STUMP » Articles » Illinois Weekend Watch: Round and Round While We Wait for a Strike » 11 March 2016, 16:06

Let’s do a quick round up for a Friday.

Thanks to my referrers for the past week:

• Illinois Policy Institute and Ted Dabrowski
• Pension Tsunami and Jack Dean
• Wirepoints and Mark Glennon
• The Other McCain and wombat-socho
• Whoever it was who posted the 80% funding watch to facebook. I can’t figure out who did it via my logs… sorry.
• Someone also posted it on LinkedIn. It wasn’t me.

Hey to whoever it is in Skokie reading this blog at the library! Howdy! (no, I don’t do IP mining. I just noticed it while scrolling through logs.)

By the way, if you’re curious what I do in my day job, you can check out my feature article in The Actuary, in which I write about the effect of the low interest rate environment on life insurers. If you’re interested in my night job, check out my UConn pages. And if you’re interested in my every-three-months-or-so job, check out my spreadsheet webcasts.

=Phew=

TEACHERS UNION PRESIDENT: NOT OUR FAULT

I will let the union representative have his say in excerpt first.

Attacks on public worker unions were misleading:

Perhaps the favorite attack on public sector unions is that union members retire with “lavish compensation packages,” as the writers describe them. In reality, these so-called “lavish compensation packages” equate to an average of $32,000 a year, with many Illinois retirees receiving much less than this amount. This comes after years of workers contributing 8 percent to 10 percent of every paycheck toward their retirement fund. It is also important to note that in Illinois, public sector employees pay into Social Security, however are unable to claim it upon retirement. Most Americans would consider these compensation packages modest.

Additionally, people like these think-tank authors like to claim pension costs are swamping local budgets, even leading to municipal bankruptcies. While everyone acknowledges the pension crisis is a dire issue, it is hardly fair to say it is the fault of public sector employees. Rather, the politicians who for decades shorted or skipped the employer contributions required by law are at fault. Pension holidays are what caused the nation’s largest pension debt, not the people contributing 8 percent to 10 percent of every paycheck on time and in full.
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In short, these attacks on public sector unions are ideological. With the middle class dwindling, it is more important than ever to have strong public sector unions representing the working class and fighting back against hedge fund billionaires, like Ken Griffin, who are able to apply their clout financially. One person shouldn’t have more of a say than the very people who keep our state running. Public employees deserve a voice in Illinois politics. Unions are that voice.

Tony Johnston, president, Cook County College Teachers Union, Local 1600

Okay, Mr. Johnston is representing the Chicago Teachers Union, but I thought I’d point this bit out:

Right now the CTU — Chicago Teachers’ Union — is threatening to strike. Not for smaller class size but because they are furious that they are being required to obey state law. Illinois law requires teachers to pay 9.4% of their pay toward their pension plan, but a few years ago they went on strike and forced the local property tax payers to pay 7% of that 9.4%. But with the ongoing financial crisis in the city, the Chicago School System is asking them to go back and contribute their required 9.4% — and they are furious.

The average Chicago teacher will retire with a salary of $77,000 a year and collect $2 million by age 81.

If I remember correctly, Chicago is not the only place in Illinois where the employers pick up the teachers contribution. I’m not going to look at this now.

As for average benefits, I have a feeling Mr. Johnston is averaging over all the people getting an Illinois pension, which will include some people who didn’t work a full career for a governmental entity.

Here are a few nice distribution graphs I made a while back:

Now, those graphs are for all teachers receiving pensions in 2014 (no matter when they retired), so the $77K number above may be from newly-retired teachers. I didn’t break out those numbers (but I’ll do it very quickly — nope, I’m seeing an overall average about $50K. While this includes people with only a few years of service, I am seeing that 75% of new Chicago Teachers retirees get between 30K and 80K. These are rough estimates from 2014 numbers.)

Okay, whatever. Teachers working full careers generally get something quite a bit more than $22K.

Related: Retired teachers call on Illinois to pay up with pensions.

NEW DATA SOURCE!

I love those.

GovRank.org.

