July 20--With less than two months until school starts and a massive hole in the Chicago Public Schools budget, officials are planning as much as $1.16 billion in long-term borrowing.
The school board plans to consider a measure authorizing the new bond debt at its Wednesday meeting. The board agenda does not detail all planned uses for the money, but it does say CPS intends to use some of it to end costly interest-rate swap deals and another portion to refinance existing debt.
The school district warned last week that without pension relief from Springfield to help plug a $500 million budget gap, it would be forced to make more cuts and resort to "unsustainable borrowing."
School officials did not say for what purposes they might borrow money or whether operating costs and pension payments might be included.
The school district is also straining to cover capital expenditures, a more typical use of bond money. The district has laid out a bare-bones capital budget for this year that officials said will largely cover projects that are underway.
School officials have already announced they intend to cut $200 million from this school year's operating budget but have said most of the cuts will be made to support staff at headquarters, sparing teachers.
Banks that are party to the school district's interest-rate swap deals demanded immediate repayment of $228 million in March after the district's credit rating dropped. The district has said it paid down a portion of that debt but has not stated how much.
CPS did the swap deals in the early 2000s as part of a borrowing plan masterminded by outgoing board president David Vitale. Included in the contracts was a clause promising that the school district's credit would not deteriorate below an agreed-upon level.
The proposed $1.16 billion in long-term debt, which would likely be repaid over two to three decades, is different from the $935 million in short-term borrowing the board approved last month. That loan was a short-term advance on property tax dollars that will be collected later this year.
hgillers@tribpub.com
