The Chicago Board of Education last week unanimously approved a new $5.9 billion budget that eliminates a $712 million deficit through cuts, use of reserves, and a property tax hike.

The spending plan includes a $5.1 billion operating fund, $391 million in capital projects funding, and $410 million for debt service. The budget is the first under Jean-Claude Brizard, who Chicago Mayor Rahm Emanuel chose as chief executive officer of Chicago Public Schools after he was elected this year.

The budget trims about $221 million by reducing administrative costs, eliminating some programs, and improving operations. It cancels a 4% cost-of-living wage increase for teachers called for in their union contract to capture savings of $100 million, but does fund scheduled annual step increases for teachers.

The district will draw $241.1 million from its various reserves to further chip away at the deficit. About $181.3 million will come from its fund balance, which provides a liquidity cushion, and another $69.8 million from other reserve funds.

CPS adheres to a board-imposed goal to keep its fund balance at or above 5% of general fund appropriations.

The once-flush fund, long cited as a credit strength, has fallen short of goals in recent years largely due to chronic delays in Illinois school aid payments.

Even after drawing the fund balance down, officials anticipate closing out fiscal 2012 with a $289 million balance, or 5.9% of appropriations.

The budget relies on $153 million of additional property tax revenue by raising the levy 2.1%, the maximum amount allowed under legal caps. The district over the last few years has sought more modest increases or held the levy flat.

The new budget anticipates $400 million of general obligation debt to fund ongoing capital projects, including maintenance and school improvements.

Fitch Ratings gives the board’s GO debt an A-plus. Moody’s Investors Service rates the district Aa2 with a negative outlook. Standard & Poor’s rates it AA-minus.

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