CHICAGO -- The Chicago Public Schools is seeking board approval to tinker with $700 million of debt in its portfolio.

District staff are proposing to convert $300 million of short-term financing taken out in a line of credit to long-term debt; to refund another $220 million of debt from issues in 2002 and 2004 for economic savings; and to remarket $180 million of variable-rate debt with new bank credit support. The current support expires in March.

The district is stressing that none of the borrowing represents new money and none of the proposals restructures existing debt in a way that pushes off principal. The district has come under fire for its proclivity in recent years toward restructuring bonds that push off principal payments for budget relief. The practice contributed to a series of downgrades.

“The refunding will save $10 million and the use of the line of credit” on a short-term basis saved another $10 million, said district spokesman Bill McCaffrey. The district is leaving the $180 million in floating-rate mode due to favorable rates.

The current budget notes that the district issued a $300 million line of credit to fund interim capital expenditures with the goal of reducing long-term debt service costs.

The Chicago Board of Education was expected to consider a resolution authorizing the issuance at its monthly meeting Wednesday. No additional details on the timing of the sale or a finance team were immediately available.

Any savings the district can squeeze out in its budget are much needed as it grapples with a $1 billion deficit in its next budget. The district’s $5.7 billion fiscal 2015 budget relied on a windfall of property tax dollars by extending its collection cycle into the next fiscal year to help wipe out a $900 million shortfall.

"Our financial challenges continue to loom over us. This one-time action is not going to address our structural deficit and we just continue to tackle it, but we've got to receive pension reform from Springfield," schools chief executive officer Barbara Byrd-Bennett said last year.

CPS closed its last budget gap with $55 million in administrative cuts bringing to more than $700 million the size of cuts since 2011. It again dipped into reserves and extended its revenue recognition period to August 29, 2015 -- 60 days after the end of the fiscal year - which combined with reserves provided $811 million in relief.

The move to extend its revenue period provided an infusion of $650 million. While its fund balance will again take a hit, it's carrying more cash as the district ended up using less than planned to balance the books in fiscal 2014.

The district's pattern of using one-shots -- from reserves to debt restructuring - to balance its books in recent years, as well as its deep pension funding woes, have driven the district's credit dive. The district acknowledged as much but said it had little choice to avoid deep classroom cuts.

The district’s fiscal 2015 pension payment hit $634 million, the largest ever. The Chicago teachers' fund unfunded liabilities rose to $9.6 billion for a funded ratio of 49.5% in 2014 compared to $8 billion and a funded ratio of 54% year earlier.

Moody's Investors Service rates the board’s debt Baa1 and assigns a negative outlook. A downgrade below the mid-triple-B level by any two rating agencies would trigger swap terminations. Standard & Poor's rates the board of education A-plus and stable. Fitch Ratings rates the board A-minus with a negative outlook.

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