Insanity: Chicago public schools pay $850M in interest on $500M loan

The state of Illinois is broke (has the state passed a budget yet?), and the dysfunctional city of Chicago is a big reason why.

This is how unsustainable and plain insane Chicago is — the city’s public schools system will pay more in interest ($850 million) than the amount of the loan ($500 million).

Robert Brutvan reports for Illinois Policy, August 1, 2017, that in July of this year, the insolvent Chicago Public Schools (CPS) borrowed $500 million in long-term, high-interest loans.

According to an analysis by the Chicago Tribune, the loans carry interest rates of 7.25% to 7.65%. CPS will pay off the loans over 25 years, at roughly $35 million a year in interest.

That means that by the time the loans are paid off in 2042, the Chicago school district will have paid more than $850 million in interest on the original $500 million loans — making the total cost of CPS’s loan repayment a staggering $1.35 billion. By 2042, students entering kindergarten this fall will be in their mid-30s.

The $500 million long-term loans came shortly after the district borrowed $387 million in short-term loans from JPMorgan to cover a pension payment. Those short-term loans generated nearly $70,000 in interest a day over the summer.

The district plans to use $229 million from the $500 million loans to recoup losses on bonds from previous years. The district will also reimburse itself $31 million in capital expenses from past years. This tactic of using new loans to pay off old debts is known as “scoop and toss,” a method of covering deficits from years of financial recklessness.

The state’s lawmakers are attempting to bail out CPS as part of Illinois’ new education funding plan. But if CPS is unable to secure funding from the state to pay off the loan, the district already has stated it plans to look to property taxes to pay off its ever-mounting debts.

Despite having taken out a total of $887 million in loans over the last two months, CPS students and parents may not notice any large improvements in the classroom come fall, as CPS has used its dependency on short-term borrowing to make payments on pension debt rather than using the money to fund classrooms.

H/t FOTM‘s stlonginus

See also:

~Eowyn

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28 responses to “Insanity: Chicago public schools pay $850M in interest on $500M loan

  1. I may sound pessimistic, but my friend, a Chicagoan tells me there’s no solution to Chicago. Chicago is no longer the Windy City, it is Gone with the Wind and there are no solutions to salvage the City.

    Liked by 3 people

  2. Mustafa Obama and his tribe say We ain’t gon the’ no mo’!

    Liked by 2 people

  3. Not that I agree with this, I don’t, but any of us with a mortgage have the same issue. We end up paying much more than the original value of the loan.

    It is possible to kill a town. It is especially possible with a town as corrupt as Chicago. Look at the government there. Look at the population mix.

    Maybe its time for it to go. It will either rise, phoenix-like from the ashes, or it won’t. People may have to move elsewhere, like beautiful St. Louis or Detroit.

    Liked by 2 people

  4. Pingback: Insanity: Chicago public schools pay $850M in interest on $500M loan — Fellowship of the Minds – NZ Conservative Coalition

  5. We used to call this robbing Peter to pay Paul. Eventually, Peter becomes unavailable.

    Liked by 1 person

  6. Increasing poverty and capital flight from the Rust Belt (where I grew up and had to flee from) are among the factors at work here and have been going on for decades. There is at least a partial solution to the immediate problem, however, and that is public banking. Our money supply is the property of privately owned banks (yes, that includes the Federal Reserve). There is not reason, legal or otherwise, why government (federal, state, local) cannot open their own banks. Such banks could lend to the government that owns it (or to any entity it chooses for that matter) at low or no interest. Those who are interested in this might check out the Public Banking Institute’s website at http://www.publicbankinginstitute.org. The Institute’s guru, Ellen Brown, also has her own website with many enlightening articles at http://www.webofdebt.com. Another partial solution to poverty is the national dividend as proposed by the social credit movement founded by Major C. H. Douglas in the 1920s. This is qualitatively different from the guaranteed basic income proposed by certain elites and which is being tested right now in the Bay Area, but I will not get into those here. M. Oliver Heydorn discusses those: http://www.socred.org/index.php/blogs/view/the-big-difference-between-a-basic-income-and-the-national-dividend. I am writing this partly in response to Alma’s friend’s comment on the prospects of Chicago. There is always a solution to every problem. In this case, the bankers, however, would prefer that we not know that. I have proposed two solutions here, but there could be any number of solutions that I have never heard of and perhaps some that haven’t even been thought of yet (FOTM readers: Get to work!). We must not allow our public-school-impaired vision to trick us into thinking that the horizon is where the world ends. The world is vast, and so is a healthy imagination. It only takes a bit of courage to explore the many options that the elites, who profit enormously from ignorance (hence their institution of Common Core and standardized testing and their control of the mainstream media) and its resulting despair, hope we will not realize exist. FOTM readers must embrace that courage, which is our birthright, and never let it go.

