RESOLVING THE LEDGER
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Claiborne Wade was troubled when he woke up Friday morning to an email from the head of Chicago Public Schools telling parents like him that the school board had made a last-minute change to the budget that could affect the start of school.
At the time, Wade, a parent leader at the nonprofit advocacy group Kids First Chicago, wondered if most parents were even aware of the budget overhaul. It happened at night, after a marathon meeting, when “parents were getting ready for dinner, getting their kids ready for bed,” he said.
In her message , Supt. Macquline King warned that the district may not be able to get the short-term loan it needs to make payroll, “which would effectively shut down the district just as staff and students are set to return.”
“My goal as a leader is to always be transparent, and it’s only fair that I be honest with you about where we are,” King wrote.
The message was dire, but even experts who are critical of the budget changes say it’s likely CPS will be able to borrow the money it needs and King sounded the alarm about a consequence that won’t play out. Still, they say it’s possible the changes, which board members hope will rescind about 1,000 staff layoffs , could lead to midyear disruptions, especially if the state doesn’t come through with the extra $150 million the school board is now counting on.
“I suspect CPS will come up with a way to limp along so that the front end of the school year starts and continues as planned,” said Joe Ferguson, the president of The Civic Federation, a fiscal watchdog that keeps tabs on the district’s finances. But Ferguson said given how “uncertain and unstable” the situation is, there’s a “legitimate and real concern about where this all goes.”
Why King made the assertion that the start of school could be interrupted is complicated.
One board member told WBEZ they thought King sent the alarming letter to families because she was upset that her budget was altered.
Rather than approve the budget King presented, board members assumed the state would provide more money — a move district officials warned was illegal and in violation of board members’ duties.
On Friday, the 11 board members who voted for those budget changes sent King a letter “respectfully asking her” to communicate financial risks “responsibly.” And they took the unusual step of laying out four things they wanted to see communicated.
The board members said King should refer to the budget as balanced — though King and her staff made it clear they don’t agree with that — and they wanted her to assure parents that the district has a plan.
In a statement, a CPS spokesperson said the district’s leadership would review that letter and continue to work with the school board.
In her letter to parents, King wrote that the newly amended budget relies on additional funding from the state that “CPS has not yet, and may not ever, receive.”
That money is up in the air. Illinois House and Senate leaders recently expressed support for giving CPS more money, but no specifics have been discussed. Similarly, on Friday Gov. JB Pritzker acknowledged state education funding is “not yet where we need to be” but said he is “a big believer” in balanced budgets.
King’s letter to parents centers on a concern that she and her acting financial chief, Wally Stock, share. They said an unbalanced budget could make creditors wary of giving CPS a loan. Without the loan and without the ability to pay staff, King and her staff are unsure that they can compel people to work.
CPS has taken short-term loans to cover payroll for many years, but it is in an especially bad financial position at the moment because Cook County has been late disbursing property taxes and expects to be late again.
Arnie Rivera, a former CPS official who is now the executive director of the Chicago Education Alliance, an advocacy group , agreed with Ferguson that CPS will likely be able to find a lender.
But Rivera said he suspects that there are not as many lenders as school district officials would like there to be, which means the cost of borrowing is high.
CPS paid $42 million to take out short-term loans to cover payroll last year. Even before last week, the district had planned to spend another $27 million in interest on short-term loans this year.
Justin Marlowe, the director of the University of Chicago’s Center for Municipal Finance, said that lenders are still open to CPS. He has interviewed CPS lenders as part of his work.
Lenders “are really only concerned with the revenues that are going to be used to repay” the short-term loans, he told WBEZ earlier this month. “As long as you know it's the property tax distribution from the county, the investors know that those dollars are coming.”
The school district “pre-commits” incoming property tax dollars to pay back the loans, and that’s sufficient as the “sole source of the pledge on these bonds,” Marlowe added.
In the meantime, parents like Wade are caught in the middle.
Wade said he understands that board members faced a difficult choice: approve a budget with layoffs that no one wants or assume more money from the state and fight to get it — even if that seems unlikely.
Wade, who chairs Kids First’s equitable funding task force , said parents are worried that their schools will not be adequately staffed.
Now he wants CPS leaders to put pressure on state lawmakers to take action to avoid midyear layoffs.
“I'm hopeful and optimistic that the state will do what it has to do in order for that not to happen,” Wade said. “The state needs to help.”
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