Vallas claims CPS healthier under his watch

A big part of the mayoral campaign of Paul Vallas relies on his six-year record as CEO of the Chicago Public Schools under former Mayor Richard Daley. And the theme that Vallas often falls back on is that he was a turnaround specialist who revived a very troubled school system and left it in better financial and academic shape than he found it.

"I took over the school district when it had a $1 billion structural deficit and left them with $1 billion in cash and 70,000 more students than they have today," Vallas declared in a New Year’s Eve interview on WGN radio. "I’ve always been a problem-solver. My approach has always been to go in, bring financial stability to the systems that I’ve taken responsibility for, design budgets that are long-term financial plans that actually invest in the community to generate growth."

Vallas is facing a crowded field of contenders in next month’s city elections to replace the retiring Rahm Emanuel as mayor, and the flagging condition of the city’s public schools will be sure to present a major test for whichever candidate prevails.

Having a proven track record as a school fix-it specialist could be a big plus for Vallas. But how valid are his claims? We decided to take a look.

Vallas’ claims raise two questions. First, whether his basic facts check out. Second, whether they can be credited to his leadership.

News clips and columns from the Vallas era at CPS, which began in 1995, back up the first beat of his claim. They note that district leaders had projected before he took over that CPS was on track to run a deficit of more than $1 billion by 1999.

Under Vallas, that huge deficit never materialized, and district financial records he pointed to show that by his last year at the helm in 2001 CPS claimed a positive balance of nearly $1 billion in all of its financial accounts.

But can Vallas credit his policy decisions entirely for that transformation? Not exactly.

In 1995, lawmakers in Springfield turned over control of the district, which was facing one of many financial crises, to Mayor Richard M. Daley. He named Vallas, who had been serving as his budget director, chief executive officer. Daley also appointed Gery Chico, now a mayoral opponent of Vallas’, as school board president.

But the new guard at CPS also got to play by a different set of financial rules. Instead of receiving state aid earmarked for specific purposes, for example, the district started getting a significant amount of funding in the form of a block grant. Another big change that helped un-tie its fiscal hands: Lawmakers allowed property tax dollars, which had previously flowed directly into the pension fund for teachers, to go to CPS instead. And in 1997, legislators permitted the district to forego payments into the pension fund provided it hit benchmarks signifying sound fiscal health.

"He was not operating under the same conditions as the CEO that existed prior to 1995," said Amanda Kass, associate director of the Government Finance Research Center at the University of Illinois-Chicago.

During Vallas’ six years with the district, and for several years following his tenure, CPS paid next to nothing toward teacher pension costs. The Vallas era at CPS coincided with the dot.com bubble that sent markets soaring, helping the pension fund stay healthy even without the annual injections of cash it began missing out on.

Had Springfield not changed the law, the CPS teacher pension fund would have been paid $90 million in 1995 to cover the employer share of pension costs that year. Instead, it got $10 million. Over the next decade, the fund was out $2 billion.

We asked Vallas in a phone interview why he opted to stop pension payments. "The system was earning such strong returns, it didn’t require that we make contributions during those few years," he explained.

Kass said it’s considered best practice for local governments to continue employer share contributions regardless of the financial health of pension funds — something the 1997 law did not require. Had CPS continued contributions during the Vallas years, the pension fund would have had more cushion to weather the financial recessions that hit in 2001 and again in 2008, she explained.

That said, Kass added that her observations come with the benefit of hindsight after watching the pension fund balance worsen dramatically after Vallas left and his successors continued to put off payments even as the fund’s fiscal viability declined.

"I do think that Vallas inherited a challenging situation," Kass said, noting that ratings of CPS bonds improved significantly during his tenure and enabled a system all but shut out of the credit markets to begin borrowing again.

In short, CPS was on the financial ropes before Vallas took over but made significant fiscal strides under him. Changes in state law, however, gave him far more financial flexibility to operate than his predecessors.

In touting his success as CEO, Vallas also pointed to the size of the district under his watch compared with much-diminished enrollment figures of today. Enrollment is important as a symbol of how attractive CPS is to families of school age children, but it also carries real financial weight because the fewer students attending classes the less state aid the district gets.

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Vallas’ numbers are roughly accurate. CPS enrollment stood at nearly 425,000 when he left the district, but now sits at about 361,000, state and CPS figures show.

But in using enrollment data as a measuring stick of his success, Vallas ignores significant demographic changes in the city since his time at CPS that render such a comparison misleading.

Chicago saw a period of population growth in the 1990s due in large part to a substantial increase in immigrants, largely from Mexico. With that increase in immigration came an influx of students into CPS, said Chicago demographer Rob Paral.

"The stuff going on demographically today is quite different than the forces that were in play in the ‘90s," he said. "Chicago was a huge magnet for all that ‘90s immigration."

In the years after Vallas left CPS, the immigrant population of the city stopped growing and the African-American population began a significant decline.

Minority students make up about 90 percent of CPS enrollment, so the changing demographics had a significant impact at the schools.

Vallas said, "I took over the school district when it had a $1 billion structural deficit and left them with $1 billion in cash and 70,000 more students than they have today."

The bond rating and bottom line at CPS did improve significantly under Vallas, but new laws passed in Springfield also removed fiscal handcuffs which gave him more flexibility to manage the district’s finances than his predecessors enjoyed.

And he is correct that CPS has nearly 70,000 fewer students today than in 2001 when he departed. But that is due at least in part to significant demographic changes in Chicago outside the control of any schools chief.

His claim is accurate but requires additional information to understand the context. We rate it Mostly True.

MOSTLY TRUE – The statement is accurate but needs clarification or additional information.

Click here for more on the six PolitiFact ratings and how we select facts to check.