This summer, when thousands of Chicago teenagers are without meaningful employment, consider what a 30 million dollar jobs program might have provided. Consider a summer jobs program that hired students at $10 an hour to clean the schools or help paint over graffiti tagged on public buildings, or hired students to be a part of a creative arts program. That 30 million dollars would have provided 3 million hours of honest work for many thousands of otherwise idled, unemployed teenagers.
But where would Chicago find 30 million dollars? According to the Governor of Illinois, the Mayor and the business community, the City is broke. Chicago could hardly be expected to come up with an extra 30 million dollars for a jobs program. Right? Well, how about this: What if instead of CPS borrowing 725 million dollars at 8.5 percent interest, what if CPS had borrowed that money at 4%?
According to the Chicago Sun-Times, on Wednesday, February 3, 2016, the Chicago Board of Education borrowed 725 million dollars at an astounding interest rate of 8.5 %. This means Chicago will pay, this year alone, $61,625,000 in INTEREST. That 61 million dollars will provide Chicago school students absolutely nothing and every cent of that interest payment will be sucked out of the Chicago economy forever. The absolute tragedy of that high cost borrowing is the City could have done better and would have done better if the political leaders of this City and state had not driven up the interest rate with their own irresponsible rhetoric and irresponsible inaction.
Let me be clear: there is no defendable reason why CPS should not have been able to borrow that same 725 million dollars at the still exorbitant but much more responsible 4% interest rate. In 2015, according to Kurt Summers, the City Treasurer, the City of Chicago paid 3.9 % interest on their short term borrowing. While that is still an extremely high rate, CPS would have saved 30 million dollars per year, just for this single bond deal had it borrowed the 725 million at that rate.
So what happened between this year and last: First, the governor and the legislature have failed to pass a budget. This continued failure to act allows bond dealers to charge all of Illinois (the state, cities, municipalities, public entities such as school boards) a higher interest rate because of the “uncertainty” of the marketplace. Secondly, the Mayor of Chicago has lost the trust and confidence of the citizenry, and his “public battle” with the Governor fuels the speculation that the City and State are in extreme economic distress. This provides bond dealers additional leverage in extracting higher interest rates out of the City and CPS.
So this summer, when thousands of children in Chicago are not working, and the City’s infrastructure continues to crumble, remember the CPS bond deal at 8.5%. The 61 million dollars each year that Wall Street is going to get for loaning CPS money at a rate that should have been half as much. The 30 million dollar summer works program that wasn’t. And if you’re a Wall Street banker, don’t forget to thank Governor Rauner, the Illinois Legislature and the Mayor for unnecessarily driving up the borrowing costs for schools.--