CHICAGO -- The Chicago Board of Education received approval over the weekend from its financial oversight authority for a $2.3 billion budget for fiscal 1992, but the plan could unravel if union employees do not agree to $78 million of salary and benefit concessions.

The budget approved Saturday by the School Finance Authority -- the state-created panel that must sign off on the board's budget -- assumes the Chicago Teachers Union will forego a 7% salary increase this year, the second year of a three-year contract, and that other unions will agree to benefit concessions.

Phillip Block 3d, chairman of the finance authority, said yesterday that authority members felt there were enough encouraging signs in talks so far between the unions and the board that the budget should be approved to ensure that schools could open on time today, even though the concessions have not been agreed upon.

"We read the contracts and are agreed that the board could reopen them for renegotiation if there was not enough money to meet the terms of the contracts," Mr. Block said. "We're hopeful that there will be some accommodation, and then the board can come back to us with an amendment to the budget."

The $78 million that would be saved from the concessions was a major component in bridging a $315 million shortfall in the budget for fiscal 1992, which began Sunday. Other cost-cutting moves included nearly 900 layoffs and 11 school closings, according to board documents.

Jackie Gallagher, a spokeswoman for the Chicago Teachers Union, said last week that the union is willing to talk about some sort of salary concessions, but it will not accept a salary freeze as contained in the board's budget.

"We've agreed to keep negotiating in good faith on salaries in order that the schools can open on time," she said. "But as far as getting the budget balanced, our position is that it is not our problem."

A proposal by the Chicago National Association for the Advancement of Colored People was not considered last week by the board. The association suggested using $100 million of a reserve fund that is used to ensure timely payments to vendors as an alternative to closing schools and making other cuts.

Drew Gilchrist, the school district's director of accounting, said the NAACP's proposal to use nearly half of the approximately $200 million reserve fund was never seriously considered.

Under an agreement with the finance authority, the board must recognize expenditures on an accrual basis, but revenues must be recognized on a cash basis. That means cash must be set aside in reserve when expenditures are incurred to ensure that payment can be made.

Mr. Gilchrist said the board probably ended last fiscal year with about $200 million in an unobligated reserve fund. Debt service payments are made from other district funds to which the board of education does not have access for operating expenses, he said.

The board has $75 million of outstanding general obligation debt that is rated BBB by Standard & Poor's Corp. and Baa by Moody's Investors Service.

Lease payments on $459 million of outstanding revenue bonds issued on its behalf by the Public Building Commission of Chicago also are the responsibility of the board. All of that debt is insured, except for about $17 million, which carries the same rating as the board's GO debt.

Officials from Moody's and Standard & Poor's said Tuesday they would have no comment on the budget until they had had a chance to study it in detail.

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