The Debate Continues – Should Chicago’s Public School District File For Bankruptcy?

It has been widely publicized that Chicago’s public schools are facing some serious financial troubles. But what options are available to save Chicago’s school district from its billion dollar debt? When an individual or a corporation gets into financial trouble they have the option of filing for bankruptcy, but do government agencies have that same option? Chicago Tonight recently sat down with Illinois’ governor and reports that according to him, Chicago’s mayor has three options to save our school system: obtain a more affordable teachers’ union contract, increase taxes, or change the law so that the district can file for bankruptcy protection. The governor thinks that Chicago’s mayor is not ready to get a better teacher’s union contract for the district, and although some community leaders are calling for a tax increase, in his opinion bankruptcy may be the best option for Chicago’s public schools.

Should Chicago’s Bankruptcy Laws Be Changed?

Chicago Tonight notes that our governor would like the bankruptcy option to at least be on the table as negotiations continue. In order for that to happen, the Illinois state legislature would have to pass a bill enabling the school district to file for bankruptcy. Under the current law in Illinois, municipalities are not allowed to file for bankruptcy, however, the state legislature has the power to change that. According to an article in Forbes, some Republican lawmakers are advocating for a new law that would allow municipalities and other agencies to declare bankruptcy. The article reports that advocates of the new law insist that allowing Chicago’s Public School system to file for Chapter 9 bankruptcy is not a get-out-of-jail-free card, but rather is a solution that would allow stakeholders to restructure and reformulate the district’s debt.

Why Is Chicago In So Much Debt?

According to Forbes, the Illinois Policy Institute reports that Chicago’s Public School district has a $1 billion deficit on the books and has a pension fund that is $9.5 billion short of funding. But how did our local public school system come to find itself in such a serious financial predicament? Forbes notes that pension funds are largely to blame due to the fact that for years the government has been borrowing money from these funds and that now they are severely underfunded. Additionally, it is noted that Chicago’s public school teachers have been permitted to pay less into their pension funds than employees in other sectors. While poor management of the teacher’s pension system is only one factor that has contributed to our school system’s financial crisis, it is undoubtedly a major source of financial trouble that will need to be reevaluated in the coming months.

How Can We Help?

While municipalities in Illinois are not currently permitted to file for bankruptcy, individuals and corporations can. If you live in Chicago and are considering filing for bankruptcy protection, contact the experienced bankruptcy lawyers at the Bentz Holguin Law Firm, LLC today. Our lawyers are happy to discuss your legal options with you and can be reached at 312-647-2116.