Mish: Chicago Headed For Insolvency, Get The Hell Out Now!
Chicago Mayor Lori Lightfoot and the Teachers Union reached agreement on a deal sure to send Chicago over the cliff.
The Wall Street Journal Editorial Board blasts Chicago Mayor Lori Lightfoot for her deal with the Chicago Teachers Union (CTU). The deal will further wreak havoc on the already insolvent school system.
Who will be hurt most?
The WSJ answers the question this way: Union Routs Students in Chicago.
16% raise over five years (not including raises based on longevity)
Three-year freeze on health insurance premiums
Lower insurance copays
Caps on class sizes
More than 450 new social workers and nurses.
New job protections for substitute teachers who going forward may only be removed after conferring with the union about “performance deficiencies.”
Chicago Public Schools will become a “sanctuary district,” meaning school officials won’t be allowed to cooperate with the Immigration and Customs Enforcement without a court order.
Employees will be allowed 10 unpaid days for personal immigration matters.
Under the new contract, a joint union-school board committee will be convened to “mitigate or eliminate any disproportionate impacts of observations or student growth measures” on teacher evaluations.
Instead of student performance, teachers will probably be rated on more subjective measures, perhaps congeniality in the lunchroom.
The new union contract caps the number of charter-school seats, so no new schools will be able to open without others closing.
Get the Hell Out
The WSJ commented “Michelle Obama the other day complained that white people were leaving the city to escape minorities who are moving in. No, they’re fleeing Chicago’s high taxes and lousy schools—and so are minorities.”
Chicago Public School Bond Ratings
Chart from CPS Credit Ratings.
You can kiss those positive and stable outlooks goodbye. The system is insolvent and this contract will further weaken the outlook.
Bond Rating Comparison
Chart from Wikipedia, yellow highlights mine.
S&P already has CPS bonds in the “highly” speculative area, five steps into its junk ratings.
A Chicago Teacher’s Pension is based on your years of service and a pension percentage (up to 75%), multiplied by your final average salary. Their union notes “There are ways to increase these factors to enhance your pension or meet eligibility requirements.”
Let’s Discuss Pensions
Wirepoints asks Chicago Teachers Strike: Why is No One Talking About Pensions?
The average retired CPS teacher already receives a pension of nearly $55,000 a year, according to a 2019 FOIA request to the Chicago Teachers’ Pension Fund.
However, looking at the pension of an average teacher far understates the true size of CPS pensions. The “average” benefit includes teachers who only worked a few years for CPS, which brings down the average.
To get a more accurate picture of what pensions are really worth, look at career teachers. Over half of all currently retired CPS teachers worked 30 years or more. On average, they receive a $72,000 annual pension and began drawing benefits at age 61.
In comparison, the average annual Social Security payment in Chicago is just $16,000 and the maximum benefit for someone retiring at age 62 is $26,500.
C-O-L-A Cola, la la la Payola
The average career CPS pension will grow by 3 percent, compounded annually, due to the COLA benefits teachers get. That will double a teacher’s annual benefit to over $140,000 in 25 years.
Those projections were based on the proposed contract. The CTU held out for even more benefits and got them.
Pension Funding Level
By 2023, Lightfoot must find an additional $989 million a year for pensions, according to the Tribune’s Hal Dardick and Juan Perez Jr. Thank you, former mayors and aldermen, for promising more pension benefits than Chicagoans could afford.
Who Will Pay?
That one is easy.
The kids will suffer because charter schools are reined in, grading standards lowered, and incompetents were given further projections.
Taxpayers will face higher property taxes, higher gas taxes, and higher sales taxes with every penny going to pensions.
Get the Hell Out
On October 5, I commented Escape Illinois: Get The Hell Out Now, We Are
Goodbye Illinois. Hello Utah. See my reasons for Utah above.
If you can’t get out of Illinois, do the second best thing, Get the Hell Out of Chicago.
By the way, Chicago is not “headed” for insolvency, it’s already there, but it is just not recognized yet.