The Chicago Board of Education is set to vote on a measure that would allow officials for the public school system to authorize $200 million of new borrowing in an effort to help the cash-strapped district make ends meet through the end of June, as well as establishing a separate line of credit that would allow them to borrow almost $1 billion to get through the next fiscal year.
The measures would merely be short-term fixes for the district that would not solve the ongoing financial crisis. The most pressing matter for the district at the moment is the bill totaling over $600 million for teacher pensions that is due at the end of the month.
While Mayor Rahm Emanuel has not said whether the payment will be made on time, he did say that doing so would mean cuts to classrooms across the district. Even if funds are approved to be borrowed, additional budget cuts could remain necessary, writes Juan Perez Jr. for The Chicago Tribune.
“We’re at a situation now that if you make that pension payment in its completion — which has been done for four years in a row for the first time in a long time, CPS has made those pension payments — we could no longer make that payment and not have it impact the school building and the classroom,” said Emanuel.
A recent report showed that the district will owe upwards of $772 million by fiscal 2020. However, even if the state legislature approved the district to take a break from pension payments for the next five years, the accumulated deficit in the district would still reach $2.4 billion in that same time period, writes Karen Pierog for Reuters.
According to Jesse Ruiz, the school district’s interim CEO and board member, the district’s financial troubles, which total around $1.1 billion, is due to decreased education funding by the state in addition to the “broken pension system that penalizes Chicago taxpayers and our city’s children.”
“In just two years, CPS has paid more than $1 billion for pension costs, and while the district has made every effort to balance past budgets without touching classroom spending, if Springfield does not take action, that may no longer be the case,” Ruiz said. “As an independent report shows, CPS is running out of cash and we are seeking a $200 million line of credit to enhance cash flow management.”
A number of fixes have been suggested including raising around $450 million in new property tax revenue throughout the city, increasing state funding, decreasing operating expenses to equal what they were in 2011, and a reduction of employee healthcare and pension costs, reports Fran Spielman for The Chicago Sun-Times.
However, even that list has issues, as financial problems are being faced by both Chicago and the state if Illinois. In addition, teacher unions oppose the proposals.