Chicago Public Schools borrow at sky-high rate to pay for pensions

Even though Illinois law currently doesn't allow municipalities or government agencies to declare bankruptcy--that law needs to change--it's hard to see how some sort of bankruptcy isn't coming to CPS.

From the Chicago Sun-Times:

The Chicago Public Schools will pay 6.39 percent — an extraordinary interest rate by short-term lending standards — to borrow $275 million it needs to make a mandatory payment for retiree pensions before a June 30 deadline.

That's more than four times the interest rate a typical government would pay on the same borrowing deal, financial experts say.

It’s yet another sign of the dire financial condition of the nation’s third-largest public school system, which for months has had a "junk" credit rating from Wall Street financial institutions.

CPS officials secured the $275 million on Monday from J.P. Morgan. It's the final chunk of cash needed to make the $721 million payment for teacher pensions that's due at the end of the month, senior vice president of finance Ron DeNard said in a statement.

Cronyism, overly generous salaries, pension holidays, and utter incompetence have created this mess. For years CPS--and of course that means taxpayers--have been paying for the teachers' portion of the pension contributions.