CHICAGO - The Chicago Board of Education on Wednesday passed a $2.8 billion fiscal 1994 budget with a $299 million shortfall and called on the state legislature and unions to help close the gap.
The Chicago School Finance Authority, the board's financial oversight panel, must approve a board budget that is "balanced, complete, and reasonably capable of being achieved" before the beginning of the fiscal year on Sept. 1 in order for schools to open on time on Sept. 7 under state law.
A source familiar with the law said the authority in "all probability" would reject the unbalanced budget at its meeting on Tuesday.
Under the approved budget, about $145 million of the budget gap could be eliminated if school unions agree to concessions. The remaining shortfall would have to be filled by additional funding that could be discussed in a special session of the Illinois General Assembly according to board members.
The $145 million of proposed concessions include employees' contributions to their pensions and health-care benefits, expanding teachers' hours to lower costs, and a freeze on bonus payments, according to a press release.
If the authority does not approve a balanced budget by Aug. 31, the board will continue to pay its debt service. However, the board would not be able to spend money for any other purpose until the budget is balanced.
Further, if the Sept. 1 deadline is not met, the authority would regain its oversight powers that were suspended in 1988 after the board balanced its budget for six consecutive years, according to authority officials.
The oversight powers would allow the authority to:
* Require the board to draft and follow three-year financial plans.
* Approve or reject all contracts, including collective bargaining agreements.
* Approve or reject the chief financial officer for the school system.
* Assume control over all of the school system's cash and bank accounts to control spending.
The oversight powers were delegated to the authority when it was created in 1980 after the board experienced severe cash-flow problems.
Diana Sheffer, a spokeswoman for the Chicago Teachers Union, said the union is willing to negotiate with the board. "We are not inflexible, but we have ideas on how the board can save money," Sheffer said. The teachers union, with 31,000 members, is the largest of the school system's 24 unions.
The budget also includes about $24 million in administrative savings as a result of staff reductions and improved management of health-care benefit plans.
In addition to union concessions, more funding from the Illinois General Assembly is needed to eliminate the $154 million deficit, according to the board members.
"Our budget includes a huge deficit that must be filled with additional revenue, rather than cuts that would serve to exacerbate the damage that has been done to our children's education," board president D. Sharon Grant said in a press release.
Mayor Richard M. Daley on Wednesday called on the unions, the governor, and the legislature to assist the beleaguered school system. Earlier this month, Daley requested that a special session be held in mid-August to discuss measures to provide more funds for Chicago schools.
"We're in a crisis. It's worse than ever before, a shutdown is a near certainty, and a bad situation will only get much worse after Sept. 1," Daley said in a press release.
Mike Lawrence, spokesman for Gov. Jim Edgar, said the governor "hasn't ruled [a special session] out," but he added that Edgar has no plans to call one.
"The governor certainly doesn't want to see a strike or a shutdown of the Chicago Public School system. But he and others who want to help the school system need to see evidence that the unions and school board are willing to make reforms that will close the budget gap," Lawrence said.
In a related action, the board directed its attorney to prepare contingency a possible litigation aimed at requiring the state to comply with its constitutional duty to provide quality education.
Steve Eaddy, associate director at Standard & Poor's Corp., said the board's budget is "under review" by the rating agency. Paul Devine, a vice president and manager of the Great Lakes regional group at Moody's Investors Service, said that the budget "doesn't look like it would enable the school board to operate for a full year period." Devine said that the board's financial situation this year seems "a lot more troublesome. Even the one-shots are coming up well short," he said.
The Chicago Board of Education has $17.9 million of outstanding general obligation debt that is rated Baa by Moody's, and BBB with a negative outlook by Standard & Poor's. The board is also obligated to make lease payments on $1.7 billion of insured bonds issued on its behalf by the Chicago Public Building Commission.
