Following a new report detailing how Wall Street sold toxic deals to school districts and municipalities that are costing communities billions in fees, interest and other payments, educators, parents, community members and local officials have joined together for a Day of Action in cities across the country. They are demanding transparency and accountability to ensure taxpayer money is being used to invest in schools and communities, not to enrich Wall Street.
"These deals are robbing schools and kids of desperately needed resources at a time when budgets have been cut to the bone and our schools are already being asked to do more with less," says AFT President Randi Weingarten. "Parents, educators and communities deserve basic transparency and accountability—both from the banks that continue to peddle these toxic deals, and from those officials who locked communities into spiraling debt and fees. Putting this money back into the classroom could mean more teachers, nurses and social workers; restoring art and music; creating community schools; and wrapping services for kids and families around schools."
"Dirty Deals," issued by the Roosevelt Institute, details how banks sold school districts and state and local governments predatory financial products like interest rate swaps and capital appreciation bonds—products that were laced with hidden costs and hidden risks, and in many cases were designed to fail—as well as charging exorbitant fees for products and services.
These deals are affecting schools, towns and cities across the country. For example, in Philadelphia, schools will lose more than $161 million as a result of 10 interest rate swaps. Los Angeles is now spending $290 million a year in financial fees—more than the entire city budget for maintaining its streets and highways. The Chicago Tribune this month detailed how the Chicago Public Schools will likely lose $100 million on a complex financing scheme. Detroit entered into a series of complex financial deals that has left the city $1.6 billion in debt. And the Peralta Community College District in California is paying $1.6 million a year in interest rate swap payments—the equivalent of 320 classes.
AFT members and leaders nationwide joined with parents and community members today to call for greater transparency and accountability.
"Philadelphia's budget crisis is no coincidence. It's the partial result of Wall Street banks rigging the game in their favor at the expense of schools, communities and students," says Philadelphia Federation of Teachers President Jerry Jordan, who is an AFT vice president. "The Pennsylvania Budget and Policy Center estimates that our city's schools have lost more than $161 million as a result of 10 different toxic swap deals. We call on the School Reform Commission to restore critical services by holding Wall Street to account for the money it has cheated our schools and students out of."
Detroit Federation of Teachers President Keith Johnson, also an AFT vice president, adds, "The predatory lending schemes contributed to the urban blight in Detroit as families lost their homes only to see them boarded up. While Detroit may one day recover, many of these families will have no such luck."
In Chicago, Chicago Teachers Union Vice President and Acting President Jesse Sharkey responded to the report, saying, "The mayor and the school district need to be as tough on their banker friends as they are on our neighborhood schools. In 2013, CPS closed 50 schools to 'save money' at the same time that banks and investment houses like Loop Capital and Bank of America were making millions from excessive fees and complicated swap deals of dubious legality. The banks owe us a rebate of hundreds of millions of dollars, which we should invest in 50 sustainable community schools with robust wraparound services, restorative justice programs, low class sizes and sufficient staffing levels."
And in Los Angeles, United Teachers Los Angeles President Alex Caputo-Pearl says, "Our school district, city and county are being systematically gouged by Wall Street. Last year, Wall Street banks made more than $200 million in fees at the expense of LA taxpayers. Our city stands to lose an additional $65 million from a toxic interest rate swap deal from the mid-2000s. We will call on the Los Angeles Unified School District to conduct a thorough analysis of its dealings with Wall Street so we can see where the banks are charging too much and we can work to get the schools LA students deserve."
[AFT press release]