From the press release:

MOUNTAIN VIEW, Calif., March 10, 2016 /PRNewswire-USNewswire/ — Today, United States Common Sense, a data-driven policy group, launched GovRank.org. The platform offers free public access to the financial data of state and local governments across the U.S., as well as their financial records and information about their fiscal performance in the years following the onset of the Great Recession. The organization also researched the nature of fiscal distress and fiscal sustainability, and it developed a framework to compare fiscal performance across governments, making the results available on GovRank’s individual government profile pages. The Laura and John Arnold Foundation provided funding support for the project.

“As a nation, we don’t pay attention to fiscal health until we’re doing fiscal autopsies,” said Autumn Carter, US Common Sense’s Executive Director. “We’ve witnessed some high-profile struggles—Stockton, San Bernardino, Detroit, Chicago, California, Illinois—but it would have been better to draw effective attention to their situations before they became so dire. GovRank.org offers the public the best opportunity to reframe our fiscal discussions around forward-looking sustainability, rather backward-looking post-mortems.”

GovRank’s more than half-million data points and the 100,000 PDF financial audits from which US Common Sense extracted them comprise the largest freely accessible public finance database and financial records repository in the nation. The non-partisan 501©(3) non-profit spent a year quietly undertaking the civic engagement initiative, compiling the reports and an additional 70,000 budgets for governments that serve as few as 700 residents, and issuing over 10,000 public records requests. It successfully developed a method to programmatically extract top line financial figures from comprehensive financial records and manually extracted the remainder. The downloadable database includes government revenues, expenses, assets, liabilities, and public employee pension and non-pension liabilities for years dating back to 2008-09, which is the earliest date for which data was broadly available.

GovRank provides percentile rankings of fiscal performance, including an overall rank and three components: budget balance, asset flexibility, and pension funding. Based on its analysis of GovRank data, US Common Sense developed the following findings:

Overall worst performing states (starting with worst): Illinois, Connecticut, New Jersey, Kentucky, Massachusetts, California, Hawaii, Maryland, New Hampshire, and Wisconsin.

Overall best performing states (starting with best): Wyoming, Idaho, Oklahoma, North Dakota, Iowa, Nebraska, Utah, Montana, Texas, and Indiana

Overall worst performing cities with at least 100,000 residents (starting with worst): Montgomery, AL; Chicago, IL; New York, NY; Houston, TX; Birmingham, AL; Indianapolis, IN; Detroit, MI; Flint, MI; Omaha, NE; and Portland, OR.

Hot damn. I downloaded the whole data set.

That will go well with my redownload of the complete data set from Public Plans Database.. I see the new data set does not have many columns, but I will see what can be done.

CHICAGO TEACHERS: WE’LL SHUT DOWN THE CITY

Somehow I doubt it. Let’s check the claim first:

Chicago Teachers Union Vows To ‘Shut the City Down’ During One-Day Strike

DOWNTOWN — The Chicago Teachers Union announced plans Wednesday for a day of action April 1 and basically called for a general strike, asking “all concerned Chicago citizens” to skip work and boycott classrooms.

The union posted a flyer on its website Wednesday asking Chicagoans to “join families, teachers, workers and all those who thirst for justice” to “shut it down.”

For an explanation on what that “it” constituted, the union posted an event on its Facebook page asking “all concerned Chicago citizens” to “unite” in “withholding your labor, withholding your dollars, boycotting classrooms, boycotting the Magnificent Mile” and other actions, including protests against Mayor Rahm Emanuel and Gov. Bruce Rauner.

The union, however, would not characterize that as a “general strike.”

Spokeswoman Stephanie Gadlin said the union “is calling for a day of action of its members and that will take a variety of forms, but we will encourage our members to engage in informational picketing as early as 6:30 a.m. We are waiting on guidance from our House of Delegates to determine the full nature and creativity of our action.”

According to Gadlin, the day of action is meant to “bring attention to the fact that the governor, mayor and their other buddies [like billionaire] Ken Griffin are starving the city and state and feeding their millionaire and billionaire friends.”

