CHICAGO -- The financial over-sight authority for the Chicago Board of Education late Wednesday approved the board's $2.74 billion fiscal 1994 budget, officially ending a fiscal crisis that lasted more than two months.
The five-member Chicago School Finance Authority gave its stamp of approval two weeks after the stamp of passed thee budget, which is partly balanced with $175 million of anticipated bond proceeds, according to Barbara Holt, the authority's executive director.
The financial crisis, caused by a $298 million deficit in the budget, forced the school system to shut down briefly three times since Sept. 1, the start of fiscal year 1994. Illinois law requires the board to have a balanced budget before classes can open.
The school system continued to operate with the help of restraining orders granted by a federal court judge in Chicago until state lawmakers passed a financial bailout plan last month.
On Nov. 14, the Illinois General Assembly and Gov. Jim Edgar approved a $427 million general obligation bonding plan designed to provide the board financial relief over the next two years.
The plan will provide the board with $378 million of bond proceeds for operating purposes in fiscal 1994 and 1995. The remaining bonding authorization is reserved for the costs associated with issuance of the bonds or bond insurance if necessary, Holt said.
To help ease budget problems over the next two years, lawmakers also permitted the use of $32 million of funds that were earmarked for poor students and $17 million of the authority's restricted funds.
The authority is working with Merrill Lynch & Co., its financial adviser, to put together a bond issue, which will be sold competitively. The authority has not determined whether the $427 million of bonds will be sold in one or multiple issues. Holt said that some or all of the bonds will be sold early next year.
The bonds will be paid off with the authority's property tax levy and will not require an immediate property tax increase.
Rating agency officials have called the borrowing a stopgap measure that does not address the board's longterm fiscal problems. Officials from Moody's Investors Service and Standard & Poor's Corp. said they expect to complete their reviews of the board and finance authority in about a week.
Standard & Poor's has placed $30.5 million of BBB-rated board-secured debt on Credit Watch with negative implications.
Moody's, which rates the board's debt Baa and the authority's debt A, has said the rating outlook is poor for debt issued by both the board and the authority.
The Illinois General Assembly created the authority in 1980 to provide financial assistance and oversight for the Chicago Board of Education, which faced an estimated operating deficit of $460 million in late 1979.
In 1980, the authority issued $573 million of GO bonds to pay off the deficit and to provide working cash for the board. The authority currently has $480 million of outstanding debt.