CHICAGO - The interim superintendent for the Chicago public school system last week proposed cutbacks that would reduce the system's fiscal 1994 budget deficit by $284 million, to $41 million.

Richard Stephenson, the interim superintendent, presented the proposal to the Chicago Board of Education.

According to a school budget official, the plan includes cutting various school programs, increasing the sizes of classes, requiring employees to pay for part of their pension and health insurance plans, and eliminating one paid holiday for workers.

The official said that an infusion of funds would still be needed even if the proposed cutbacks are adopted.

"After gutting the system, there would still be a $41 million gap," the official said, adding that some of the alternatives would require approval from school unions.

School officials last Tuesday unveiled a $2.8 billion fiscal 1994 budget with a projected $416 million deficit. But the budget gap decreased to $325 million when Gov. Jim Edgar and state lawmakers later in the week approved a $91 million funding package in the state's fiscal 1994 budget.

In order for schools to open on time, the Chicago School Finance Authority, the board's financial oversight panel, must approve the board's balanced budget by Sept. 1. If the authority does not approve the board's budget by that deadline, the board would continue to pay its debt service. However, the board would not be able to spend money for any other purpose until the budget is balanced.

Meanwhile, Mayor Richard M. Daley last Wednesday sent letters to Edgar, legislative leaders, school board officials, and union officials calling for a special legislative session by Aug. 16 to address school funding options if the board and its unions make progress at the bargaining table.

"Unlike in some years past, this year's school funding crisis is very real. But calling for additional state funding is pointless unless unions and the Board of Education can agree to reforms that not only lower costs, but also improve education, " Daley said in the letters. Contracts for 24 unions expire on Aug. 31.

Noelle Gaffney, a spokeswoman for the mayor, said the special session could include a discussion of using some proceeds from a proposed riverboat gambling complex to assist Chicago schools.

Pamelyn Massarsky, recording secretary for the Chicago Teachers Union, said that her group agrees that a speedy resolution is necessary.

"We will do everything in our power to come to closure, but it's not an easy task," Massarsky said, adding that negotiations include discussion of the lengths of the school year and school days.

Mike Lawrence, a spokesman for Edgar, said the governor had not received Daley's letter. He said Edgar could not comment on Daley's proposal until he has reviewed it.

Mark Gordon, a spokesman for Senate Majority Leader James Philip, R-Wood Dale, said that Philip has received Daley's letter and is reviewing it.

Steve Brown, a spokesman for House Speaker Michael Madigan, D-Chicago, said that Madigan has formed a special task force to study the school system's financial problems. He said Illinois' financial situation limits the amount of assistance the state can provide.

Keep in mind, Illinois is not in great condition. There are no pots of gold in Illinois," Brown said.

In a related matter, school officials have instructed their attorneys to look into legal options that would force the state to provide adequate funding if the board does not eliminate its budget gap by Sept. 1.

The Chicago Board of Education has $17.9 million of outstanding general obligation debt that is rated Baa by Moody's and BBB with a negative outlook 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.

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