CHICAGO - Chicago schools will remain open until at least Friday under the third court order issued to give the Chicago Board of Education time to balance its budget for fiscal 1994.

U.S. District Court Judge Charles Kocoras issued the latest order on Monday, adding four days to the school board's time. The board's financial oversight panel, the Chicago School Finance Authority, agreed to the extension only if the new order imposed deadlines for action by the board, the teachers union, and the Illinois General Assembly.

The board and the teachers union are negotiating a new contract that board members hope will help close the system's $298 million deficit for fiscal 1994, which began Sept. 1. If an agreement is reached by Friday, the restraining order will be extended to Oct. 15 to allow the General Assembly to consider a two-year, $300 million bonding plan to help solve the board's budget problems, according to Roger Pascal, the authority's attorney.

Under state law, the board must have a balanced budget before classes can begin. State legislators have said that they will not pass a funding package for the school system until there is some positive movement innegotiations between the board and the union.

If there is no agreement between the two sides by midnight Friday, the school system will shut down indefinitely, board officials said. Payment of debt service on outstanding bonds would not be affected.

Kocoras granted the latest restraining order after making a "painful and unsatisfying decision" to reject a board request for an immediate preliminary injunction that would have kept schools open for 30 days.

Kocoras said that he will hold a hearing on the request on Oct. 18. At the hearing, Kocoras may establish a schedule to consider the board's motion for a court-ordered bailout plan for the beleaguered school system.

The board has asked the court to allow the issuance of $120 million of general obligation bonds by the school finance authority this fiscal year, the use of $55 million of teacher pension revenues, and the transfer of $18.3 million of restricted state funds to enable the board to balance its budget and keep schools open.

However, Kocoras said on Monday that remedies for the school system's fiscal woes could be "broader than the three sources of funds" that the board has requested.

In court documents, Charley Gillispie, chief financial officer for the board, said that the finance authority should issue bonds on behalf of the school district because the authority in the past has turned to bonding to address the school system's operating problems.

In 1980, the authority issued $573 million of bonds and provided the board with $450 million for operating purposes in fiscal 1980 and fiscal 1981, Gillispie said.

The $120 million of bonds needed for fiscal 1994 would not require a property tax increase, Gillispie said, because of decreases in debt service for the finance authority's outstanding bonds due to refinancings and increases in Chicago's property tax base.

Pascal, the authority's attorney, has argued against the $120 million bond issue, saying that any bonds sold by the authority under a court order would be "unmarketable."

The authority has said in court documents that it lacks state legislative authority to sell the bonds, turn the proceeds over to the board, and force Chicago to raise the necessary property taxes to pay debt service.

The board's $120 million bonding request was first proposed as part of the two-year $300 million general obligation bonding plan unveiled by Mayor Richard M. Daley in August.

The restraining order issued on Monday was the third granted by the judge since the school board failed to enact a balanced budget by Sept. 1. Under Illinois law, the board cannot open schools without a balanced budget approved by the Chicago School Finance Authority.

Kocoras granted the first 10-day temporary restraining order on Sept. 10, after the board argued that a shutdown of the system would violate a federal consent decree to eliminate segregation and ensure quality education. On Sept. 23, the judge approved another 10-day temporary restraining order that expired Monday in order to give the school system time to work out a solution with its teachers union and the General Assembly.

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