    Liked by 3 people

  7. I can still hear those chicago teachers saying “it’s for the children”.

    Liked by 1 person

    • stone . . . Uup! That’s the rallying cry . . . “It’s for the children” that we hear again and again spouted by the education unions of this nation. Actually, it’s all bigtime BS! Our nation’s children have been forsaken for those who teach, they fondest wishes and dreams are . . . “excellent salaries, fabulous perks, and over the moon retirement payments, to Hell with whether or not children become educated!”

      Liked by 2 people

  8. Reblogged this on kommonsentsjane and commented:

    Reblogged on kommonsentsjane/blogkommonsents.

    That is the problem with these muslim/communists democrats – math is not their best subject since they went through the Clinton math program where 2+2 = 8,9 or 10 – whatever you want it to be and now you see what you get when they start being in charge. They know not what they do – they think they are supposed to play marbles with their brain. That is why they stay so confused.

    kommonsentsjane

    Liked by 1 person

  9. Cities, like countries, depend on having a self-sustaining system. For years, in the East, there were manufacturing jobs that paid a living wage. Then the predators decided that it was “too expensive” (read not profitable enough) to manufacture things here. Slick Willy Clinton and his bosses decided China and Mexico were better (read cheaper) places to make things.

    Meanwhile, back in those affected cities, they still had the same infrastructure to support without paying jobs. If you were to define people who do things like this, would you call them “shrewd businessmen” or thieves? I know what I call them, “the Enemy”.

    Actions have consequences. Societies have functions and needs that must be addressed by their members or they fail. If you live in a small tribe and one or two members steal the rations, if you catch them you put them on an ice floe and wave goodbye.

    This is what happened recently in Iceland. They did the right things to fix it. The only reason they haven’t invaded them yet is that they are too small and they haven’t gotten around to it yet.

    Liked by 2 people

    • lophatt . . . that is the best, most insightful history of how our cities, schools, etc work in this day and age. Congratulations! God Bless you for telling it like it is! I wish that We The People could muster the courage of the people of Iceland and follow their lead! It would certainly help to set things straight here in the pitiful US of A.

      Liked by 2 people

  10. 850M interest on 500M? Those kickbacks aren’t going to pay out of thin air. The interest payments were negotiated into the contract. Chicago legislators have 2nd home mortgages, drug dealers and bookies to pay.

    Liked by 2 people

    • Yep. It’s the “wonder of compound interest”. Look at your mortgage. You bought your place for $300K. When its paid off you spent $900K. Add to this the fact that the money never existed in the first place, just the “right to earn” interest from “loaning” it to you.

      Does this look a little shaky? I think so.

      Liked by 1 person

      • lophatt . . . you should be teaching classes on “how our money really works in this country/” It is rather evident that you understand exactly what a con game is going on with The Federal Reserve, and their cabal. It really is amazing that money can be lent when there is no money to begin with. People should read the book, “The Creature from Jeckel Island,” and they should read up on fractionalized banking. It should be taught in school, then as a people we would not be able to be hoodwinked the way we are today by the World Banking cabal. I did not learn about this major scam until I was nearly 50 years old . . . that is rather sad.

        Liked by 1 person

        • Thank you Lulu. And, yes they should read the book. I think they don’t teach this in school because they’re afraid they’ll be chased through the streets.

          Liked by 1 person

  11. As long as they elect people like Rahm Emanuel, Chicago will never be okay.

    Liked by 2 people

  12. This is all on the backs of the leadership. Who in their right mind would make such deals on loans and those ridiculous teacher pensions if they are concerned with the welfare of the city they are supposed to be protecting unless they are making a serious kickback from this insanity.
    And the people keep electing the same people over and over. Let them live in the pigpen.

    Liked by 2 people

  13. ManCavePatriot

    Just another liberal, progressive success story that they will run on.

    Liked by 2 people

  14. Pingback: Insanity: Chicago Public Schools Pay $850M in Interest on $500M Loan | The Olive Branch Report

  15. There are more state workers than private sector workers in IL.

    Like

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