CHICAGO -- The Chicago Board of Education approved its $2.6 billion fiscal 1993 budget over the weekend after agreeing to eliminate an $84.6 million budget shortfall.

As in previous years, Illinois provided the key to filling the budget gap. Gov. Jim Edgar decided Sunday to give the board its $42.3 million September state aid payment before the start of the new fiscal year today.

Gov. Edgar agreed to accelerate the payment after the board had made significant progress in its budget talks with the Chicago Teachers Union and the Chicago School Finance Authority.

The three groups hammered out an agreement over the weekend in a 30-hour meeting requested by Mayor Richard M. Daley of Chicago on Saturday. He had summoned them to find a solution before the start of the new fiscal year.

In exchange for concessions from teachers and the authority, the board reduced its administrative costs by $5.7 million. The teachers union agreed to a delayed 7% pay raise effective in October instead of September, saving the schools $8.5 million. The union also agreed to restructure its bonus plan for a $6.4 million savings. Meanwhile, the authority agreed to release $21.7 million in reserve funds.

The budget must still be formally approved by members of the finance authority. In addition, the teachers union must approve its concessions.

Stephen Dragich, legal counsel for the authority, said he expected the authority to approve the agreement late yesterday afternoon. If the budget is not approved by the finance authority by today, the authority would regain oversight powers that were suspended in 1988 after the board had balanced its budget for six consecutive years.

Jackie Gallagher, spokeswoman for the teachers union, said she did not expect significant opposition to the agreement by union members. She said the union's 750-member House of Delegates is expected to vote on the agreement today. The union's 31,000 teachers will vote on the agreement after school starts Sept. 9.

Ms. Gallagher said the union was not happy with having to make concessions, but added that a legal battle over its contract may have resulted in "less dollars" for teachers.

Todd Whitestone, a managing director at Standard & Poor's Corp., said that while "it is certainly good" that a budget agreement was reached, the school board still hasn't solved its "underlying problems," which include its annual reliance on the acceleration of state aid payments.

Moody's Investors Service did not return phone calls. Paul Devine, a vice president and manager at Moody's, said that though the board has balanced its budget, the larger issue of "long-term structural balance" still needs to be resolved.

Both agencies are waiting to see the final budget before completing their reviews of the schools' credit rating.

The Chicago Public Schools has a BBB rating with a negative outlook from Standard & Poor's and a Baa rating from Moody's for its $30.3 million of outstanding general obligation debt.

The school system is also obligated to make lease payments on $427.5 million of revenue bonds issued on its behalf by the Chicago Public Building Commission.

The refinancing of $146.7 million of the lease debt was postponed indefinitely last week. Market conditions eroded a large amount of the approximately $5 million of savings anticipated for the deal, according to Walter Knorr, Chicago's comptroller. He added that the commission would continue to watch the market for a new opportunity to refinance the debt.

Charley Gillispie, the public schools' chief financial officer, said the expected $5 million of savings from the refinancing was not included in the fiscal 1993 budget projections.

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