Chicago’s Elite Fights Progressive Mayor Over Schools and Taxes

(Bloomberg) -- When Brandon Johnson was elected mayor of Chicago, the progressive politician was received with nervous caution from the city’s business leaders who’d lost patience with his predecessor.

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But over the intervening 18 months the relationship has deteriorated from frosty to hostile. Business leaders are already working to curb his power, setting the stage for a challenge against him in 2027.

Johnson, a former organizer with the city’s powerful teachers union, had already alienated many of Chicago’s economic leaders by proposing a series of taxes on the rich. But it’s a fight over schools that’s turned behind-the-scenes sniping into political action.

Executives from firms including GCM Grosvenor and Citadel threw their cash behind candidates for a new elected school board this month. Their money helped helped defeat six of 10 union candidates, delivering a blow to Johnson and the teachers union that propelled him to City Hall.

“We have to make Chicago an attractive place for people to want to come, and instead, people are fleeing,” said Pete Kadens, who made his fortune in the solar and legal cannabis industries before co-founding Hope Chicago, a nonprofit focused on post secondary education. “The business community really understands that, and they’re invested. For the next couple years, I think they’re going to fight, there’s going to be a lot of pushback on Johnson’s agenda.”

Businesses had already turned against former Mayor Lori Lightfoot — the first openly gay Black woman to lead the city — for her failure to curb violence in the wake of the pandemic. Johnson, who is also Black, surprised pundits when he beat her — the first mayor of Chicago to lose a reelection bid since 1983. But less than two years into his government and his approval rating has sunk to below 30%.

Jonson’s battle with schools started earlier this year, when he was caught up in a debate over whether to end school choice and move away from investing in selective enrollment, magnet and charter schools — coveted establishments that provide academically-advanced programs.

He was later engulfed in a dispute between the district and the teachers union over how to pay off a debt that sparked a surprise budget deficit this year.

On one side is Johnson and the unions, who first proposed borrowing $300 million to pay the debt. On the other are powerful donors fighting to keep city finances in check and ensure school choice.

The turmoil is adding to concerns about the city’s inability to close another $1 billion hole in its finances at a time wealthy residents continue to flee to Florida, Texas and Tennessee.

Griffin’s Views

Billionaire Ken Griffin, who relocated his Citadel financial conglomerate to Miami in 2022, weighed in on the debate in an interview at the Economic Club of New York last week.

“The mayor of Chicago is a former member of the teachers union, negotiating with the teachers union,” Griffin said. “The taxpayers and the children are left out in the cold.”

Citadel’s Chief Operating Officer Gerald Beeson was among business leaders that donated to support candidates running against the ones backed by the Chicago Teachers Union, contributing $5,000. 2Fi Investments Chief Executive Officer Jim Frank, who’s on the board of nonprofit Chicago Public Education Fund, put up more than $100,000 together with his wife.

Michael Sacks, a prominent Democratic donor and chairman of GCM Grosvenor, and his wife gave more than $69,000.

Chicago is transitioning to an elected school board, with voters able to select 10 members in the Nov. 5 election. The remainder are appointed by the mayor.

While full donation records won’t be public until the end of the year, initial data showed that the CTU spent the most — $2.4 million — and lost the most seats.

“This election was a referendum on the mayor and on the leadership of the teachers union,” said Hugo Jacobo, a consultant at L2 Strategies, who started Chicago Democrats for Education, a political action committee that funded non-CTU backed candidates.

To be sure, the union still holds a majority on the school board, at least until 2026, when voters elect all 21 members. CTU President Stacy Davis Gates said billionaires poured millions into the race and failed.

“Chicagoans elected a mayor and a board that is committed to transforming our education system to end generations of inequity and provide quality public education in every neighborhood,” she said in a statement.

Chicago and Illinois have been struggling with persistently high crime, population declines and high-profile corporate departures that also include Boeing Co. and Caterpillar Inc. In the past five years, the state has lost almost $42 billion in adjusted gross income, according to the Internal Revenue Service.

Approval Ratings

While crime rates have declined 11% this year, Johnson’s popularity has continued to slip. In May, on the anniversary of his first year as mayor, his approval ratings stood at just 28%, according to a poll for Crain’s Chicago Business by political consultants M3 Strategies.

“The business community, the philanthropic community and the civic community are rallying together, working together to solve the challenges that currently are not being solved at City Hall,” said Jennifer Guzman, executive director of Rise Chicago, a non-partisan voter engagement group backed by leaders including Ira Weiss, a founding member of Hyde Park Venture Partners. “If we don’t have a different outcome in 2027, then I think we have some cause for concern.”

Even before the current troubles, the city’s schools were already struggling. While enrollment increased over the past year, fueled by a wave of migrants, the number of kids in schools is still about 10% below pre-pandemic levels.

“It’s critically important that we have a strong public school system here in Chicago, because it does help attract talent,” said Terry Duffy, CEO of Chicago-based CME Group Inc., the US’s largest derivatives exchange.

The debate over school choice was a major driver of donations. David Weinberg, the board chairman of the Illinois Network of Charter Schools, gave $26,900 personally to five candidates. That’s on top of $74,000 that the INCS and its PAC donated.

Melinda Young, a program manager at Airbnb Inc. who has lived in Chicago since 1999, said she would leave the city if selective-enrollment options weren’t available. Didem Greco, who owns DCG Realty with her husband, said that shifting funding away from gifted and magnet schools would be another blow for the already struggling real estate market as families flee to the suburbs.

“The better the school district, the property values increase because there’s more demand for the housing,” she said.

The school board race also attracted cash from independent expenditure committees, which can fund ads without providing directly to candidates.

The one set up by the Urban Center Action counted donations from billionaire Joe Mansueto, founder of Morningstar Inc., and Paul Finnegan, chairman of Madison Dearborn Partners. INCS also set up one, which spent $2.3 million and saw inflows from Jim Walton, an heir to the Walmart Inc. fortune.

Kadens, who didn’t contribute to the races, said it’s hard for Johnson to stand against the CTU.

“He needs their capital to be able to run his administration and then in his mind to get elected again, which in my mind is not going to happen,” Kadens said.

--With assistance from Shruti Date Singh.

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