Chicago
By ED McMANUS

Padlocking the cookie jar

WHEN New York, and later Cleveland, crumbled in fiscal chaos, Chicago was smug. It couldn't happen here. But it did. The mess that the Chicago school system finds itself in shouldn't have happened, but nobody blew the whistle.

Now the people of Chicago are asking: How could our public officials allow the situation to get so severe? Who is to blame? And everybody is pointing a finger at everybody else.

What happened in Chicago is not much different from what is happening with many a family budget in these inflationary days. Your expenses keep going up, and your income isn't keeping pace, so you are forced to dip into a savings account or a cookie jar or some other source of funds that you hadn't planned to use for buying groceries. The first few times, you put the money back as soon as your paycheck arrives, but then it gets harder and harder to put it back, and finally, you just don't. And eventually you run out of cookie jars.

People go bankrupt every day, but it's not supposed to happen to governments. There are supposed to be enough checks and balances. Obviously, in Chicago, there are not enough.

The Board of Education ultimately is responsible. But we pay them nothing, unlike school boards in most other big cities; we require them to meet no professional qualifications; and we let the mayor appoint them rather than electing them, as most other major cities do. We shouldn't let them off the hook, but we really cannot expect them to be financial wizards.

The board relies heavily on the superintendent, whom it hires, and Superintendent Joseph Hannon, who resigned in November, certainly must share the blame for what happened.

Why didn't the school district's auditor, Arthur Andersen & Co., do something? Board records show that the firm repeatedly warned Hannon and the board that tragedy lay ahead. As early as 1976, Arthur Andersen said in a memorandum that the viability of the educational program was becoming more seriously jeopardized as the size of the deficit increased. "It is important to recognize that municipal security investors are rapidly requiring more complete and current financial information from a governmental agency selling securities," the firm said. "If the deficit continues to increase in size, the issuance of additional debt in the future will become more costly and difficult, if not impossible" (emphasis added).

Arthur Andersen advises the board, but it has no authority over the board. And Chicago has no governmental auditor which might have demanded that the board discontinue its irresponsible fiscal practices.

It is important to note that the board is not independent. It is appointed by the mayor and inevitably answerable to the mayor. When the teachers' union asked for more pay, Hannon recommended against it, but the late Mayor Richard J. Daley pressured a bare majority of the board into going along. Daley and his successor, Michael A. Bilandic, also blocked attempts by the school district to increase its property tax rate.

Now that the damage has been done, what steps can be taken to see that it never happens again? There are several possibilities, although some of them may not be very realistic politically:

•   An elected school board in most other cities would be likely to be more responsible to the public than an appointed one, but in Chicago there historically has not been much difference between being appointed and being slated by the Democratic party.

•  Requiring appointees to meet certain qualifications would prevent the mayor from appointing political hacks to the board.

•  Paying board members for their services might encourage more qualified persons to apply.

•  Cutting down on expenses and/or increasing revenue might have averted the disaster. A recent study by Pierre de Vise of the University of Illinois, Chicago Circle (see "The Rostrum," p. 35) found that among the nation's 10 largest independent school systems, Chicago spent the greatest amount of money per pupil. The study also disclosed that the percentage of revenue raised locally was lower in Chicago than in seven of the other nine cities.

•  Perhaps the most important need is for an agency empowered to oversee the activities of the school board. On the state level, the auditor general, a creature of the legislature, performs that function, watchdogging the executive branch of state government.

Chicago needs an auditor. In the absence of such an agency, the City Council ought to have a committee that would keep an eye on the finances of both the school district and the park district. And if that is not done, maybe the legislature should mandate the State Board of Education to perform the function.

An official whistle blower is what is needed — one who could slap a padlock on that cookie jar.

30/March 1980/Illinois Issues