(Adds details from judge's ruling, comments from Chicago mayor and state official)
By Karen Pierog
CHICAGO, April 28 (Reuters) - An Illinois judge dealt a blow to Chicago's cash-strapped school system on Friday by dismissing its lawsuit that argued the state's school-funding formula discriminates against minority students.
Cook County Circuit Court Judge Franklin Valderrama gave the nation's third-largest public school system until May 26 to amend the lawsuit after determining it failed to identify alleged discriminatory practices under Illinois' Civil Rights Act.
"To say that the state's current scheme of funding public education is broken is to state the obvious," the judge said in his ruling, adding however that the current lawsuit "is not the vehicle to redress this inequity." The Chicago Public Schools (CPS) sued Illinois officials in February, claiming the state's method of education funding discriminates against its largely black and Hispanic student body in violation of the Civil Rights Act.
Unlike all other Illinois school districts, which participate in a teachers' retirement system heavily subsidized by the state, CPS maintains its own pension fund for educators.
Escalating pension payments have led to drained reserves, debt dependency, and junk bond ratings for CPS.
Chicago Mayor Rahm Emanuel, who controls the district, said students will have a full school year despite the ruling.
The district had raised the possibility of saving $96 million by ending the school year on June 1 instead of June 20 and cancelling some summer school programs as it deals with a lingering $129 million deficit in its $5.41 billion budget and a looming $721 million pension payment. Emanuel offered no clue as to where the money would come from to fill the budget gap, telling reporters "we're going to look at all options." Some Chicago aldermen are pushing a plan to raid the city's surplus tax increment funding cash.
Governor Bruce Rauner punched a hole in the CPS budget with his veto of a bill allowing a one-time $215 million state cash infusion for the district's pensions.
His administration's top education official Beth Purvis said that CPS should be urging state lawmakers to craft an equitable school funding system.
"With this distraction behind us, we can move forward on working with the General Assembly to fix our state's school funding formula," Purvis said in a statement.
CPS CEO Forrest Claypool said lawyers needed time to review the ruling before determining the next legal move.
The state sought to dismiss the lawsuit, while CPS asked for a temporary halt to the state-wide distribution of school-aid dollars, which the judge denied. (Reporting by Karen Pierog; Writing by Dave McKinney; Editing by Matthew Lewis and Diane Craft)