Chicago Public Schools faced a shortfall in its operations budget of roughly $500 million at the close of its last fiscal year, leaving the financially troubled district with a significant bill to cover even as it struggles to balance this year’s spending plan.
The budget shortfall was reported in a recently issued financial postmortem for 2016 that also repeated a long-held conclusion: CPS either needs an infusion of new money or will have to make major cuts if it is to keep operating as it has been.
CPS has faced budget gaps for years, but has been able to cover them partly by dipping into cash reserves and tapping costly lines of short-term credit for cash to pay the bills. Those strategies are beginning to reach their limit, district officials acknowledge.
That means CPS faces a narrowing range of options, according to Ralph Martire, executive director of the Center for Tax and Budget Accountability.
"Liabilities are so far in excess of assets that anything that builds the revenue side of the ledger at this point has to be considered," Matire said.
Delivering a balanced budget is just one challenge. Even if CPS manages to make up for state aid that hasn’t arrived and pulls together other savings to balance a $5.5 billion operating budget, which relied on ambitious assumptions, more than $100 million from last year’s shortfall remains.
"Despite the balanced budget, we have a cash problem that goes back for many years because we didn’t have a balanced budget," Chicago Board of Education President Frank Clark said last month to a packed hearing room at district headquarters. "So when we balance the budget, all we do is stop bleeding."
Chicago Public Schools seeks quick fix to budget hole left by Rauner’s veto Juan Perez Jr.
For the second year in a row, Chicago Public Schools officials are looking to slash expenses after failing to cash in anticipated funding from Springfield.
The budget hole created by Gov. Bruce Rauner’s veto of a state aid measure is less than half the size of the nearly half-billion-dollar gap…
For the second year in a row, Chicago Public Schools officials are looking to slash expenses after failing to cash in anticipated funding from Springfield.
The budget hole created by Gov. Bruce Rauner’s veto of a state aid measure is less than half the size of the nearly half-billion-dollar gap…
(Juan Perez Jr.)
"The problem doesn’t go away, it just doesn’t get any worse. What we have to do, in addition to a balanced budget, is figure out a way to address our cash problem."
CPS’ cash struggles will play out again this month when the district is expected to send a debt payment of well more than $500 million to its bankers, plunging district coffers deeper into the red until a surge of property tax revenue arrives.
The district now has to borrow against those anticipated property taxes to cover its bills. A district spokeswoman said CPS has the financing needed to cover its debt payment.
But CPS CEO Forrest Claypool suggested that strategy may no longer be available to the district.
"That short-term credit card for cash is maxed out," Claypool told the school board last month "It’s maxed out in terms of the maximum collateral that can be loaned against it, it’s bumping up against state law. So the criticality of continuing to balance the budget for that reason is, you know, fundamental."
In disagreement with competitor’s report, Fitch says tax hike unlikely option for CPS Juan Perez Jr.
A Wall Street ratings agency took issue with a competitor’s recent conclusion that Chicago Public Schools could let an automatic tax hike kick in to ease the pressure of mounting debt costs.
Fitch Ratings did not argue with the grim appraisal of CPS finances presented by Moody’s Investors Service…
A Wall Street ratings agency took issue with a competitor’s recent conclusion that Chicago Public Schools could let an automatic tax hike kick in to ease the pressure of mounting debt costs.
Fitch Ratings did not argue with the grim appraisal of CPS finances presented by Moody’s Investors Service…
(Juan Perez Jr.)
Officials have held off announcing additional cuts to help balance this year’s budget waiting for the Illinois Senate to reconvene this week to consider a complex series of legislation aimed at ending the state’s budget impasse.
According to part of the district’s annual financial report, CPS ended the past fiscal year $487 million short in its general operating fund; a $127 million deficit remains.
"The long-term future sustainability of the District at its current operating level is dependent on new revenue sources or major reductions in costs," CPS said in the report.
CPS already has implemented four unpaid furlough days for employees to trim a fraction of the looming shortfall, prompting the Chicago Teachers Union to stage City Hall demonstrations and call for Claypool’s resignation last week.
Officials have discussed cuts to other expenses, including the length of the school year. In financial disclosures, the district has said it will turn to budget cuts, unspecified legal action and borrowing to close this year’s budget gaps.
Clark said the district could present plans for its third spending plan of the year later this month. There’s also expectations from some observers that the city will again turn to its taxpayers for revenue.
"Given the reality that they no longer have reserves, CPS really has to have all these options on the table at least for the next couple of years. At least until we can get some rational resolution out of the state’s fiscal problems," Martire said.
"The only other rational vehicle available is statewide fiscal reform that would allow the state to enhance its funding of K-12 education significantly over current levels."
Local officials continue to point to the state.
"To have a surplus is remarkably challenging; what you need to do obviously is find new sources of revenues — primarily revenue you’d expect to get from the state of Illinois," Clark said.
Chicago Tribune’s Peter Matuszak contributed.
jjperez@tribpub.com
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