Group of Illinois House Democrats aims to cut Chicago schools' projected budget deficit.

CHICAGO - A group of Illinois lawmakers has proposed a three-part plan to reduce the Chicago school system's fiscal 1994 deficit before school begins in September.

In an attempt to help the schools open on time, 19 Democrats from the Democrat-controlled House have proposed the plan that would cut by $92.7 million the school system's projected $415 million deficit in the fiscal year that begins Sept. 1.

Under the House plan, the state would speed up to August a $46 million state aid payment now slated for Sept. 1, according to State Rep. Monique Davis, D-Chicago, the bill's chief sponsor. The funds would have to be shifted to an earlier date because the budget must be in place before the fiscal year begins.

In previous years, current Gov. Jim Edgar and former Gov. James Thompson, both Republicans, reluctantly agreed to accelerate the payment.

Mark Gordon, a spokesman for Senate President James Philip, R-Wood Dale, said the Republican-controlled Senate has not yet seen the House bill.

Secondly, the bill would require the Chicago School Finance Authority. the school system's financial oversight panel, to release $22 million of "restriction calculation" funds. The Board of Education must set aside such funds every year in its budget to provide for expenses expected to be paid with revenues from the next fiscal year, Davis said.

Thirdly, the House plan would provide Chicago schools with another $24.7 million in Chapter I state poverty aid. Lower than in previous years, the amount was calculated from a three-year phase-in of reduced Chapter I aid based on 1990 census figures. Those figures show a decreased number of poor children in the city. Still, the school system would lose even more, $37.5 million of aid in fiscal 1994, without the phase-in process, Davis said.

While Davis said the House plan is "just a drop in the bucket," she noted that it would help the schools open in September as lawmakers work on a long-term solution to the deficit.

State Rep. Ellis Levin, D-Chicago, another sponsor of the measure, said the plan incorporates several provisions, including the acceleration of the state aid payment, that have been used in the past to help Chicago schools.

"Our concern is to get past the immediate crisis," Levin said. "This is a package of ideas that have worked in the past."

It is uncertain if the Chicago School Finance Authority will accept the plan. Executive director Barbara Holt said the authority agreed to an early release of the restriction calculation funds last year with the understanding that they would not be released early again.

The authority's agreement to release the funds last September was a component of a last-minute elimination of an $84.6 million deficit in the schools' fiscal 1993 budget. Every year since the oversight board's creation in 1980, the Chicago public schools have had to fill projected budget gaps.

Holt said the restriction calculation funds were designed to ensure that the school system has sufficient money on hand to meet its cash-flow obligations.

Rating agency officials said the provisions, which do not increase funding for schools, are one-shot solutions that do not address the school system's long-term budget problems.

The Chicago Board of Education has $17.9 million of outstanding general obligation debt rated Baa by Moody's Investors Service and BBB by Standard & Poor's. The board is also obligated to make lease payments on $1.7 billion of insured bonds issued on its behalf by the Chicago Public Building Commission.

The Illinois House measure is the second plan to surface this month that would provide short-term relief for the beleaguered school system. Earlier, Mayor Richard M. Daley of Chicago said he is considering a school borrowing plan for fiscal 1994 that would use future gambling admissions fees if riverboat casinos are brought to the city. No city or state official has come forth to claim authorship of the borrowing plan.

The borrowing plan would allow the Chicago Board of Education to borrow $70 million against future fees for city schools, according to Noelle Gaffney, a spokeswoman for Daley. She said that the mayor has not committed himself to the borrowing plan, and it is only one of the options being considered.

If it is pursued, the borrowing plan may run into opposition from Republican lawmakers and the governor. Gordon, the Senate president's spokesman, said that while Philip has not taken a position, many Senate members "have a philosophical problem with bonding to pay ongoing expenses."

Mike Lawrence, the governor's spokesman, said that while Edgar is open to using riverboat gambling revenues to help the Chicago school crisis, the governor also "takes a dim view of issuing bonds for operating expenses."

Rating agency officials said that the borrowing proposal raises numerous questions regarding the reliability of the revenue source and attendance forecasts, among other things.

"If the sole source is fees, that in itself is a riskier situation than a general tax pledge," said Steve Eaddy, an associate director at Standard & Poor's Corp.

Paul Devine, vice president and manager of the Great Lakes regional group at Moody's, said that revenues from expected admissions fees and gaming taxes for projects that have yet to be built are not perceived as a sound repayment stream.

"I would say there is some question about what role a revenue source from a project not developed would play," Devine said.

Davis said that riverboat gambling proceeds should not be considered a remedy to the school system's woes despite Daley's plan to allocate $71 million a year for Chicago schools. She added that a state income tax increase would provide more stable funds for schools.

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