Fitch Ratings warned Wednesday that Gov. Bruce Rauner’s veto of a school funding measure creates “uncertainty” as to whether schools will open on time and could affect the Chicago Board of Education and other school districts’ credit ratings.
“A return to political gridlock specifically related to school funding puts at risk the ability of school districts to open all of their schools with a full complement of services,” Fitch warned.
Rauner on Tuesday issued an amendatory veto of the measure — with lawmakers able to accept the changes, do nothing or try to override. There’s also another option of trying to pass a new bill — all of which will take time as the clock ticks ahead of a new school year.
The governor’s changes would give CPS $215 million to help pay for teacher pensions, since it’s the only district not covered by the state-funded Teachers Retirement System. But it would make the Chicago pension payment part of state pension law rather than in the school code.
“Any other aid would require additional legislation, perhaps making it vulnerable to separate budget appropriation this year and in the future,” Fitch wrote of the Chicago pension payment.
The ratings agency said delayed distribution of funds to schools may have a negative impact on school district ratings: “Fitch will closely monitor the potential impact an extended impasse may have on Illinois school district credit quality and will take action on a case by case basis as necessary.”
CPS leaders say they’ll do whatever is necessary to open schools on time. But some districts outside of Chicago have warned they won’t be able to open — or won’t stay open long without state aid. The Illinois State Board of Education says it needs the formula soon to get payment processed on time. General state aid typically goes out for K-12 school districts on Aug. 10.
Fitch called an override “unlikely” despite the budget package override last month. Fitch noted that Rauner’s veto limits the increase in funding to CPS by removing from the formula a $250 million block grant the district traditionally received, while also cutting CPS pension considerations. Fitch notes the veto would mean money required to fund normal pension costs would have be in statute instead.
Also Wednesday, a Senate Democratic analysis found that any district that loses enrollment beginning with the 2020 school year would lose funding under the veto; it also concluded that absent any changes to the 2018 budget, the veto would increase state spending by $221.3 million.
The governor’s office disputed that budget price tag — saying the movement of pension money is “budget neutral,” and that the CPS block grant funds are run through the formula and “made available to all districts.”