Nearly 200 teachers were fired and more than 800 others threatened with dismissal this summer at seven city schools criticised for alarmingly low test scores, reading skills and truancy rates.
Chicago and a growing number of states and big cities have targeted schools that seem resistant to reform, and threatened them with re-staffing or closure - in effect, declaring them academically, rather than financially, bankrupt.
One of the Chicago schools - DuSable high school - showed results that were typical: a 59 per cent attendance rate, a 63 per cent drop-out rate over four years, and teenagers with the reading skills of eight-year-olds.
"We've always had the ability to take over for fiscal reasons but no way of taking over a district or school if they were doing poorly academically," said Chris Pipho, a spokesman for the Education Commission of the States in Denver. The commission is an umbrella group for the 50 states whose governments bear the main responsibili ty for education in the US.
Academic bankruptcy policies, though under different names, have now taken hold in 20 states and are spreading, said Mr Pipho. California is the latest to consider a system that rewards high-perfor ming schools financially but threatens drastic measures for those stuck at the bottom of the ladder.
The move reflects an urge for action that is widespread in big urban districts such as Chicago, with schools that just do not seem to deliver, however much money and advice is thrown at them. The reasoning is that they and their teachers and administrators, rather than parents, students or social conditions, are standing in the way of change.
In Los Angeles the new superintendent of the second-largest district in the country after New York recently listed the 100 worst schools and vowed to improve them. Ruben Zacarias said that targeting them does not necessarily imply incompetence on their part, and they are not for the moment threatened with closure or firings.
The action mirrors a feeling that schools in the poorest urban districts with large minority populations may have attracted a disproportionate number of second-rate teachers. Union rules and tenure are sometimes blamed.
From Houston to Denver, often under interventionist superintendents, schools have been "reconstituted" or temporarily closed, and teachers offered untenured jobs elsewhere. President Bill Clinton called for failing schools to be closed in his re-election campaign last year.
Typically, schools on these lists at first get special attention, with technical assistance from "distinguished educators", and sometimes extra funding. Parents and headteachers may be handed more local control; alternatively, families are given the option to move children elsewhere. But the threat to Chicago schools which failed to improve was made clear early on.
Chicago's "accountability council", a collection of business leaders appointed by the school board, made the recommendations. At seven schools,1,026 teachers were dismissed and invited to re-apply. The 188 who were not re-hired included many veterans of 20 or more years' standing, who were offered help finding jobs elsewhere. Five new principals were installed.
"This is a pretty bold step, but we have schools that are not showing progress and not improving and we have to use every instrument at our disposal," schools chief Paul Vallas told the Chicago Tribune newspaper. "Sometimes you just have to start over."
States began adopting "academic bankruptcy" measures 10 years ago, but the pace has quickened lately.
Critics say these policies look too closely at test scores, and demand too much too soon. Some states, such as Kentucky, West Virginia and New Jersey, have reported improvements. Results in other places such as San Francisco, which has "reconstituted" a number of schools, are, however, inconclusive.