Chicago Public Schools’ board of education has approved a plan to borrow $389 million to help pay its financial obligation to the Chicago Teachers’ Pension Fund (CTPF).
In the next few weeks, the Chicago Public Schools plans to complete a short-term financing of up to $389 million in grant anticipation notes (GANs). The school system said the GANs will be secured by the delayed state block grant payments, which it expects to receive in the coming months. Proceeds from the sale of the GANs, along with savings made through budget reductions earlier in the year, will be used to make the 2017 contribution to the CTPF.
“Gov. Rauner wants CPS to get by on ‘baling wire and chewing gum,’ the words of his representatives,” said CPS CEO Forrest Claypool in a statement. “And this plan does exactly that – bridges CPS through the next few months, keeping schools open until June 20, making our pension payment that no other district in the state has to make, and meeting our obligations until we receive more funding later this summer.”
But that $389 million might not be enough to cover its financial obligations. For fiscal year 2017, the CPS is required to make a payment to the CTPF of just over $733 million, and it must make the full payment by June 30. According to Charles Burbridge, executive director of CTPF, as of May 9, the balance due is just under $716 million.
Public Act 99-0521 allows the Chicago Board of Education to levy a separate tax to help pay for an employer contribution to the Chicago Teachers’ Pension Fund. According to the CTPF, this tax will be collected for the first time in 2017, and the CPS said the estimated $250 million in proceeds will be remitted in July and August of this year.
CPS indicated that it will use the revenue received in July or August to fund part of its required FY 2017 payment. If this occurs, Burbridge said in a statement, the fiscal year 2017 CPS contribution will be delinquent, and CTPF will have a receivable due of the outstanding balance as of July 1.
“The Illinois Pension Code does not define a specific remedy or course of action in the event that CPS fails to make a full payment,” said Burbridge. He added that if the fund has a receivable on July 1, the board of trustees must meet and determine the appropriate course of action. The first CTPF Board of Trustees meeting following the close of the fiscal year is scheduled for July 20.