By Karen Pierog
CHICAGO (Reuters) - The lack of a final Illinois budget is delaying a fiscal 2016 spending plan for the Chicago Public Schools (CPS), a spokesman for the district said on Monday.
Bill McCaffrey said CPS, which begins its new fiscal year on July 1, is "waiting for clarity on state education (funding) levels before producing our budget." The Democratic-controlled Illinois Legislature and Republican Governor Bruce Rauner remain at odds over a state spending plan for fiscal 2016, which also starts next week.
In the meantime, the nation's third-largest public school system will ask its board of education on Wednesday to approve $1.13 billion of tax anticipation warrants and notes for cash-flow needs in the current and next fiscal year.
Jesse Ruiz, the district's interim CEO, said a recent report indicates that CPS is running out of cash and needs the money to enhance cash-flow management.
An Ernst & Young report commissioned by the district said CPS could run out of money as soon as this summer in the absence of major cost-cutting and increased revenue.
The accumulated deficit for CPS is also on track to grow by more than $1 billion a year, reaching $5.4 billion in fiscal 2020 when revenue is projected at only $5.28 billion.
The report noted that "shared sacrifice" is necessary to pull CPS out of its fiscal free fall. Potential fixes could include raising as much as $450 million in new property tax revenue through the city of Chicago, increasing state funding, cutting operating expenses to fiscal 2011 levels, and reducing employee pension and healthcare costs.
The list has obstacles, including serious financial problems facing both the city and the state of Illinois, teacher union opposition, and legal issues over whether Chicago could levy property taxes for schools, which have a state-imposed cap on collections.
A big part of the problem is escalating public pension payments, with $634 million due by June 30, climbing to $772 million in fiscal 2020. But even if the district were to take a pension payment holiday for the next five years - a move requiring state legislative approval - its accumulated deficit would still rise to $2.4 billion over that time, the report said.
Jesse Sharkey, vice president of the Chicago Teachers Union, said without a budget, teachers do not know if they will have jobs in the coming school year.
"It's extremely unsettling," he said.