CHICAGO – Cash-strapped Chicago Public Schools announced on Thursday that classes will resume as scheduled after Labor Day and schools will stay open even if fiscal 2018 state operating aid is held up by Gov. Bruce Rauner over his opposition to legislation that would overhaul school funding formulas.

Rauner has threatened a veto of Senate Bill 1 because he considers it a “bailout” for CPS. The fiscal 2018 state budget package allows for appropriated state aid to be distributed only if a new evidence-based formula such as one laid out in the bill is used. The first aid payment is due Aug. 10. The district will release its full fiscal 2018 budget on Aug. 7.

“Other school districts around the state…are in much weaker position than CPS,” said CPS Chief Executive Officer Forrest Claypool, citing some districts' warnings that they can’t open or remain open for long if the state aid is held up.

“Despite all the fiscal challenges, CPS is in a stronger position than that and we are going to make sure that our schools remain open,” Claypool said. “We are going to make sure for this school year that our schools open and remain open and we will do whatever is necessary to make that happen.”

Claypool did not elaborate on how the district could afford to keep doors open. The district’s precarious fiscal condition has forced it to rely heavily on short-term borrowing to stay afloat, even with its general state aid dollars in hand.

Chicago Public Schools chief Forrest Claypool
“On Aug. 7 you will see the complete picture,” said Forrest Claypool, the Chicago schools CEO. “We are in the middle of the budget process.”

The district issued $1.55 billion of tax anticipation notes in fiscal 2017 that will be retired by December and a similar amount is expected this year. More recently, the district sold nearly $400 million of state grant backed notes. While general state aid has generally been on time, the state is three-quarters behind in grant payments.

Claypool and chief education officer Janice Jackson on Thursday laid out local school district budgets for principals.

CPS projects an 8,000 decline in enrollment, from 381,349 last year. The local budgets total $2.3 billion, a decline of $43 million from fiscal 2017 but the student based budgeting rate will rise by 5%, or about $200 per student to $4,290. “These budgets provide schools with needed resources to continue to deliver on students’ improvements,” Jackson said.

The local budgets incorporate an extra $300 million CPS expects to get from the state if Senate Bill 1 becomes law. The bill provides the district with greater aid levels, maintains current block grants, and includes new help covering teachers’ pension payments the state already provides for other districts. Rauner wants to cut the additional CPS funding by about half.

“This budget is based on Senate Bill 1 which is the only piece of legislation that has passed both houses of the General Assembly,” Claypool said in defense of the decision to rely on uncertain funding. The district has scrambled over the last two years to deal with red ink after hundreds of millions in proposed state aid fell through.

Claypool declined to put a current size on the current deficit in the fiscal 2018 budget or how the district would fully tackle it. The district last year faced a $1 billion gap but state approval of a $250 million teachers’ pension property tax levy and permanent spending cuts whittled it down. The district had previously projected a $544 million deficit headed into fiscal 2018. That figure includes a carryover of $215 million in state pension funding it expected but did not receive last year, $99 million in higher salary and benefit costs, and $52 million in higher pension costs and other expenses. The deficit figures does not assume the new funding in SB1. If the state funds come through, the district is still facing a $244 million gap.

“On Aug. 7 you will see the complete picture,” Claypool said. “We are in the middle of the budget process.”

Mayor Rahm Emanuel has said the city is considering ways to help the district but has not specified whether that help would come in the form of more tax increment financing surplus dollars or a new tax or fee. Emanuel has said he doesn’t want to show his hand until state action is final.

Moody’s Investors Service recently put the city’s Ba1 rating on review for a downgrade over CPS’ woes and the potential burden any future help might pose. Moody’s also has the district’s junk rating, now in the single-B category, on review for a downgrade.

Chicago Teachers’ Union president Karen Lewis said the budgets show the district is “getting serious” about meeting conditions of the teachers’ contract and special education needs, but attacked district leadership for relying on uncertain state funding and failing to address a $244 million deficit that would remain even with the funding. “Rahm has to do the right thing—find real revenue for our schools. Waiting is unconscionable and irresponsible and will further exacerbate the mass exodus of Black and Latino families out of the city,” Lewis said in a statement.

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