CHICAGO -- The financial oversight authority for the Chicago Board of Education yesterday rejected the board's revenue estimates for its fiscal 1993 budget, based on the uncertainty of $120 million of early state aid payments and employee concessions.

Meanwhile, Standard & Poor's Corp. yesterday affirmed a BBB rating with a negative outlook for the board's $30.3 million of general obligation debt, but warned that "an adverse rating determination" may be made if the board fails to balance its budget.

Martin Koldyke, chairman of the Chicago School Finance Authority, said the authority's rejection of the revenue estimates sends a message to the board that the budget is not in balance.

He added that the board must now either make cuts in the budget or pin down the uncertain revenue sources before the budget receives approval from the authority. Under state law, the board must submit a balanced budget to the authority before the school system's fiscal year begins Sept. 1.

School board President Florence Cox, who attended the authority's meeting, said the board has done all it can to reduce the $155.9 million shortfall in the $2.67 billion fiscal 1993 budget.

"I can say to you with great certainty we have no place to go," Ms. Cox said. "We can't do it alone. We have given it our very best."

The budget, approved by the board late Saturday and submitted to the authority the same day, was dependent partly on the receipt this month of a $43.7 million state aid payment due to the schools in September. Gov. Jim Edgar said he would not consider accelerating the payment unless the schools have their finances in order.

Though the governor has the option to accelerate state aid under current law, he vetoed a bill last Friday that would make the practice permanent.

Another key component of the board's budget includes a reduction in teacher pay raises to 2.6% from 7% to save the school system $44.3 million. The teachers union has balked at the reduction, saying that a contingency clause enabling the school system to renegotiate teacher's contracts was eliminated during last year's contract negotiations.

The other major elements needed to balance the budget are concessions from principals, teachers, and other unions totaling $32.5 million.

Other cuts include the elimination of $15.8 million in special programs and $17 million in administrative costs.

Mr. Koldyke said he was optimistic that a final balanced budget could be approved by the authority "a week or two" before school is scheduled to open on Sept. 8.

Wayne McCoy, the authority's general counsel, said if the authority does not approve the board's balanced budget by Sept. 1, the board may continue to pay debt service as it comes due. However, he said the board will not be able to spend money for any other purpose until its budget is balanced.

Furthermore, he said if the Sept. 1 deadline is not met, the authority would regain its six-year oversight powers that were suspended in 1988 after the board had balanced its budget six consecutive years. Those 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.

As for the affirmation of the board's GO rating and negative outlook, Todd Whitestone, a managing director at Standard & Poor's, said the agency is "closely monitoring" the board's ability to make budget cuts, receive the authority's approval of its fiscal 1993 budget, and open schools on time. In a release, the agency said that if those three factors are not addressed, the board may face an "adverse" rating action.

"We will be watching closely because it's a real question as to whether they can make the cuts stick," Mr. Whitestone said. Paul Devine, vice president and manager of the Great Lakes region at Moody's Investors Service, said the agency is "awaiting final resolution of the budget" before it reviews its rating. Moody's rates the board's GO debt Baa.

In addition to the school board's outstanding $30.3 million of GO debt, the board is obligated to make lease payments on $427.5 million of outstanding revenue bonds issued on its behalf by the Chicago Public Building Commission.

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