CHICAGO – Chicago Public Schools’ proposed $5.75 billion fiscal 2018 budget received a black mark from the Chicago Civic Federation Friday for its reliance on still uncertain revenues and borrowing.
With the schools already facing budget, liquidity, debt and pension funding crises, the plan relies on nearly $570 million in still uncertain funding and on costly short- and long-term borrowing for operations and does “not do enough to divert CPS from its dismal fiscal trajectory,” according to the report from the local research organization. The Chicago Board of Education will vote on the budget Monday.
“Chicago Public Schools’ practice of budgeting for hundreds of millions of dollars in dubious resources has twice proven devastatingly unsuccessful,” said federation president Laurence Msall. “Relying this year on $269 million in mystery funding from the city of Chicago, coupled with a growing debt burden, does nothing to move the district forward financially or in a transparent manner.”
The city has yet to detail how it plans to aid the district. The budget also relies on $300 million of additional state aid and help in covering its teachers’ pension payments. Legislative leaders announced a tentative agreement Thursday on an overhaul of school funding and will meet Sunday in an attempt to finalize it so that voting can begin as soon as Monday. Mayor Rahm Emanuel suggested Thursday that the deal provides the district with the expected funding and more.
“However, details of the agreement have not been publicly released, and the state’s impasse has demonstrated that even agreed-to deals can fail to materialize,” the federation wrote. Underscoring the acrimony at the state capital, Gov. Bruce Rauner criticized pieces of the legislative compromise on Friday, one day after praising it and applauding leaders.
The rising volume of the district’s debt is among the most concerning factors behind the federation’s opposition to the budget. The district has issued nearly $2.1 billion of debt, $1.9 billion of it new money, over the last two years and is paying punishing yields due to its junk ratings and precarious finances.
“CPS’ fiscal year 2018 budget also relies on $1.55 billion in short-term borrowing and authorizes additional grant anticipation notes to cover delayed state funding at an extraordinary projected interest cost of $100 million—money that ultimately cannot go to the classroom,” the federation wrote.
The budget also does not adequately address long term planning or back up options should funding from the city or state fall through. The federation also raised the specter of greater oversight as a means to stabilize the district’s finances.
The report suggested resurrecting the School Finance Authority as an option should its balance sheet continue to deteriorate. The authority created by the state legislature oversaw district finances after the district’s financial collapse in the late 1970s. Moving the district under the auspice of the city as a city department is also an option, the federation said. The district’s board is currently appointed by the Chicago mayor and most major school decisions flow through city hall.
The analysis did offer some praise for the district’s elimination of the teacher pension pick-up for new hires, ongoing pursuit of savings through management efficiencies, and CPS’ continued advocacy for a more equitable school aid formula.
