Effects Of The Economy

Here's a blog post from Rod Estvan about the economy, its effects on CPS, and the use of international comparisons:

Our city has been praised by many for

escaping the rust belt syndrome and being a transformed urban center

built around the economic realities of the Twenty-First Century.

But a recent Wall Street Journal (April

9, 2009) has an article titled “Chicago’s Magnificent Mile Hits

a Rough Stretch.” The article discusses Borders decision to close its

largest store in the nation located on Michigan Avenue because according

to a company representative the “location wasn’t meeting our profit

objective and hadn’t for some time.”

I could go on with bad news relating

to our city’s transformed economy, but I think most of us are aware

of this rather obvious development. But how does the economy impact the CPS?

It impacts the school district in two ways, in terms of revenues and

in terms of educational vision.

Click below to read the rest.

From Rod:

Our city has been praised by many for

escaping the rust belt syndrome and being a transformed urban center

built around the economic realities of the Twenty-First Century.

But a recent Wall Street Journal (April

9, 2009) has an article titled “Chicago’s Magnificent Mile Hits

a Rough Stretch.” The article discusses Borders decision to close its

largest store in the nation located on Michigan Avenue because according

to a company representative the “location wasn’t meeting our profit

objective and hadn’t for some time.”

I could go on with bad news relating

to our city’s transformed economy, but I think most of us are aware

of this rather obvious development. But how does the economy impact the CPS?

It impacts the school district in two ways, in terms of revenues and

in terms of educational vision.

First the revenue picture, the largest

impact of this decline in Chicago’s new economy will be for Personal

Property Replacement Taxes (PPRT). The primary basis for this tax is

corporate income-tax receipts which are directly linked to corporate

profits. From FY 2003 to FY 2008 CPS cashed in on the new economy PPRT

receipts for all funds grew from $106 million to $215.5 million or a

103% increase.

In FY09 CPS estimated PPRT was to decline by 11%, but

in reality it could have fallen by 30%. Projections for FY2010 will

likely be still lower. The PPRT provides for about 3% of CPS operating

funds, the biggest revenue factor of course are property taxes which

account for 37% of CPS operating funds.

If or when CPS will experience a decline

in property tax revenue is a very complex issue because CPS will raise

its taxing rate. One thing is for sure 2009 is a tax reassessment year

for properties in the city and the effect of the approximate 15% market

rate decline in property market values will have on equalized assessments

will be felt at least to some degree.

But, the more important issue is that

for CPS’s educational vision, particularly for Education to Careers

(ETC) clusters in high

school driven by the transformed economy of Chicago. Numerous

low income CPS students are being prepared for jobs in basic accounting,

culinary arts, construction technology, and other service sector jobs

like cosmetology.

Many

of these jobs were growth areas in Chicago’s transformed economy;

many are now in dramatic decline. For example restaurant sales, when adjusted for inflation,

declined in the first nine months of the year, a first since the recession

of 1991, according to the National Restaurant Association. The US Bureau

of Labor Statistics (BLS) recently reported that foodservice has lost

66,500 jobs since June 2008.

Another part of the interrelation between

CPS and the economic transformation are thematic schools, some or example

focusing on the medical industry or finance. We have seen significant

job cuts here in Chicago in both sectors. Probably even more frightening

for some of Chicago’s academically strongest low income students who

do go on to college are the number of young college graduates who are

either unemployed or under employed.

A recent study conducted by the National

Association of Colleges and Employers (NACE)

is predicting that employers will

hire 22% fewer graduates from the class of 2009 than they did last year.

It goes without saying that those most likely to be hired will have

graduated from more competitive colleges that most CPS graduates can’t

qualify to enter.

In December 2008 alone, 282,000 degree-holders

in the US were laid off, but the number deemed unemployment by the Department

of Labor rose by only 2,000. The government only considers people unemployed

if they are out of a job but looking for work, and a large number of

these young adults are leaving the workforce by going back to graduate

school. This is an option many low income CPS graduates leaving college

will likely not have, in fact given the debt they have built over four

years they may be broke.

But there is a bright side to all of

this, the situation of USA’s number one economic competitor China

is far worse. This year, some 6.1 million students are expected to graduate

from China’s institutions of higher education and enter the job market.

But the unemployment rate for degree-holders in China is already at

27%.

But wait haven’t I heard our Mayor

discussing the Chinese economy and the need for our education system

to look more like China’s? In October 2005 our Mayor said “The idea,

still having two months off, is ridiculous in this country. If you're

going to compete with India and China, they're going to school six days

a week and they don't take the summer off.”

In March 2006, the Mayor

also said this: “Countries like China and India continue to gain the

competitive edge because they have made investments in science and math

education that allow them to produce more doctors, technicians, engineers

and others who are prepared for the jobs of today.”

But unfortunately

two years later 27% of these Chinese college graduates prepared for

the jobs of today have no jobs.

Leave a comment