State Board of Ed launches financial probe of CPS

CHICAGO (STMW) - A day after Gov. Bruce Rauner accused a broke Chicago Public Schools of getting special treatment from the state, his handpicked state education team launched a financial investigation of Illinois’ largest school district that could lead to the takeover the governor is seeking, the Sun-Times is reporting.

CPS must turn over detailed financial information about cash flow, bonds, payroll and major contracts by March 4. That’s according to a letter sent Thursday by Tony Smith and James Meeks, the superintendent and the board chairman of the Illinois State Board of Education, about CPS’ “concerning financial situation.”

They sent the letter to CPS chief Forrest Claypool and Board of Education president Frank Clark.

The state board’s leaders cited CPS’ inclusion on the state’s financial watch list since March 2015 as justification to “initiate a proper investigation of the financial integrity of Chicago Public Schools.”

“Our sincere hope is that the forthcoming investigation will identify opportunities for actions to be taken that will improve the financial condition of Chicago Public Schools, avoid ‘certification of financial difficulty’, and most importantly, result in fiscal stability,” the letter read.

That ‘certification of financial difficulty’ is necessary before the state board could take over the district.

State education officials did not respond to messages seeking comment, including whether any other districts on the watch list are also under investigation.

CPS spokeswoman Emily Bittner said that much of the extensive information sought — four years of audits, monthly payroll, annual cash flow, as well as major contracts, is already publicly available, and added that state statute didn’t allow for the governor to impose any district oversight. She questioned Rauner’s expertise since taking over the state, which, now eight months without a budget, has a $7 billion backlog in unpaid bills.

“The last time Governor Rauner offered his financial advice for Chicago Public Schools, Chicago taxpayers were forced to pay even more for our bonds, and we cringe at what his latest venture could cost our children,” she said, referring to a recent bond sale in which CPS initially sought to borrow $875 million at an already high 7.7 percent interest, but after Rauner’s bankruptcy remarks had to settle for $725 million in bonds at a whopping 8.5 percent.

CPS said Thursday it spent $200 million of that $725 million to refinance existing debt — a move Moody’s credit ratings agency described as “credit positive”.

However, that minuscule improvement did not improve the junk rating assigned to the cash-strapped district, which still plans to lay off school staffers later this month.

Old friends Rauner and Chicago Mayor Rahm Emanuel have been feuding over CPS’ finances. Emanuel wants state help with the schools’ massive pension obligation. Rauner is treating CPS’ financial troubles as part Springfield’s overall budget problem.

The governor called in January for a state takeover of CPS, an idea Democratic leaders dismissed as lacking legal standing. Then he directed the state board to prepare an interim schools CEO. The governor, who is committed to curtailing the power of unions, also has called for changing state law so CPS could declare bankruptcy, which would void its labor contracts. He has blamed the Chicago Teachers Union for the school district’s bad financial habits.

On Wednesday, during his budget address, Rauner singled out CPS as unfairly benefitting from special financial treatment, indicating he would not support any financial aid to CPS that might take money away from other districts.

Claypool retorted that the state’s arrangement with its largest district, where nearly eight of nine children are poor, is a “raw deal,” and he urged other districts by name to lobby for a fairer funding formula.

“We have to come together as citizens of this state to fight against the governor for the children who are most disadvantaged,” Claypool told reporters,. “That is a statewide issue. It is important to us in Chicago but it’s important in communities throughout the state of Illinois.”