CHICAGO — Chicago Public Schools intends to make the $634 million pension payment due by the end of June 30, Illinois House Speaker Michael Madigan said Tuesday.
The Chicago Democrat said knowledgeable sources told him that the cash-strapped school system had the funds needed to make the payment deadline.
The comments came as Madigan was questioned on the status of legislation to extend the pension payment deadline to Aug. 10, when the system expected to have received school aid and property tax revenues.
The House rejected the bill last week, driving a fresh round of sniping between Gov. Bruce Rauner and Madigan over who was to blame for its failure.
Chicago Mayor Rahm Emanuel and CPS believed they had an agreement on the legislation with legislative leaders and Rauner. Madigan said last week supporters needed to drum up more support and he intended to try again on June 30. The fate of the bill remained uncertain as the House session proceeded Tuesday.
"I think it's moot," Madigan said when asked. "I've been advised that the Chicago school system will make the payment before the end of the business day, today." Madigan declined to name his sources, saying they were "reliable" and they had advised him that CPS has the "cash on hand" to make the full payment.
It's unclear what the district's decision to make the full payment means with respect to its ability to meet its payroll and other obligations, and to open schools on time in September.
A recent CPS-commissioned report warned of a cash crisis that looms later this summer given payment pressures. The district likely faced a teachers' pension fund lawsuit if it cut the size or delayed the payment without state approval and concerns were raised such a move could spark more credit rating deterioration.
Moody's Investors Service dropped the Chicago Board of Education to the junk rating of Ba3 in May.
CPS closed on a fresh $200 million note-backed credit line with JPMorgan this week to ease some cash flow pressures and is working on a $935 million line for the next fiscal year. CPS has support from at least two banks but is still looking to secure another $200 million, sources said Tuesday.
At a news conference earlier in the day, Emanuel did not say the full payment would be made but stressed that schools will open on time although cuts are likely.
"I want to be clear: We're in active conversations with numerous parties to figure out a way to have — I want to also achieve the goal to have the least impact on the schools and the classrooms of the city of Chicago," Emanuel said. "School will start, but our ability to hold the impact of finances away from the classroom — that's gonna change. Our ability to kind of hold or put a wall down where those finances did not impact [the classroom] is coming to a breaking point."
The school board carries ratings of BBB-minus with a negative outlook from Fitch Ratings, A-minus with a negative outlook from Standard & Poor's, and BBB-plus with a stable outlook from Kroll Bond Rating Agency. Moody's assigns a negative outlook. The district has pushed off release of a fiscal 2016 budget that begins July 1.
