CITY HALL — Chicago will borrow $389 million to keep Chicago schools open through the end of the school year — and to make a required payment to the teachers' pension fund, officials said Friday.
The Chicago Board of Education is expected to approve the plan Wednesday to borrow against $467 million worth of state grants Illinois owes to the Chicago Public Schools.
CPS must pay its employees' pension fund $721 million by June 30. Chief Financial Officer Carole Brown said the borrowed funds would allow CPS to pay its bills through the last day of school on June 20 and make the full pension payment.
Brown said that CPS was not borrowing to fill the budget hole created when Gov. Bruce Rauner vetoed a bill in November that would have given Chicago's schools $215 million. CPS was able to bridge that gap by managing its cash flow carefully and freezing nonpersonnel spending on May 1, Brown said.
Although aldermen were briefed on the plan Friday, it does not require approval from the City Council. Members of the board of education, which must approve the plan, are appointed by Emanuel.
Emanuel dismissed criticism from Ald. Ricardo Munoz (22nd) that his proposal amounted to a "payday loan" that would saddle the city with additional costs at a time when it can ill afford to borrow more money.
"We didn't choose this," Emanuel said, blaming Rauner for "willfully" refusing to meet its obligations to school districts across the state. "It is a short-term solution to a short-term problem created consciously, woefully by the governor to create political pressure. That’s how we’re handling it. That’s the most appropriate way to deal with it.”
A statement from the Chicago Teachers Union called the proposal "terribly irresponsible."
"This deal is akin to a payday loan that will take years to pay off at the expense of our school communities, while bankers continue to profit off the school district—a scenario that has, in part, led us to where we are today," the union said.
Ald. Scott Waguespack (32nd) said the city need to have "a real conversation about progressive revenue once and for all.”
“Gov. Rauner’s commitment to sabotaging Chicago has put us in a no-win situation where we may be forced to accept what is essentially a pay day loan to keep the lights on in CPS," Waguespack said, adding that city officials should ask the "very wealthy and big corporations to pay their fair share."
“We will do whatever it takes to keep the schools afloat--but it’s time to have a real conversation about progressive revenue once and for all,” Waguespack said.
Eleni Demertzis, a spokeswoman for Rauner, said Emanuel was doing his best to distract "from the failures of his own leadership" by blaming the governor.
"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," Demertzis said. "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."
The additional borrowing means Chicago Public Schools CEO Forrest Claypool's threat to close school June 1 — 20 days early — came without teeth, since CPS was able to come up with that money.
Claypool — and Emanuel — portrayed Rauner's veto as an existential threat to Chicago's schools.
Because of the impasse that has left Illinois without a budget for two years, school districts throughout the state have not received $1.4 billion worth of state grants through March 20 that officials count on to fund a variety of state-mandated programs, including bilingual education and school security.
Brown said it was less than ideal to "patch things together" to keep the state's largest school district operating. For that, Brown placed the blame squarely on the shoulders of Rauner — echoing Emanuel's criticism of the Republican governor.
"We're not willing to let Springfield off the hook," Brown said.
Schools will not see more cuts this school year, nor will new taxes be imposed.
City and CPS officials hope to pay less than 8 percent interest on the short-term loan, but the cost of the last-minute rescue plan won't be set until a deal is in place, Brown said. The district already owes about $950 million in short-term loans, which are typically more costly than long-term borrowing.