Ah, I see that Ken Griffin is the designated baddie. I have no idea who this Ken Griffin is. Do Chicagoans know? I have no clue.

Let me do a quick Google…Here we go:

In 2012, Griffin said in an interview with the Chicago Tribune that he was a Reagan Republican. He said that “This belief that a larger government is what creates prosperity, that a larger government is what creates good: is wrong.”⁶⁴ After the 2007-08 financial crisis, Griffin made political contributions and donations to political candidates, parties, and organizations that supported his views of limited government such as American Crossroads, the Republican Governors Association, and Restore Our Future a Super PAC that supported Mitt Romney’s presidential bid.⁶⁴¹¹ Mr. Griffin backed Mitt Romney’s 2012 run for the presidency and has donated to former U.S. Representative Eric Cantor, Republican of Virginia, and Senator Mark Kirk, Republican of Illinois. He donated $2.5 million to Bruce Rauner, a Republican candidate for Illinois governor.⁶⁵

In December 2015, Griffin endorsed Sen. Marco Rubio for the 2016 Republican presidential nomination and stated that he plans to donate millions to a pro-Rubio super PAC.⁶⁶ Before this endorsement, Griffin had donated $100,000 each to three super PACs supporting Rubio, Jeb Bush, and Scott Walker for the GOP nomination.⁶⁷

Okay, so he’s a big Rauner supporter, and he’s rich. I seem to recall that Rauner is also supposed to be rich.

Am I remembering correctly?

And yet, he got elected governor.

Like rich guy Bloomberg was elected mayor of NYC.

I don’t think people care.

Anyway, let me think on the numbers — according to CTU itself, it has about 20K members. According to the Chicago Public Schools, there are about 400K students in the system. Even assuming we have one working adult inconvenienced by a strike, that’s 420K adults. Chicago area employment is about 4 million people. So if we have those 420K affected, that’s about 10% of the workforce.

I’m not seeing that as a city shutdown, but good luck with that. I can imagine a lot of people would prefer to skip April Fools Day at work.

On a Friday.

UNHAPPINESS WITH THE MAYOR

Unhappiness from the leftie side: How Rahm Emanuel Is Failing Chicago:

The Chicago experiment with meritocracy is failing. The quintessential American city— “the city that works”—is in chaos. Its municipal corporate bonds are are at different levels of junk status and going south. Teachers are poised to strike. Petty corruption continues to surface.

The overarching story is the broad failure of Mayor Rahm Emanuel.

To be fair, Emanuel was handed a nearly insolvent city in 2011, after twenty-two years of Mayor Richard M. Daley’s misappropriations of Chicago’s finances.
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Emanuel’s trademark arrogance is much subdued since losing the trust of 75 percent of Chicagoans. A full 40 percent wants him to resign over his stonewalling of the release of a dash-cam video showing the sadistic police shooting of Laquan McDonald in October 2014.

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Chicago Public Schools teachers are ready to strike for the second time in Emanuel’s tenure, perhaps in April. The school system currently faces a $480 million deficit, and layoffs in administration are already underway. Just two years after Emanuel ordered the closing of fifty public schools on Chicago’s primarily minority south and west sides—even as he continued to create more charters—the administration cannot account for some 5,600 computers, 36,000 desks, chairs, and tables, and no one is sure how many books are missing.

Emanuel’s third public school CEO in four years, Barbara Byrd-Bennett, is on her way to prison after pleading guilty for guiding approximately $23 million in no-bid contracts toward her former education consulting firm employer—which pledged a 10 percent kickback to Bennett. The contracts were for principal training, which most principals reported was useless.

Oh, and about that last…

TRY TO SUE THE EX-BOSS

Chicago school board seeks $65 million in lawsuit against ex-CEO:

The Chicago Board of Education is seeking more than $65 million in damages and penalties in a lawsuit against former district CEO Barbara Byrd-Bennett and her co-defendants in a multimillion-dollar bribery scheme.

“In plain terms, Defendants have stolen money from Plaintiff and the schoolchildren of the City of Chicago, and that money should be returned,” the school board said in a lawsuit filed Thursday in Cook County Circuit Court.

