed by a New York broker that the investment was only available in units of $100,000 or more. “People who buy these are not saving for their kids’ education,” he commented. “They are for hedge funds, wealthy individuals, traders and speculators.”
Photo: Earchiel Johnson/PW