(Guest post by Greg Forster)
During the mad real estate rush a couple years ago, five school districts here in Wisconsin (including the biggest district here in my county) borrowed $200 million and sunk it into some extremely unwise investments hoping to get rich quick.
Because that’s exactly why we gave the public school system the right to tax us – so it could play the market with our money.
The investments all went south and are now worthless.
But don’t panic! Fortunately, they structured the deal so that in the event they lost all their money, they could totally shaft their creditors. The investments were made by a trust they set up rather than by the districts themselves, so the districts aren’t liable for the losses. Their creditors have to eat it all.
One bank, which lent the districts $165 million, has asked the districts to try to pay at least some of it back, on grounds that they have a “moral obligation” to make the losses good even if they don’t have a legal obligation to do so.
Here, according to the Milwaukee Journal Sentinel, is the districts’ response:
The districts’ officials have argued they are protected from paying back the $165 million because the loans were undertaken by trusts rather than the districts themselves and because a moral obligation is not the same as a legal obligation.
But remember, public schools are the cornerstone of democracy because they and only they are capable of inculcating children with strong civic values like responsibility and respect for the rights of others.