CPS taking on long-term debt to cover daily operations

They denied it on Monday, but Chicago Public School officials admitted on Wednesday that they do plan to use one of the budget ploys that earned CPS a junk-status credit rating. 

School officials plan to borrow over a billion dollars this fall. They'll repay it over 20 years, but use a big piece of it over the next few months to pay daily bills.

CPS blames the stalemate in Springfield.

In public at least, the Board of Education says it expects Gov. Bruce Rauner and the General Assembly to compromise on a budget deal, which is a deal that could save Chicago schools several hundred million dollars.

In fact, they're now preparing for the grim possibility of no deal and no help at all.

The school system's chief financial officer sheepishly explained the controversial borrowing plan at Wednesday’s meeting of the Board of Ed.

“Borrowing that is not a choice that we want to make. But it's potentially what we need to do,” said CPS Chief Financial Officer Ginger Ostrow.

For more than a decade, CPS quietly borrowed from its pension funds. The result: the Chicago Teachers Pension system – 100 percent funded in 2001 - is now at 56 percent.

It's now required to deliver giant makeup payments, which has forced thousands of layoffs.

In part to avoid more layoffs, CPS wants to borrow up to $1.16 billion for 20 or more years. Watchdogs are outraged that up to $250 million of that will go for paychecks and daily operations.

It's been compared to mortgaging your house to pay your grocery bill.

"It's absolutely irresponsible to use long-term debt to cover regular, current services," declared Ralph Martire of the Center for Tax and Budget Accountability.

Officials say the new borrowing provides more time to negotiate a comprehensive financial solution. But if Plan A fails, they have a grim Plan B.

“The overall school budget you will vote on next month relies on either $500 million in pension relief from Springfield, or a mix of unsustainable borrowing and additional cuts,” said Jesse Ruiz of the Board of Education.

Chicago Schools are not the only ones preparing to cope with a long-term stalemate in the State Capitol. It's why Cook County Board President Toni Preckwinkle last week pushed through a half-billion dollar sales tax increase. She thought her pension reform bill was a lock, but not now. Nothing is going to come out of Springfield, perhaps for more than a year.