CHICAGO - Chicago Public Schools and its teachers' fund have ended negotiations over the district's request to defer $500 million of its fiscal 2016 contribution, the two announced in a joint statement.
The fiscally stressed district that tapped credit lines to cover most of its $634 million contribution for fiscal 2015 late last month had asked the fund to defer some of its 2016 contribution into fiscal 2017, as it works to close a $1.1 billion deficit. In exchange, the district offered to shift to a monthly payment schedule and pay an interest rate tied to investment return assumptions.
"After exploring various options and identifying potential benefits for both sides, we have mutually decided to end these discussions," CPS interim chief executive officer Jesse Ruiz said in a statement issued late Friday. "CPS is committed to exploring all options on the table to resolve its structural deficit while working with its partners in Springfield on a solution to the district's significant financial challenges."
CTPF Executive Director Charles Burbridge said the parties were unable to agree on a solution after several meetings. "We have concluded that alternative options will need to be explored in order to resolve CPS's budget deficit while providing security for our members," he said.
The district's budgetary and pension ills have dragged its ratings down and raised questions over its solvency.
Standard & Poor's dropped the Chicago Board of Education's general obligation bond rating two notches to BBB and put it on CreditWatch negative recently after CPS borrowed against its credit lines to cover the fiscal 2015 payment.
The board's $6 billion of GO debt previously was rated A-minus with a negative outlook by the rating agency. The credit score is two notches above a speculative grade. Moody's Investors Service in May stripped the Chicago Public Schools of its investment grade rating, lowering it three notches into junk territory at Ba3 with a negative outlook.
Fitch Ratings assigns the Chicago schools its lowest investment grade rating of BBB-minus with a negative outlook; Kroll Bond Rating Agency assigns a BBB-plus rating with a stable outlook but recently put the rating on watch negative.
"KBRA's action is based on the board's unresolved budget deficit for FY 2016 and the lack of meaningful progress in the development of a long-term funding solution for Chicago Public Schools at the state level. In addition, this action is further driven by the Board's increased liquidity pressure," the agency wrote.
CPS and Mayor Rahm Emanuel want the state to pick up a greater share of teacher pension payments, to bring it in line with support provided to other districts in the state, which participate in the state teachers' pension fund. A plan laid out by Emanuel would also raise property taxes and require teachers to pick their share of contributions covered by the district.
