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The spending plan
for the fiscal year that began on July 1 was increased by $55
million to $5.5 billion to reflect an additional contribution of
surplus tax increment financing money from the city of Chicago.
That money will cover higher costs from a new four-year contract
with the Chicago Teachers Union that the board ratified on
Wednesday.
Chicago Public Schools (CPS), the nation's third-largest public
school system, is struggling with pension payments that will
jump to about $720 million this fiscal year from $676 million in
fiscal 2016, as well as drained reserves and debt dependency.
The fiscal woes have pushed credit ratings on the district's
$6.8 billion of general obligation bonds deep into the junk
category and led investors to demand fat yields for its debt.
Illinois Governor Bruce Rauner last week vetoed a bill to give
CPS a one-time $215 million state payment to help cover pension
costs.
CPS officials on Wednesday blasted Rauner's action, while
contending there is still time to pressure the governor and
state lawmakers to restore the money.
"We will not allow Chicago students, most of them poor and
minority, to be held hostage," said CPS Chief Executive Officer
Forrest Claypool.
If the effort fails, School Board President Frank Clark said the
district was prepared to deal with the budget gap in January.
The board also reaffirmed its approval for issuing up to $840
million of bonds backed by a new $45 million a year property tax
levy earmarked solely for capital expenses.
On Tuesday, CPS released a preliminary prospectus for a $500
million bond sale secured by that revenue stream and not the
district's junk-rated general obligation pledge. A CPS
spokeswoman said the timing for the bonds' pricing is subject to
market conditions.
Richard Ciccarone, president and CEO of Merritt Research
Services, an independent municipal bond research and data
provider, said the new type of CPS credit could attract
investors who have avoided the district's GO bonds.
"The buyers are still going to demand a higher rate," Ciccarone
said.
(Reporting by Karen Pierog; Editing by Matthew Lewis)
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