In addition to passing a $5.4 billion operating budget, approving up to $945 million in bonds for capital projects, and voting to raise property taxes by more than $250 million, Chicago’s Board of Education on Wednesday also will consider authorizing a 45 percent increase on Chicago Public Schools’ line of credit to $1.5 billion.
All of the district’s financial proposals to the seven appointed board members are expected to pass.
Appearing with the mayor at a South Side elementary school, CEO Forrest Claypool chalked up the increase in the line of credit — up from just over $1 billion in the last fiscal year — to a “huge mismatch between revenues and expenses” between February, when an annual debt service payment for $373 million is due, and March, when property tax revenue begins to roll in.
“Last year the district did what’s called ‘scoop and toss’ where they took debt payments that were coming due and got a one year $200 million-plus source of revenue by pushing that debt into the future longterm debt. Because we’re not doing that this year, that payment . . . is significantly higher, hundreds of millions of dollars higher,” Claypool said after Mayor Rahm Emanuel touted the completion of installing air conditioners in all schools, an idea he had belittled during the 2012 teachers strike.
And without any remaining cash reserves it used to rely on, CPS now leans on costly short-term borrowing to cover such gaps.
“The line will extend down to the $1.5 [billion] or probably $1.4 [billion] for that three-week period and then it will be immediately repaid with the March property tax receipts,” Claypool said.
No details of the borrowing are yet available. CPS spokeswoman Emily Bittner said that officials continue to negotiate with various lenders to secure the short-term loans. Asked about the remaining $1 billion, she pointed to CPS’ budgeted cash flow projections showing that the schools system will run out of cash around October.
Claypool said earlier this summer that the budget will not depend on borrowing for actual operations, just for cash flow purposes.
He also called it “balanced” though it depends on two major conditions: that the state passes “pension reform” by January and that the Chicago Teachers Union agrees to a new contract.
Emanuel defended the district’s plan to sell up to $945 million in new bonds that’ll go toward building new schools and annexes, despite wide criticism that the country’s third-largest school district can’t afford the buildings it already has. Among the latest capital plans CPS has announced are new annexes at overcrowded schools serving relatively wealthy students near downtown and within a mile of underused schools serving low-income children.
“Look, nobody likes to raise taxes, but nobody wants to see kids in the middle of a hallway eating lunch or in a stairwell or in a closet, and so we have to do what’s right,” Emanuel said. “I don’t want to raise taxes, I’m not eager to do it, but the fact is for decades we postponed, delayed, denied, deferred and then the cost became more expensive. . . . The good news is we’re not raising taxes to pay for old bills, we’re raising taxes to invest in the future where our kids will have a brighter tomorrow than we have.”
CPS will hold a brief public hearing on the bond authorizations Wednesday morning at 8:30 a.m. at district headquarters, 42 W. Madison. But to speak for two minutes, members of the public must register between 7:30 and 8 a.m.
On Monday, the CTU called for a forensic audit of district finances, writing that “CPS has proven itself to be fiscally irresponsible and reckless with limited tax dollars,” in a new anti-privatization report called “Outsourced: How CPS sells its own governance to the lowest bidder.”
The district has just laid off more than 1,000 staffers and drastically cut special education spending but still included nearly $2 billion in private contracts, according to the union, shich alleges CPS hasn’t saved the money it wanted to by outsourcing its work.
“Our report is just the beginning — digging deeper would undoubtedly reveal even more overspending and mismanagement,” union president Karen Lewis said in a statement.