Can Illinois Block CPS Bond Sales?

Here’s an interesting new wrinkle in the ongoing and depressing argument between the Chicago Public Schools and the State of Illinois. The Sun-Times is reporting that Illinois Gov. Bruce Rauner has said that the state could block CPS’s bond sales:

Gov. Bruce Rauner said Monday the Illinois State Board of Education has the ability to block Chicago Public Schools from entering into bad bond deals.

And less than an hour later, CPS CEO Forrest Claypool had a simple response: No, they don’t.

Rauner made the statement just three weeks after CPS borrowed $725 million by selling bonds carrying an extraordinarily high interest rate of 8.25 percent — and days after his handpicked education leaders announced they’re investigating the finances of the state’s largest district.

I don’t know the details of the statute in question but I do know that as a general matter the city of Chicago, the Chicago Public Schools, and all other government entities subordinate to the State of Illinois have no power other than that which the state gives them. They are creatures of the state and operate entirely at its pleasure.

If the statute cited by Mr. Claypool does what he says it does:

Speaking at Curie Metropolitan High School on the Southwest Side, Claypool denied that state authority to block CPS borrowing exists.

“The governor has come up with a number of novel legal theories, but I would just refer him back to the statute,” Claypool told reporters. “The statute is very clear that the authority he seeks to exercise does not apply to the Chicago Public Schools.

rather than what the governor said it does:

The latest tussle between the governor and Chicago’s schools system centers on a phrase in the school code both leaders are leaning on: whether or not CPS is “subject to” a section of school code establishing a School Finance Authority for districts in cities with more than 500,000 inhabitants.

Naturally, Claypool believes the district is still ruled by that article, which would allow the state board merely to notify Chicago’s mayor of any financial difficulty an investigation turns up.

But Rauner contends that as of 2010, it isn’t anymore.

“That applied only when the reform board existed, which it no longer does,” Rauner spokeswoman Catherine Kelly said.

blocking the CPS’s bond deals would require an act of the Illinois legislature. The legislature hasn’t shown any particular fondness lately either for the governor of the CPS so I have no idea whether they would do that. But they could so in that sense at least the governor is right.