CHICAGO -- The Chicago Board of Education late Monday unveiled a $2.8 billion fiscal 1994 budget, warning that a projected $416 million shortfall will have to be eliminated by Aug. 31 in order for schools to open on time.

Clinton Bristow, chairman of the board's budget committee, called on the Illinois General Assembly to hold a special session to consider funding options to fill the gap, including issuing bonds.

"What we have to do is get some type of revenue coming in, and some type of bond financing becomes a possible source," Bristow said.

Bristow said that if a bond plan were offered, it could resemble a proposal offered in May by the chairman of the Chicago School Finance Authority, the board's financial oversight panel.

Under that plan, $1.35 billion of bonds would be issued to provide operating funds for the Chicago board and other school districts in the state over the next three years. Chicago schools would be able to issue $392 million of those bonds, backed by the state.

The May bond plan, which received a cool reception from legislative leaders, the governor, and rating agency officials, was never introduced as legislation.

Todd Whitestone, a managing director at Standard & Poor's Corp., said that issuing bonds for operating expenses is a "particularly poor option."

"We would be very concerned about bond issuance for operating expenses," Whitestone said. "It doesn't solve the problem. It provides an amount for the immediate year, but would present the board with the same problem the following year."

Paul Devine, vice president and manager of the Great Lakes regional group at Moody's Investors Service, said the board needs to find ways to balance its budget on a recurring basis.

"Selling bonds to meet operating expenses doesn't quite fit that bill," Devine said.

Even the possibility of a special legislative session appears to be remote. Legislative leaders and Gov. Jim Edgar earlier this week reached a state budget agreement that would only provide an $84 million funding package for Chicago schools.

The figure includes an accelerated 46 million state aid payment and $22 million of "restriction calculation" funds. The board of education must set aside these funds in its budget to finance expenses in the next fiscal year.

"If [the board] thinks that there will be a special session that results in extraordinary funding, they're really in a fog," said Steve Brown, spokesman for House Speaker Michael Madigan, D-Chicago.

Mark Gordon, spokesman for Senate president James Philip, R-Wood Dale, said "the well is dry," and that it was time for the board and the teachers union to begin negotiating cuts.

Charley Gillispie, the school board's chief financial officer, said the board's tentative fiscal 1994 budget does not rely on the $84 million of funds from the state budget agreement.

Under the tentative board budget, the board would receive $117 million less than last year in state revenues and $33 million less in local revenues, Gillispie said.

Tomorrow, interim school superintendent Robert Stephenson and board staff will present the full board with "possible solutions" to balance the budget.

The board is required to submit a balanced budget to the Chicago School Finance Authority by Aug. 31, or the schools cannot open on time. Bristow said he expects the board to submit a balanced budget to the authority by July 31.

Whitestone said Standard & Poor's would feel "more comfortable" with a board plan to make cuts to balance the budget while it lobbies for more funds from the state legislature. Devine said budget cuts would enable the board to live within its means.

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