Thursday, December 29

Chicago schools show how spending way more than you have is normal for Dem-controlled cities

Politicians of all stripes are fond of spending money they don't have, and Democrats are normally even worse than the almost-as-awful Republicans.

This tendency is obvious not just at the federal level but also in Dem-controlled cities and states--like California and Chicago.

As someone who's fluent with numbers and trends it's amusing to see signs of utter mismanagement that should be obvious to everyone--but that are totally ignored.  Which leads to...um...interesting tap-dancing by the pols who presided over the resulting disaster.

Except the Lying Media in Dem states and cities never hold Dem pols responsible--for anything.  They keep quiet to avoid damaging their team.  And of course low-information voters in Dem strongholds don't have enough savvy to figure it out for themselves.  (In fairness, few people have the time or resources to do that.)

With that said:  Chicago's public schools have been running a deficit for decades.  In most places this would lead to some efforts at corrective actions, like reducing costs.  But of course Democrat pols, like mayor Rahm Emmanuel, never try to buck their favorite constituency (the teachers' union), so corrective actions are never taken.

So now Chicago schools are in a cash crunch:  They have a $400-million debt service payment due in January, and a $700-million pension contribution due in June.  Their cash reserves are $83 million.  So they're trying to sell more bonds--which have junk-level ratings.
 
Amazingly, in the last 4 months JPMorgan Chase has purchased almost $1 billion of short-term notes from the junk-rated system.  A month ago Chase offered some of this paper for sale.

Nobody bit.

On Nov. 22, Chase offered $50 million to $100 million of the notes maturing Dec. 2017.  The notes had a rating only a few notches above debt that’s already in default.

The lack of buyers in the Chase offer suggest the school system may have to offer very high interest rates if it goes through with a planned $600 million note sale in January, a month before it must deposit more than $400 million for debt service.

As one analyst amusingly put it, if the school system can’t issue the debt, it faces some difficult decisions.

Expenses at the third-largest U.S. school system consistently exceed tax revenue, and the district is counting on more than $200 million in state aid to cover a $720 million retirement-fund payment due in June.

JPMorgan has been the biggest lender to the school system, loaning $500 million to Chicago’s schools in 2015.  The company is also the third-largest private sector employer in Chicago.  William Daley, son and brother of Chicago mayors Richard J. Daley and Richard M. Daley, was vice chairman at JPMorgan.

The school system's reliance on short-term borrowing has grown by $850 million in two years. Illinois governor Bruce Rauner has said bankruptcy for the school system might be the best option, though the Democrat-controlled legislature has bucked his suggestion that state law be changed to allow it.

Of course one hopes that Dems and so-called "progressives" will come to their senses, recognize the approaching abyss and take effective action.  That will not happen.  They are totally, irrevocably committed to their folly, and no amount of disastrous results will get them to change.  Rather, disaster will merely guarantee greater lunacies, more money taken from taxpayers across the nation to support fatal (but politically attractive) Dem policies.

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