CHICAGO (Reuters) - The Chicago Board of Education on Wednesday signed off on a revised fiscal 2018 budget and up to $1.1 billion of bonds the junk-rated school district tentatively plans to sell next month.
The board revised the $5.75 billion spending plan it approved in August to incorporate a $450 million funding boost. That money resulted from the enactment in August of a new Illinois education funding formula that gives the Chicago Public Schools (CPS) higher aid payments and pension contributions from the state and allowed it to hike local property taxes.
Escalating pension payments have led to drained reserves and debt dependency for CPS, the nation’s third-largest public school system.
The district plans to refinance about $630 million of outstanding debt, including $440 million of floating-rate notes that carry interest rates as high as 9 percent, during the week of Nov. 13 subject to market conditions.
Also scheduled for sale are $225 million of new general obligation bonds and $65 million of capital improvement tax bonds that have a separate investment grade rating based on a provision that insulates pledged property tax revenue from the risk of a potential bankruptcy by the school system.
The infusion of more state funding will reduce the district’s cash-flow borrowing to $1.3 billion versus $1.55 billion in fiscal 2017, according to school board documents. The district reported it received a 3.60 percent interest rate for recent tax anticipation note deals totaling $550 million.
Reporting by Karen Pierog; Editing by Matthew Lewis