Chicago mayor weighs options to fill widening gap in school budget

Chicago Mayor Rahm Emanuel speaks with media after meeting with U.S. President-elect Donald Trump at Trump Tower in Manhattan, New York City

CHICAGO (Reuters) – A gap in Chicago’s public school system budget is likely to grow more than 4-1/2 times beyond a previous estimate and Mayor Rahm Emanuel is considering a property tax increase or additional borrowing among options to close it, a city spokeswoman said.

Molly Poppe, an Emanuel administration spokeswoman, said late on Tuesday that the projected shortfall grew to $596 million because the district has yet to receive $467 million in state grant payments for this fiscal year, which ends June 30.

The grants, which have been delayed due to Illinois’ own budget problems, cover items such as transportation and special education.

Poppe said a plan to shore up the $5.41 billion school budget will be unveiled in the coming weeks.

She also confirmed a Tuesday report by the Chicago Sun-Times that options under consideration include a property tax hike, a loan of city tax increment financing money, borrowing, staff cuts, vendor payment delays, and postponement of part of a $721 million payment due to the Chicago Teachers’ Pension Fund by June 30.

Abdon Pallasch, spokesman for the Illinois Comptroller’s Office, said on Wednesday grant payments for fiscal 2017’s first quarter only went out last month and that there might not be enough money in state coffers to make any subsequent quarterly payments by the end of June.

Chicago Public Schools (CPS) in February had pegged its budget shortfall at $129 million after ordering spending cuts and unpaid furlough days to help deal with Illinois Governor Bruce Rauner’s veto of $215 million in one-time state cash the district had budgeted for teacher pensions.

Escalating pension payments have led to drained reserves, debt dependency, and junk bond ratings for CPS, the nation’s third-largest public school system.

Chuck Burbridge, the teacher pension fund’s executive director, said he was advised by CPS of its intent to apply July and August property tax receipts to the June 30 payment and that the fund’s board has not discussed a response to that move. He added that school officials have asked to make a presentation at the fund’s May 18 board meeting.

CPS was dealt a blow late last month when a Cook County Circuit Court judge dismissed its civil rights funding lawsuit against Illinois.

After the ruling, the mayor, who controls the district, quashed an idea floated by CPS officials to save $96 million by ending the school year on June 1 instead of June 20 and cancelling some summer school programs.

(Reporting By Karen Pierog; Editing by Daniel Bases and Tom Brown)