CHICAGO - The Chicago Public Schools proposed $5.7 billion fiscal 2015 budget relies 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.
The budget was released late Thursday and the final version will go before the Chicago Board of Education for a vote at its meeting later this month. About $4.8 billion of the budget goes to schools.
"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.
CPS said it closed its budget gap with $55 million in administrative cuts bringing to more than $700 million the size of cuts since 2011. It will again dip into reserves and will extend its revenue recognition period to August 29, 2015 -- 60 days after the end of the fiscal year - which combined with reserves will provide an additional $811 million.
The move to extend its revenue period will provide 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.
In defense of the tax collection move, CPS said the extended period brings CPS in line with the city and majority of school districts in Cook County. It used a similar tactic to raise revenue in the fiscal 2014 budget but it extended the collection period through just one month, not two as is now planned.
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.
"This is a one-time fix for this year and gets the district through next school year without having to initiate major cuts to the classroom, but without pension reform, we may not be able to protect the classroom from cuts," a district statement said.
The budget document highlights what the district sees as financial accomplishments in the past year, and its goals in the next. The district issued a $300 million line of credit to fund interim capital expenditures.
"This line of credit reduced budgeted debt service by $30 million in fiscal 2015 a result of delaying the bond financing for capital projects by a year and reducing debt service," the budget overview said.
To fund fiscal 2015 capital projects totaling $466 million, the district intends to sell general obligation bonds although a final size for the borrowing has not been released. The capital budget includes plans to install air conditioning in schools, build a new selective enrollment high school named for President Obama, and other upgrades.
The district also will refund $180 million of variable rate debt ahead of credit facility expiration this year.
State general aid is expected to go down by about $50 million in the new budget. The plan relies on a total of $2.2 billion in property tax revenue. CPS expects $60 million in state capital support for debt service. The budget earmarks $604 million for debt service.
The district said its pension contribution in the next budget will hit $634 million, the largest ever, and reiterated what it calls the need for a state legislative pension reform package. The CPS teachers' pension fund has $6.8 billion of unfunded liabilities for a funded ratio of 59.9%.
The board last year adopted a $6.6 billion budget that closed its deficit through a property tax increase, spending cuts and the use of $700 million in unrestricted and restricted reserves, including a first time draw on a debt service account.
The use of reserves, a non-recurring revenue source, left the district with a structural imbalance and projected $900 million gaps again in fiscal 2015 and 2016. Moody's Investors Service in March lowered the board of education's rating to Baa1 and assigned a negative outlook, its second downgrade within a year.
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 downgraded the board in September, lowering it to A-minus with a negative outlook.