Also named in the lawsuit is SUPES Academy and Synesi Associates, companies that won more than $23 million in no-bid contracts from CPS while Byrd-Bennett was CEO; Gary Solomon, owner of the companies; and his partner, Thomas Vranas.

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One sticking point in any plea deals for Solomon and Vranas had been the expected effort by the district to seek restitution through a civil lawsuit. Attorneys for the two men have said that would conflict with mandatory restitution sought by federal prosecutors as part of any conviction.

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The federal indictment accused Solomon and Vranas of arranging to pay Byrd-Bennett as much as $2.3 million in kickbacks and other perks in exchange for her using her influence to award more than $23 million in no-bid contracts to SUPES Academy. Byrd-Bennett had previously worked as a consultant for SUPES.
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The lawsuit hinges on Illinois law that entitles public entities defrauded by corrupt individuals and companies to three times the amount of what was “fraudulently obtained,” Claypool said.

That would include salary, pension contributions or other payments CPS made to Byrd-Bennett and her co-conspirators, Claypool said. As a consultant and as CEO for CPS, Byrd-Bennett received almost $870,000, according to the lawsuit. Solomon, Vranas, SUPES and another company, Synesi, were paid a total of $15.5 million, the lawsuit said.

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The district told principals Wednesday that it is “short of the necessary cash for the remainder of the school year,” while asking school leaders to help save more than $45 million by holding off on nonpersonnel spending through the end of the budget year June 30. The district faces a pension payment of almost $700 million by the end of June.

It does make one wonder how much money is actually around to be had to clawback from these entities.

MONEY GOING AWAY

So, what’s the leverage again?

Vise Tightens on Chicago Schools:

CHICAGO – From a threatened teacher strike to an escalating state-level attack on its governance and borrowing powers, the barrage of bad news has not let up since junk-rated Chicago Public Schools sold $725 million of debt at a punishing 8.5% rate.

Market participants disagree on whether to define the district insolvent or barely solvent, but they agree any lasting fix remains caught in the state political divide, and that the clock is ticking.

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The state school code exempts CPS from many oversight rules, but the state Board of Education does have the power to investigate its finances and it recently launched such a probe. Rauner believes the state Board of Education can block future CPS borrowings if declares the district to be in “financial difficulty” as soon as next month.

CPS’ chief executive officer, Forrest Claypool, says the district is exempt under Article 34A of the code, which deals solely with CPS. Rauner’s administration argues the provision no longer applies to the district because it was tied to the existence of the Chicago School Finance Authority, which provided financial oversight of the district after its financial collapse in 1979 and was dissolved in 2010.

CPS argues that Article 34A and other provisions of the school code limit the state board solely to reviewing its finances and then notifying the governor and Chicago mayor of its findings.

Market participants say the open question and potential for litigation alone could chill future attempts to access the market. With no near-term public offerings planned, the district’s more urgent needs lay in setting up short-term credit lines for fiscal 2017.

If state officials’ arguments are correct, the district’s current private placement structure with a tax revenue pledge would appear to violate the code. Several market participants who work with the district said it could get around the limits by pledging revenue not cited in the state statutes or using some other short-term structure.

Concerns over ongoing access, absent state approval, could drive short-term rates up even higher from the 3.25% paid on several recent transactions, a steep penalty for lines of short duration.

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Claypool’s announcement last week that the district would phase out its longstanding coverage of 7% of the teachers’ 9% pension payment drew a fiery response from the Chicago Teachers Union, which took the position that such a move violates its contract.

It warned of a strike as soon as April 1. The district countered that the current contract’s expiration permitted the move.

The district further fanned the flames with the announcement later in the week of three furlough days. The two sides have since retreated somewhat but if they can’t agree, a strike could occur by mid-May.

The currently-scheduled end of the school year in Chicago is June 21.

Related: CPS tells principals it lacks the cash to get through this year

In any case, I don’t really see the populace of Chicago coming out to support Chicago Teachers avoiding getting hit with making pension contributions.

Compilation of Chicago posts.