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Chicago college board President Sean Harden laid out a case Wednesday for borrowing as “a viable choice” for closing the district’s $734 million finances deficit. However he mentioned it have to be paired with long-term options to unravel CPS’s bigger monetary disaster.
“The centerpiece is kids and training, and if the software that we’ve got to guard that’s borrowing, then that’s the software that we’ll use,” Harden mentioned in an unrelated interview with Chalkbeat. “However we’re additionally saying: ‘Give us totally different instruments, after which we’ll use that.’”
The district should move a balanced finances inside 60 days of July 1, when the brand new fiscal yr began. CPS hosted a collection of public finances conferences final week, and is anticipated to current a finances replace to the board this week. District leaders have mentioned they plan to current a finances proposal to CPS subsequent month, with a board vote anticipated at its Aug. 28 assembly.
Harden is one among 11 individuals — the vast majority of the college board — appointed by the mayor. Harden can solely vote to interrupt ties.
Former CPS CEO Pedro Martinez resisted short-term borrowing final yr when Metropolis Corridor floated it as a solution to reimburse town for pension prices and canopy new labor contracts. That resistance led, partially, to Martinez’s firing and the mass resignation of Mayor Brandon Johnson’s first appointed college board.
However Harden mentioned borrowing could possibly be the one pathway to keep away from “draconian cuts” to colleges and mentioned he doesn’t really feel the general public is connecting the dots between finances cuts and the way they might affect college students in colleges. He made related feedback to WBEZ on Wednesday.
“We’re speaking about considerably impacting instructional expertise,” Harden mentioned, arguing that cuts might harm the progress made by CPS college students within the wake of great tutorial declines in the course of the COVID-19 shutdowns.
However borrowing shouldn’t occur in “isolation,” Harden mentioned. Meaning in search of cash down the highway that would herald further sustainable income for the district to unravel its long-term monetary issues. That would embody extra “efficiencies” in CPS’s finances, analyzing declining enrollment and underutilization of buildings, pushing the state for extra income, offering further tax levying authority for CPS, and taking a look at pension obligations.
Harden additionally pointed to future income anticipated from expiring Tax Increment Financing, or TIF, districts, which symbolize a pool of metropolis tax {dollars} meant to spur financial growth.
Roughly half of the property tax income tied up in these districts would go to CPS as soon as they expire — a degree Metropolis Corridor officers have beforehand identified when making the case for CPS to borrow cash. By the tip of 2025, CPS is anticipated to obtain $54 million in further property tax income from expiring TIF districts and one other $117 million by the tip of 2026 with quantities rising past that, in response to information revealed by Cook dinner County.
“The objective is to have this be a short-term technique related to structural change,” Harden mentioned.
Nonetheless, attracting lenders could possibly be tough for CPS. The district has a junk bond score standing, which is analogous to having a below-average credit rating. Moreover, its monetary difficulties and challenges to search out extra income are well-publicized.
Any short-term borrowing the district does now’s extra more likely to have excessive rates of interest, which might imply pricey debt funds within the coming years — probably impacting school rooms sooner or later as income is diverted to repay debt. Requested if it’s definitely worth the threat of incurring excessive rates of interest and failing to safe long-term income options, corresponding to extra state cash, Harden mentioned, “Sure” — however that failure shouldn’t be an choice.
“I might make a simply rationale for incurring (a excessive rate of interest) in lieu of what would occur when it comes to job loss, the atrophy that may happen in colleges,” Harden mentioned. “That domino impact is so vital that I’d argue it pales compared to what we might incur in curiosity.”
The Chicago Academics Union, a robust ally of the mayor’s, has advocated for the same answer: borrowing now and discovering sustainable income sooner or later, corresponding to pushing the state to carry a particular legislative session and impose higher taxes on the state’s highest earners.
A number of board members and different organizations, nevertheless, have additionally advocated for not reimbursing town for a pension obligation of $175 million, which CPS is just not legally obligated to do however started paying again below former Mayor Lori Lightfoot, in addition to having town present extra TIF-related {dollars} to keep away from borrowing.
Reema Amin is a reporter protecting Chicago Public Colleges. Contact Reema at ramin@chalkbeat.org.
