Chicago school board to consider up to $500 million more long-term borrowing
CEO Forrest Claypool, left, speaks during a Chicago Board of Education meeting in Chicago, on April 26, 2017.
Chicago Public Schools said on Monday it plans to add up to $500 million in debt to its load of long-term obligations, an annoucement that comes just days after Mayor Rahm Emanuel said the district would use a short-term loan to settle bills, including a massive pension contribution.
The half-billion dollars of bond debt would be used in the district’s coming budget year, which begins July 1, to bring cash into the system and modify the terms of some of the district’s existing bond debts, a district spokeswoman said.
"The bonds will refund outstanding bonds and reimburse the Board for prior obligations," CPS spokeswoman Emily Bittner said in an email.
The Chicago Board of Education is set to vote on the plan Wednesday, along with a separate measure to finance a loan of up to $389 million to cover the remaining weeks of the school year. That loan would be backed by future state grant fund payments to CPS. Both the short- and long-term debt must still be sold to investors.
District officials sought to sell hundreds of millions of dollars in bonds late last year but delayed the deal in November due to what CPS described as "changing market conditions."
The stated use for the bond money hints CPS will employ a similar strategy to one used last year, when the district used almost half of $725 million it borrowed through high-interest bonds to reimburse itself for capital projects it had paid for out of its operating budget in recent years.
Much of the remaining money raised by that prior bond issue was also spent to refinance debt, and district records showed CPS paid $110 million from the bond proceeds in a type of interest to investors.
Like most of the district’s long-term obligations, the bonds set to be authorized this week would be backed by general state aid dollars — and if necessary, property taxes.
The district has turned to more borrowing as it continues to fight for additional state funding. Last week, the school board filed an amended complaint in its previously rejected lawsuit against the state over education funding, which included a new demand for a judge to "award CPS damages in an amount sufficient to compensate CPS" for what the district argues is a racially discriminatory state method for funding teachers’ pensions.
At Wednesday’s board meeting, members will also take up changes to the district’s graduation requirements, including a plan to require high school seniors starting with the Class of 2020 to show proof they’ve been accepted into college or the military, a job, a trade or "gap year" program in order to graduate.
District officials have acknowledged that every Chicago public high school graduate essentially already meets the new standard because graduation guarantees admittance to the City Colleges of Chicago community college system.
Other new high school graduation requirements will prompt future high school students to take one unit of financial education courses and make changes to science education standards.