One day after Chicago Public Schools officials announced $100 million in proposed budget cuts, the Chicago Teachers Union closed its Bank of America account on Wednesday in protest over the controversial interest rate swap agreements held between the bank and school district.
CTU says cash-strapped CPS, which is facing a $480 million budget hole this fiscal year, has lost more than $502 million to "predatory" swap deals with financial institutions, including Bank of America. According to the union, Bank of America has collected $77 million in profits off of its interest rate swaps with CPS.
"What we hope is that our withdrawal of funds will spark people all over this city, all over this state and all over the country to start withdrawing funds from Bank of America until they give back some of the ill-gotten gains they've made off the backs of our students," CTU Vice President Jesse Sharkey said outside the Bank of America at 135 S. LaSalle St.
The union closed its Bank of America account in the amount of $726,000 and moved the funds to Amalgamated Bank, which is not profiting from such swaps, according to the union.
CTU officials noted that other municipalities have taken successful legal action against banks to recoup money lost to "toxic" interest rate swaps.
"If the mayor and Board of Education would choose to fight the banks the way that they fight the Chicago Teachers Union for these schools cuts and put real legal and financial pressure on the Bank of America, we have no doubt that the bank would come to the table," said CTU Recording Secretary Michael Brunson. "If the Board of Education wanted some of this money from the bank, they could get it."
Here's more from Brunson:
Ald. Carlos Ramirez-Rosa (35th) stood with the union.
"They've done the right and necessary step of withdrawing their money from Bank of America, because Bank of America's greed has cost our children tens of millions of dollars, has cost our schools tens of millions of dollars," the alderman said.
Ramirez-Rosa called on Chicago Mayor Rahm Emanuel and the Chicago Board of Education to "follow CTU's lead and withdraw its money from Bank of America," adding that the "greed of the banks should come after the needs of our children."
A Bank of America spokeswoman declined to comment specifically about the CTU's account closure and concerns about the bank's interest rate swaps with CPS.
"For privacy reasons, we don't comment on customer relationships," Bank of America spokeswoman Diane Wagner said in an email.
Bank of America, she added, will "work to ensure that our customers will be able to conduct their business at our financial centers without disruption in service."
Requests for comment in response to the CTU's press conference were left with CPS and the mayor's office.
Emanuel's long-term plan for reforming the city's financial practices calls for terminating swap agreements held between the city and financial institutions. At the request of the Progressive Reform Caucus, the Emanuel administration held off on a proposal last month to borrow money specifically for paying termination penalties tied to the city's controversial swap deals. The delay will give aldermen and the administration more time to review the plan.
The city's law department, meanwhile, has found "no legal basis under securities law or state law" to pursue a claim in an effort to recover losses from the controversial bank deals, City Budget Director Alex Holt said last month.
Union members held their protest one day after CPS announced $100 million in new school budget cuts, including $50 million in the form of layoffs. The proposed cuts were announced following Monday's rejection of CPS' four-year contract offer by a CTU bargaining team.
Asked about the chances of a teachers strike, Sharkey said the union is "dedicated to continue talking" to reach a contract agreement.
"We don't want a strike," he stressed.
However, he said the district's "threats" of layoffs, budget cuts and a unilateral move to discontinue its pension pickup for teachers is "the kind of talk that will push us closer" to a strike "and potentially even over the edge."
Sharkey said the issue boils down to the school district needing new revenue.
"Unpaid debt on pensions and unpaid debt on bondholders and charter schools are the three drivers" of the district's financial issues, Sharkey said. "You're not gonna solve that by cutting frontline educators."
"The real solution here is to find some sources of revenue," Sharkey added. "Start with the things that are easiest to get where we know there's money. We know there's money in the TIF funds, and we know there's money in swaps. There's hundreds of millions of it. The banks are doing fine right now. Get some money from them."
TIF is short for tax increment financing, the city's economic development subsidy program that depends on property tax dollars. A TIF surplus of $87.2 million is going to CPS in the current budget year, the district said. Since 2011, over $300 million in TIF surplus funds went to the district, according to CPS.
Sharkey also weighed in on news from Tuesday that Gov. Bruce Rauner's administration is preparing for a possible state takeover of CPS.
"Governor Rauner's threats of a takeover of CPS represent an educational abomination," Sharkey said, adding that Rauner "knows nothing about real education."
Sharkey said he believes Rauner's CPS takeover talk is aimed at trying "scare people" and ultimately "drive the district into a financial crisis in order to help him enact his turnaround agenda in Springfield."
Rauner has been pushing for his pro-business, anti-union policy agenda during the ongoing state budget impasse, now in its eighth month.
CTU plans to head back to Bank of America on Thursday afternoon for a rally and march to City Hall. Check back with Progress Illinois for coverage of the event.