The Chicago Board of Education last week unanimously approved a $5.14 billion budget for fiscal 2009 that closed a looming deficit through cuts, the use of reserves, and interest rate savings by delaying a planned new-money bond sale.
The budget also provides an additional $45 million to expand classroom programs aimed at improving academic results, and it’s the first budget in recent memory in which Chicago Public Schools officials did not seek a property tax increase.
“Mayor Daley challenged us this year to find a way to continue supporting our key programs without raising taxes,” board president Rufus Williams said in a statement, referring to Chicago Mayor Richard Daley’s mandate that CPS not raise property taxes following significant increases by both the district and city last year.
“These are very tough economic times, and this year — due to the hard work and careful planning of our board and our budget team over the past several years — we were able to draw from our reserves and not further burden taxpayers, despite our continuing need for more funding for our children,” Williams said.
The board tapped about $100 million from its unreserved budget balance that, combined with $35 million of interest rate savings and $12 million in cuts and other so-called efficiencies, eliminated the looming deficit.
“We cannot continue down this path,” CPS chief executive officer Arne Duncan said in the statement. “We cannot continue to take $100 million from our reserve fund beyond this year. Going much deeper than this can jeopardize our financial security and the solid standing we’ve worked so hard to secure with the rating agencies. We need a more stable state-funding structure that meets the needs of school districts across the state.”
The draw on reserves will bring the balance in that account down to $380 million in the next budget. The administration originally intended to use $50 million, which still left a $100 million hole in the budget. Officials had hoped to close it with additional state aid. Although Illinois gave the district an extra $98 million, officials had been seeking nearly $190 million. So CPS opted to boost its draw on reserves to $100 million, although that still left a $50 million hole.
That hole was closed with the cuts and one-time debt service savings by shifting the timing of the board’s new-money issue to late next spring. It had typically come to market with between $200 million and $300 million in the late summer or fall.
The $5.14 billion budget is up about 4.3% over the fiscal 2008 spending plan. Capital spending brings the budget up to about $6.15 billion. The board will vote on the budget in August. The school system also will continue to push for state passage of a proposed $34 billion capital budget that would help the cash-strapped system keep its $5 billion capital program on track.
Despite the district’s struggles, Fitch Ratings this spring revised its outlook on the Board of Education’s A-plus credit to positive from stable. Moody’s Investors Service rates the district A1 while Standard & Poor’s rates it AA-minus.
The Chicago Urban League recently filed a lawsuit challenging the constitutionality of Illinois’ school funding system because of the disparities in funding across the state due to the heavy reliance on local property taxes.