CHICAGO, Dec 16 (Reuters) - The Chicago Board of Education on Wednesday approved the issuance of $1.23 billion of debt, a school spokeswoman said, as the “junk” rated school system expects to run low on operating funds next month.
The nation’s third-largest public school district is struggling with a $1.1 billion structural budget deficit fueled by big pension payments and could be hit with a teachers’ strike next year.
The Chicago Public Schools asked the board to boost a tax anticipation note issuance to $195 million from a previously approved $65 million. That move, which won board approval, along with a plan to delay school vendor payments, will help the district avert a January cash shortfall, according to a Dec. 11 memo from CPS consultant Ernst & Young.
The school board also agreed to increase a $1.04 billion unlimited tax general obligation bond issue it approved in August to $1.16 billion. The issue will restructure some outstanding debt to free up more than $200 million for the district’s $5.7 billion budget, fund capital projects, and convert variable-rate debt to fixed rate, while paying related interest-rate swap termination fees.
CPS officials continue to hope for $480 million in pension funding from the state of Illinois. But help for the district is entangled in an ongoing state budget impasse between Republican Governor Bruce Rauner and Democrats who control the legislature.
Escalating public pension costs and budget deficits have pushed credit ratings on more than $6 billion of the school district’s debt into the “junk” category. Investors demanded hefty yields for CPS debt sales earlier this year. (Reporting by Karen Pierog; Editing by Matthew Lewis)