CHICAGO – Cash-strapped Chicago Public Schools will have to wait until the end of the month to find out whether the courts will intervene in its plea for more state funding.
CPS is asking the court to issue a preliminary injunction blocking the state from any further distribution of aid based on a formula it claims discriminates against its mostly minority enrollment. Even if the court agrees there's no assurance that it will result in additional funding needed to close its deficit.
The state is asking the court to dismiss the lawsuit filed this year by CPS accusing it of violating the Illinois Civil Rights Act because of funding disparities between CPS and other districts.
After filing a series of briefs laying out their arguments, attorneys for CPS and Illinois Attorney General Lisa Madigan’s office squared off in oral arguments Wednesday. Cook County Circuit Court Judge Franklin Ulyses Valderrama said he would rule on both sides’ motions on April 28.
The junk-rated district has said it will have to close schools several weeks early to erase $129 million of red ink that remains after cuts to close a $215 million hole.
The gap occurred when Gov. Bruce Rauner vetoed pension funding help for the district late last year. The aid was conditioned on passage of state pension reforms which have remained stalled amid a nearly two-year-old state budget impasse.
After the April 28 ruling “we will know where we stand,” schools chief Forrest Claypool said following the hearing. He didn't say what other steps the district might take if the case is dismissed or whether the April 28 date allowed sufficient time for the district to act on school closures or other needed steps.
There’s also no guarantee that a favorable ruling from the court on the injunction will immediately result in any new funding, because the court can’t order the General Assembly to appropriate funds.
Claypool would say only that the courts have “broad authority to fashion a remedy.” Clergy from churches with majority Latino and African American congregations flocked around Claypool as he spoke.
CPS filed the complaint in chancery court against Rauner, other state officials and state board of education on Feb. 14 alleging violations of the Illinois Civil Rights Act of 2003. It contends under a fair system it would receive $500 million more annually.
The district argues the state’s funding structure is unfair, as Illinois provides $4 billion in annual pension help for all other districts, covering most of their pension payments while only providing CPS with $12 million.
The district argues it receives a total of 15% of the state aid while educating 20% of Illinois' public school children. CPS gets $1.7 billion annually while $9.6 billion goes to all other districts.
The state countered in its filings that CPS last year received more than $252 million more through the block grants than it would have if it received the same funding as all other school districts in the rest of the state.
After ordering furlough days and trimming costs, CPS says it has run out of options without more state help.
During oral arguments, state attorneys claimed Gov. Bruce Rauner and the Illinois state is immune to the district’s claims as funding decisions rest with the General Assembly, and the civil right law can’t be used override those decisions or the state’s pensions laws. “This is about appropriation decisions,” said AG attorney Michael Dierkes.
CPS lawyer David DeBruin, of Jenner & Block LLP, countered that the application of the civil rights law doesn’t “exempt the state” from abiding by it.
AG lawyers warned a preliminary injunction blocking any further distribution of funds under current formulas would harm school districts across the state who might not even be aware of the CPS lawsuit.
“If I were to agree with you” other districts’ funding would be stayed without those districts “having been heard” Valderrama told CPS. The judge said he lacks the authority to order the General Assembly to appropriate funds or to order Gov. Bruce Rauner not to veto funding.
CPS in court filings has also argued that it also has limited ability to borrow more, saying it must use remaining authority to help cover its $733 million teachers’ pension payment owed in June. The state questions the validity of that position.
Ending the school year June 1 would save about $91 million, while curtailing some summer school would save another $5 million. Trimming so many days, however, would violate state requirements on school days, so the district could lose between $45 million and $60 million in aid in the next fiscal year.
CPS closed the books on fiscal 2016 with an operating deficit of $537 million, has drained most reserves, and tapped out its ability to continue pushing off principal debt repayment. CPS' general obligation bonds are rated junk Fitch Ratings, Moody's Investors Service, and S&P Global Ratings. Kroll Bond Rating Agency rates the district's GOs in the triple-B category.
With concern growing over the possibility of schools closing early, Mayor Rahm Emanuel dodged questions Wednesday over whether the city would step in to help. Emanuel, who handpicks school board members and the district’s chief executive officer, tapped tax increment financing surpluses to help cover the first year of a new teacher’s contract in fiscal 2017.
Asked several times during the news conference that follows City Council meetings, Emanuel said: “I’m not doing hypotheticals…a judge is going to make a big decision on a big case CPS has brought. That’s first.” A proposal to free up more TIF funds is pending before the council’s Finance Committee but no vote was taken this week as some aldermen voiced frustration over CPS’ refusal to testify on its finances.