Chicago’s cash-strapped public school system plans to seek up to $389 million in short-term loans to avoid closing schools early for the summer and to make required pension payments next month, the mayor’s office disclosed on Friday.
The fix will be secured through short-term financing against $467 million in delayed block grant funding by Illinois’ fiscally paralyzed state government, which has not passed a full-year operating budget in 23 months.
Escalating pension payments have led to drained reserves, debt dependency and junk bond ratings for Chicago Public Schools.
The move follows Republican Governor Bruce Rauner’s veto of legislation last November that would have funneled $215 million in state funds to the nation’s third-largest school system to help it make a required $721 million pension payment next month.
A school-funding overhaul that would direct more money to Chicago’s schools passed the Illinois Senate this week but drew immediate criticism from Rauner’s education chief, casting serious doubts on the measure’s long-term prospects.
(Editing by Chizu Nomiyama and Matthew Lewis)