CHICAGO -- Standard & Poor's Corp. on Friday assigned a negative rating outlook to the Chicago Board of Education while affirming the BBB rating on the board's $75 million of outstanding general obligation debt.

A negative rating outlook also was assigned to two bond issues done on behalf of the board by the Public Building Commission of Chicago. That debt, $9.45 million of Series 75A bonds and $4 million of Series 76A bonds, also was confirmed at BBB. Debt service payments on the bonds are made by lease payments by the board to the building commission.

The rating agency's action was taken "due to increasing pressure on the board's finances and operations," according to a news release put out by the rating agency.

Todd Whitestone, a senior vice president at Standard & Poor's, said the rating agency was particularly concerned about the board's use of $78 million in not-yet-agreed-to wage and benefit concessions from school employee unions. The board used those funds to assist in balancing the $2.3 billion budget for the fiscal year that began Sept. 1. Budget cuts and the concessions eliminated a shortfall that had been estimated at $314 million.

The unions have not approved the concessions but are negotiating with the board about where other cuts in the budget can be made, according to Jacki Gallagher, a spokeswoman for the Chicago Teachers Union.

"Our position remains that in a $2.3 billion budget, there are areas where you can find $78 million other than our salaries," Ms. Gallagher said Friday.

Mr. Whitestone said the rating agency is concerned the talks between the board and the unions could lead to a showdown that could harm the school system's ability to operate.

"We're concerned that the talks with the unions could be acrimonious," Mr. Whitestone said. "We think there is potential for conflict and tension there."

But Ms. Gallagher said the unions' recent meetings with the board about where other cuts could be made have been positive, and the teacher's union has put off a strike authorization vote because of the ongoing talks with the board.

Mr. Whitestone said the agency was paying close attention to the negotiations and hoped to set up a meeting in the near future with school board officials to discuss the board's finances.

Board Controller Joseph Monahan said the negative rating outlook from Standard & Poor's was not surprising given the difficulty in drafting this year's budget and the potential for more shortfalls in the coming fiscal years.

The board issued a three-year financial forecast in May that predicted it could face a deficit of $447 million in fiscal 1993 and $620 million in fiscal 1994 unless additional revenues are found.

Mr. Monahan said a priority of the board is to convince the General Assembly and Gov. Jim Edgar to allow it to use at its own discretion about $170 million of state funds now mandated for special programs for disadvantaged children.

In addition to the $75 million of outstanding GO debt, the board is responsible for making lease payments on $459 million of outstanding revenue bonds issued on its behalf by the Public Building Commission of Chicago. All of that debt is insured, except for the Series 75A and Series 76A.

Paul Devine, vice president and manager of the Great Lakes Region at Moody's Investors Service, said the rating agency is still reviewing the fiscal 1992 budget passed by the board and its financial overseer -- the School Finance Authority -- on Aug. 31.

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