Take 5: Danger in interest-rate swaps; Winckler’s gone and Lane cuts architecture

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For years, the Chicago Teachers Union has been warning that so-called “toxic” swaps are costing the district millions and that they put it in a precarious position. This week articles in Forbes and Bloomberg confirm what union leaders have been saying and that CPS and the city, which also has these deals in place, must initiate arbitration by October if they want any chance of getting out of these deals.

Last decade, CPS and the city of Chicago, like many other cities, agreed to sell its debt and do interest rate swaps with companies, such as Bank of America Corp., Goldman Sachs Group Inc. and Loop Capital Markets. The governments went into these deals to protect themselves should interest rates spike, but they fell apart when rates plummeted in 2008. These kinds of swaps contributed in part to Detroit’s bankruptcy.

A provision in these deals stipulates that CPS and the city are on the hook for hundreds of millions of dollars if their credit ratings falls too low. CPS, which repeatedly has emptied out its reserves to balance its budget, is two ratings away from triggering a payout of $224 million, according to Bloomberg. The companies could also ask the district to put up collateral instead of paying up.

With this danger looming, on Tuesday in a press release, the CTU, AFSCME Council 31 and SEIU Healthcare IL called on Mayor Rahm Emanuel to file for arbitration to get out of the deal and ask for refunds for all the money paid to the banks. They also are holding a press conference on Thursday. A press release issued by the group notes that Los Angeles and Harris County (Houston), Texas, have taken steps to end these deals and recoup money.

The Forbes article notes that winning arbitration is difficult because cities must prove that underwriters knew city and district officials did not understand the risk. Another approach being bantered about on the Oakland and Los Angeles city councils is to threaten to blacklist the companies if they won’t renegotiate the swaps, according to Forbes.

While this seems like a rather technical issue, it gets to the heart of some bigger political issues. Emanuel and others make the case for pension reform by saying that the city and CPS are broke. But the unions say the city could recoup hundreds of millions of dollars by trying to renegotiate these deals. And they try to paint his refusal as evidence that he is more interested in keeping his banker friends happy than getting money to support the workers and services.   

2. Winckler out… CPS confirmed Wednesday that Chief Talent Development Officer Alicia Winckler is leaving her post, but there’s no word on why or who is taking her place. CTU Vice President Jesse Sharkey said union officials, who negotiated with her during the strike, will not miss her. He is especially critical of the fact that the administration pushed the overhaul of the teacher evaluation during the last contract negotiations, but that this year–the first year the evaluations count—the evaluations won’t be available til October. Starting the school year and another round of evaluations without getting the last evaluations, he says is difficult for teachers. “That is just one thing that is a mess,” he says.

But in a letter to staff, Byrd-Bennett praised Winckler: “Under her leadership, CPS has begun the transformation from a compliance to a performance based culture, initiated very positive supports for families to take care of their health and wellness and implemented systems to support talent movement within CPS.”

Byrd-Bennett said Winckler is leaving to “blend her private and public background to consult with organizations within and outside of education.”

Winckler came to CPS five years ago after working for Sears and Coca Coca. She was one of only four chief level executives to remain when Jean-Claude Brizard left and Barbara Byrd-Bennett took over. Now, the only holdover is Chief Administrative Officer Tim Cawley.

3. New design plan… Lane Tech High School cut its architecture program this year because its superstar teacher retired and the program had trouble competing with AP classes and electives, reports NewCity Design. The post by a blogger named Designy Mom notes that the architecture program was a staple at Lane since its early days when it was more of a vocational high school. Once upon a time, architecture was in several other vocational high schools in the city, including Lindblom, its counterpart on the South Side. A former design instructor, Designymom writes that Lane’s program was a feeder to the University of Illinois Chicago and the Illinois Institute of Technology’s architecture and engineering programs.

While there was a big outcry this summer when Simeon’s principal cut the electrician program, there’s hasn’t been a stir around the loss of the architecture program at Lane. That’s likely because Lane is a selective enrollment school and almost all students are college bound; whereas Simeon’s electrician program is seen as an alternative for students who won’t go to college.

What’s more, Lane will had a ribbon cutting this week on its new “Makers Lab,” which has 3D printers, 3D scanners, wood and vinyl cutting machines, laser cutters and industry standard CNC machines, which uses computers to control machine tools. In his letter on the website, Lane’s principal writes “this type of learning will continue our pursuit of cross-curricular science, engineering, math, technology, and art.”

4. Cuts a coming… Portage Park Elementary School has 79 fewer students than its projections and now stands to lose a whopping $400,000, according to DNAinfo. For the first time this year, CPS is doing the official enrollment count on the 10th day, rather than the 20th day as has been done in the past. Also new this year is that schools will lose about $4,300 for each student less than projections.

Portage Park Elementary Local School Council members and the principal say that they think the loss is due to families moving to the suburbs or putting their children in Catholic schools.

On Monday, the news was that Goethe School in Logan Square was recruiting students to try to shore up enrollment. Catalyst has also heard of magnet schools offering seats in recent days, something that is pretty unusual after the school year has started.

CPS officials say that school-by-school enrollment counts will be available soon. What will be worth taking note of is whether overall enrollment in CPS is down and whether charter schools are also struggling to get their projected enrollment numbers.

5. Further allegations at Concept … Authorities in Ohio have widened their inquiry into allegations of misconduct inside Concept Schools, the chain of charter schools based in Des Plaines, the Associated Press reports. The state-level investigation had previously focused on allegations of test-tampering, sex games and other possible criminal acts at a Dayton school, but now authorities are also looking at schools in Columbus and Cincinnati run by the same operator. Meanwhile, the FBI continues to investigate Concept charter schools in several states in for its use of a federal “E-rate” program, which helps schools pay for internet access.

The new allegations come as the Annenberg Institute for School Reform at Brown University issued a series of recommendations this week on accountability for charter schools. “While most charter operators are working hard to meet the needs of their students, the lack of effective oversight means too many cases of fraud and abuse, too little attention to equity, and no guarantee of academic innovation or excellence,” the report’s authors write. Among the group’s recommendations: require members of charter school governing bodies to file full financial disclosure reports and identify potential conflicts of interest or relationships with management companies; prohibit online charter schools or halt their expansion until there has been an assessment of performance and operation.

In other news… Access Community Health Network, SGA Youth & Family Services, Near North Health Service Corp. and Healthcare Consortium of Illinois (HCI) received “Healthy Start” funding from the U.S. Department of Health and Human ServicesIn a press release, SGA said it will be using a total of $10 million in funding over a five-year commitment in partnership with HCI to provide early childhood education services in Roseland and surrounding neighborhoods.