PLY: The tragically fetid failure of Chicago public services is writ large in schooling. Here’s the SIB angle:
Rick Perlstein – Jacobin Mag
Last September, an award-winning Chicago Public Schools principal named Troy LaRaviere published a post on his blog that began, “Whenever I try to take a break from writing about CPS to focus on other aspects of my professional and personal life, CPS officials do something so profoundly unethical, incompetent and/or corrupt that my conscience calls me to pick up the pen once more.”
What had Principal LaRaviere going this time? We’ll get there eventually. But first we have to back up and survey what brought the Chicago Public Schools to this calamitous pass in the first place. It’s hard to know where to begin. Though when it comes to the failings of America’s institutions you can rarely go wrong by looking to the plutocrats.
Given the CPS’s $480 million budget hole, and the fact that its bonds are rated at junk status, something had to give. But if you’re wondering why special education bore the burden — well, you need to know about Wall Street’s latest, most whacky financial instrument: the social impact bond.
A social impact bond is a loan to a public entity that pays off for investors if certain policy benchmarks are met.
Like most instruments of privatization, it is a very sweet deal for the financial masters of the universe. The entrance costs imposed on cities are enormous: right up front, they have to hold the money in escrow for any potential repayments of the loan. In the case of Chicago’s recent $16.6 million deal to expand preschool with Goldman Sachs and the Chicago investment bank Northern Trust (which has two members of the Commercial Club’s Education Committee on its board), over 10% of the loan goes to various third-party costs like legal fees — including the investor’s legal fees, which the city pays.
The risk is also very low, because a third lender, the Pritzker Family Foundation, signed on to the deal in a “subordinate” role to absorb any financial hits before the banks do. For their sacrifice, the banks may earn a profit of as much 50%, if the benchmarks are met. And what are those benchmarks?
You’d better sit down.
Fewer students in special education.
You read that right. According to a CPS press release, “Payments for decreases in special education are $9,100 compounded at an annual rate of 1% for each child that avoids special education after attending the CPC program.”
The logic is absurd, and the science behind it is bogus.