How could Chicago Public Schools get a fresh restart, fix its pension crisis, cut its debt, void bad contracts and end the teachers strike? The same way Michigan did for Detroit schools. Its called reconstitution and its a regular process in the private sector, often called oldco/newco. It would have all the benefits of a bankruptcy reorganization, though a formal bankruptcy might not even be needed.
It would go something like this:
Create a new entity, or perhaps several of them, to run the schools.
Redirect to the new entity taxes and other funding now going to CPS. Transfer needed assets to the new system. Put the old CPS in a Chapter 9 bankruptcy, if necessary.
Freeze the Chicago Teachers Pension Fund and, instead, begin funding a new, affordable retirement plan.
Terminate all CPS employees and rehire the good ones on terms affordable for the city.
We wrote about the option for CPS in 2015. The Wall Street Journal wrote later about its application in Detroits schools and its potential for Chicago:
The district would avoid declaring bankruptcy by using an oldco/newco model similar to GMs. School operations would be transferred to a new debt-free district.
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The Detroit Free Press reported the opening of that citys new school district in July 2016. We also wrote here about why the option is actually better suited for Chicago than it was for Detroit.
GM did the same thing in its bankruptcy. The GM you know today is actually a new company formed in 2009 to take over assets of the old, insolvent GM.
Reconstituting CPS would require state legislation as well as the citys cooperation. That legislation could also include changes to the collective bargaining process to ensure theres no repeat of the Chicago Teachers Unions impossible demands. Currently, those laws are stacked in favor of CTU and are out of line with other states, especially our neighboring states, as we described here.
To nobodys surprise, Illinois politicians have never considered the option for Chicago. And with lawmakers still in denial about the scope of our crisis, its right to be cynical about the chance of them reconstituting CPS now.
But maybe, just maybe, they will start to consider how history will record their failure to act. Mayor Lightfoot has no good options for dealing with the citys financial plight, and may not have any bad options either. CTU seems resolute, impassioned with their role as the vanguard of a radical agenda that goes far beyond schools. Bargaining for the common good is what they call it they anointed themselves to bargain for the working class across the country.
Faced with that, why shouldnt Lightfoot ask Springfield for legislation to reconstitute CPS? Chances are she would be ignored, but at least she would be remembered as the first Chicago politician to suggest a serious step to head off or at least mitigate the meltdown thats ahead.