CHICAGO – Chicago Public Schools plans to borrow $389 million to make it through the current school year, money officials hope to pay back with overdue state aid payments.
The borrowing will be expensive because of the district’s junk bond rating, and would only serve to avert a financial crisis until next fiscal year, when CPS will face another massive budget deficit, the Chicago Tribune reports.
Chicago Chief Financial Officer Carole Brown said the board will vote Wednesday on a plan to borrow $389 million to help cover a $721 million payment to the Chicago Teachers’ Pension Fund. The state owes the district $467 million in past due state aid payments, but CPS can only borrow up to 85 percent of that amount, Brown said.
District officials are banking on funds from a new $250 million pension property tax levy this summer to cover the rest.
“After a lot of hard work by the CPS and city financial teams, and many discussions with their lending partners, tomorrow we will brief aldermen on the district’s finances and the financial plan for the remainder of the CPS fiscal year,” Mayor Rahm Emanuel’s spokesman, Adam Collins, said in a statement.
City officials had threatened to cut days off the end of the school year to balance the budget, but Collins said Friday that cuts are “not part of the conversation” with aldermen, NBC Chicago reports.
Finance officials told aldermen Emanuel considered a bridge loan from tax-increment financing districts and making a partial payment to the pension system, but ruled against those options because of how they could impact the school district’s already shaky credit.
“Instead, CPS, which needs $596 million to finish the year, will go it alone on short-term borrowing that will allow it to make the bulk of a $721 million teacher pension payment due June 30, minus $250 million from a dedicated property tax increase that will get deposited directly later in the summer, according to sources” who spoke with the Chicago Sun-Times.
“They would not divulge the source of the borrowing, sure to resemble a payday loan, its exact amount or the interest rate expected to be paid by a district in which its credit card was believed to have been maxed out,” the news site reports.
The mayor and CPS officials are still hoping for a state bailout or new school funding formula to save the district from financial ruin, and city and school officials placed the blame of Gov. Bruce Rauner for the mess in the presentation to aldermen.
The Republican governor has been locked in a two-year stalemate with the Democrat controlled state assembly over the budget, differences centered mostly on the public pension systems and plans to overhaul the school funding system. Rauner vetoed $215 million for pension payments when the legislature did not approve a broader effort to address pension problems, and CPS had built the $215 million into its budget as if it was guaranteed.
“We are not willing to let Springfield off the hook,” Brown told aldermen, according to the Tribune.
But both the Tribune and Sun-Times pointed out CPS’ financial problems are mostly self-inflicted, and the governor doesn’t appreciate city officials throwing shade.
“Instead of engaging with leaders and lawmakers to find solutions to this crisis, the mayor continuously chooses to lay blame on others instead of taking responsibility for his own massive failure of governance,” Rauner spokeswoman Eleni Demertzis said Thursday. “While the mayor is pointing fingers at Springfield, he’s running a city with crumbling infrastructure, a school system in crisis and violence that affects every neighborhood in Chicago. It’s apparent that this mayor of mismanagement is avoiding responsibility as a means to distract from the failures of his own leadership.”