Aldermen will be told Friday that the Chicago Public Schools will get through the end of the school year and pay for teacher pensions by short-term borrowing against $467 million in late block grants owed by the state, the Chicago Sun-Times has learned.
Mayor Rahm Emanuel had considered but ruled out a bridge loan from tax-increment financing districts amid concern it would endanger the city’s already shaky bond rating, City Hall sources said Thursday. He also decided against making a partial payment to the Chicago Teachers Pension Fund, concerned it would trigger a lawsuit and yet another drop in CPS’ bond rating.
Instead, CPS, which needs $596 million to finish the year, will go it alone on short-term borrowing that will allow it make the bulk of a $721 million teacher pension payment due June 30, minus $250 million from a dedicated property tax increase that will get deposited directly later in the summer, according to the sources.
They would not divulge the source of the borrowing, sure to resemble a payday loan, its exact amount or the interest rate expected to be paid by a district in which its credit card was believed to have been maxed out.
As for longer-term school funding, aldermen will learn that Emanuel plans to wait out the General Assembly, set to adjourn on May 31, and then determine what holes remain be filled locally, according to the sources. That’s in case a new school funding formula somehow makes it through the Legislature and across the desk of Republican Gov. Bruce Rauner, as CPS CEO Forrest Claypool and CPS parents and teachers lobbied for on Wednesday in the state capital.
The Sun-Times has reported that without any state help, Emanuel is considering taxing downtown businesses, high net-worth individuals or both.
Aldermen, who would like to get more difficult votes over with as quickly and as far from the 2019 election as possible, are likely to press the mayor, who has postponed the briefings twice already. But Emanuel will likely put them off until the next pressure point, around July 4, when principals will receive their individual school budgets.
During Friday’s briefings, to be conducted by the city’s chief financial officer Carole Brown, and CPS finance chief Ronald DeNard, Emanuel will try to frame the schools’ cash crunch as a $1.1 billion crisis caused by Rauner’s actions over the last two years.
Emanuel’s proxies will argue that Rauner’s decision last year to threaten a state takeover and pave the way for a CPS bankruptcy forced the school system to shrink its planned borrowing by $400 million and pay an exorbitant interest rate of 8.5 percent. The crunch was then compounded by Rauner’s veto in December of $215 million for pensions CPS built into its budget despite strings attached to the money, and then again this spring by a delay in $467 million owed to CPS in block grant money that’s yet to arrive.
Rauner has said the agreed-upon conditions for the pension money were not met.
“Instead of engaging with leaders and lawmakers to find solutions to this crisis, the mayor continuously chooses to lay blame on others instead of taking responsibility for his own massive failure of governance,” Rauner spokeswoman Eleni Demertzis said Thursday. “While the mayor is pointing fingers at Springfield, he’s running a city with crumbling infrastructure, a school system in crisis and violence that affects every neighborhood in Chicago. It’s apparent that this mayor of mismanagement is avoiding responsibility as a means to distract from the failures of his own leadership.”
Emanuel spokesman Adam Collins would only confirm the briefings.
“After a lot of hard work by the CPS and city financial teams, and many discussions with their lending partners, tomorrow we will brief aldermen on the district’s finances and the financial plan for the remainder of the CPS fiscal year,” Collins wrote in an email. “We will also outline the importance of Governor Rauner finally proposing a budget that adequately and fairly funds education in this state.”
CPS’ ongoing budget woes helped fuel the Chicago Teachers Union’s decision to ask members this week for a vote of no confidence on Claypool, who had banked on a civil rights lawsuit against the state to bridge this year’s budget gap.
The lawsuit, which accused the state of shortchanging CPS’ mostly minority students for the benefit of their whiter counterparts elsewhere, was dismissed late last month but the judge gave CPS until May 26 to try again.
The CEO had threatened to end the school year up to three weeks early if CPS didn’t receive more state money, but Emanuel assured CPS parents he’d find a way to finish classes as planned on June 20.