CHICAGO — The junk-rated Chicago school district doesn't meet any of five criteria that would warrant further state intervention, the Illinois State Board of Education has found.
The finding will be discussed by the state board at its meeting Wednesday. The board had launched the investigation earlier this year after the district had fallen under financial watch status for the last two years. It was aimed at determining whether the district met the threshold for "financial difficulty" status, which can trigger additional state invention.
The probe became the subject of a feud between Gov. Bruce Rauner's administration and Chicago Public Schools' leadership over just what powers the state would have over CPS based on school code statutes and exemptions built into the law that applied only to CPS.
"At this time, the district does not meet any of the criteria for certification," the report reads. "The district has not realized two consecutive years of negative operating fund balances nor is it forecasted in this model."
The report lays out an overview of CPS finances beginning in 2012 and forecasted through fiscal 2019.
On its current trajectory, an ending fund balance of $365 million is expected this year but it will be depleted and result in a negative $125 million balance in fiscal 2019. The district's stark deterioration since 2012 is laid bare. It then carried a fund balance from reserves of nearly $1 billion with 98 days cash on hand compared to a current 13 days on cash which is expected to fall to a negative 18 days in 2019.
The district expects to close the current fiscal year with a slight operating surplus of $46 million due to mid-year cuts and savings but a deficit of $21 million is expected next year.
The current numbers incorporate $31 million in savings from three furlough days ordered this year and $85 million in other cost reductions. An additional $120 million in savings are projected, but not detailed, for fiscal 2019. If the budget reductions as identified on their website are not realized, a negative, operational fund balance is possible for fiscal year 2018, the report said.
The district issued a total of $1.8 billion in tax anticipation notes in fiscal 2015 and had $700 million outstanding at the end of fiscal 2015. "The district continues to utilize short-term and long-term borrowing to address cash flow needs," the report says. The district did not provide all information sought, according to the report, and will continue to be monitored due to its watch status.
CPS said in a statement the probe's finding back up the district's position that "Gov. Rauner's attempts to drive CPS into bankruptcy are misguided and wrong."
The finding further frees CPS from worries that the state could block its borrowing power, which had interfered with the district's attempts to reach agreements on new credit lines. Rauner earlier this year warned the state could block future borrowing if the district was found to be in "financial difficulty" and has repeatedly called it a candidate for Chapter 9 although such a filing is currently impossible under Illinois law.
Illinois Attorney General Lisa Madigan recently issued an opinion siding with the district's position that it remains exempt from oversight and intervention based on a provision in the school code excluding districts that serve a population of more than 500,000, which applies only to CPS. The Rauner administration had argued that the exemption no longer applied.
CPS is rated junk by Fitch Ratings, Moody's Investors Service, and Standard & Poor's as it struggles with a $1.1 billion deficit, mounting teachers' pension costs, and the prospect of a fall teachers' strike. Its pleas for additional state help have so far gone unanswered.
A legislative overhaul of school funding sponsored by Sen. Andy Manar, D-Bunker Hill, that would provide CPS up to $300 million in additional aid and pension help stalled last week.
CPS has fully tapped $870 million of existing fiscal 2016 credit lines set to expire in August. District officials have warned new credit lines are needed to stay afloat and budget strides are needed to secure them.