CHICAGO -- The Illinois General Assembly will meet Thursday in a special session to consider a $300 million bond-financed bailout of the Chicago public school system.
The move comes in reaction to a proclamation issued Friday by Gov. Jim Edgar of Illinois ordering state lawmakers back from their summer recess to resolve the city's school financing dilemma.
Edgar said he supports a plan proposed last week by Mayor Richard M. Daley that calls for the Chicago School Finance Authority to issue $300 million of bonds, backed by city property taxes, to help eliminate the school system's operating deficit.
The beleaguered school system currently faces a $299 million deficit in its projected $2.6 billion budget for fiscal 1994, which begins Wednesday.
"The mayor of Chicago and I are in agreement on an approach he recommended," Edgar said in a press release. "No state resources will be required. There will be no state bailout. No state funds that otherwise would go elsewhere are necessary to resolve this problem."
Noelle Gaffney, a spokeswoman for Daley, said the mayor is pleased with Edgar's announcement and is hopeful the plan will be approved.
Edgar said the General Assembly must take action this week in order for schools to open on time Sept. 8. In order for any bailout plan to take immediate effect, a three-fifths vote of the legislature is required.
To implement Daley's plan, the governor said, the General Assembly would have to approve measures allowing for issuance of the bonds, flexibility in the use of state funds for supplemental services, administrative and financial reforms in the school system, and changes in school pension programs that would result in savings for the board.
Edgar said that the passage of the legislation also would allow Chicago school officials and the teachers' union to help close the budget gap with union concessions.
The legislation "must be approved swiftly so the board and the teachers' union can use the new flexibility to bring their negotiations to a successful conclusion before Sept. 8," Edgar said.
Last Tuesday, Daley unveiled a two-year plan to rescue the financially strapped school system with $300 million of bonds that would be issued by the Chicago School Finance Authority, the board's financial oversight panel.
The bonds would be issued in two installments, with $120 million allocated to the fiscal 1994 budget and the remainder to the 1995 budget.
Under the plan, the bonds would be backed by a portion of the oversight authority's property tax levy, which provides debt service on bonds issued in the early 1980s to bail out the school system.
As the previous bonds are retired or refinanced, the estimated $31 million of annual savings will be transferred directly to the board's operating budget. Daley has said those funds can be used to pay off the 14-year bonds until another source of revenues is found.
Daley has proposed that revenues from riverboat gambling admissions fees could replace the property taxes used to pay off the bonds if Edgar and state lawmakers allow a riverboat gambling complex in the city. Daley has said he will lobby for passage of that plan in the fall legislative session.
How open lawmakers will be to the bonding plan remains uncertain. House Speaker Michael Madigan, D-Chicago, is in favor of the borrowing and is hopeful that it will be in place so Chicago schools can open on time, said Madigan spokesman Steve Brown.
However, Mark Gordon, spokesman for Senate President James Philip, R-Wood Dale, said Senate Republicans will be calling for a lower amount of borrowing for the Chicago schools during the special legislative session.
"[The members] are pretty concerned about the cliff the schools will fall off of in the third year," Gordon said, referring to the fact that proceeds from the bond issue will only provide operating revenues for schools in fiscal 1994 and 1995, and not for succeeding years.
Gordon said no acceptable level of bonding has yet been determined by the Republican members.
In addition, the Republicans want to see more powers vested with the finance authority, such as a line item veto over the board's budget, and would like a pilot school-voucher program that would include private schools in Chicago, Gordon said.
Officials from the school finance authority, the school board, and the teachers' union did not return phone calls.