(Adds Claypool quote, adds borrowing plans)
By Karen Pierog and Julia Jacobs
CHICAGO, Aug 11 (Reuters) - A fiscal 2018 budget unveiled on Friday by the Chicago Public Schools (CPS) depends on nearly $570 million in new money from the state and city that may not materialize or has not been identified.
The $5.7 billion spending plan for the fiscal year that began July 1 includes $300 million the state of Illinois would send the district under education funding legislation. But Republican Governor Bruce Rauner used an amendatory veto to substantially rewrite the bill to remove what he called a CPS bailout. It was unclear how much the district would receive under Rauner’s revisions.
The Democratic-controlled legislature, which passed the funding formula bill in May without a veto-proof majority, is scheduled to meet next week. A failure by the Illinois House and Senate to muster a required three-fifths majority vote to override or accept changes Rauner made to the bill would kill the measure.
“The budget we released today is more of an outline than a traditional budget as we wait for the resolution of the education funding stalemate in Springfield,” CPS CEO Forrest Claypool told reporters, referring to the state capital.
Escalating pension payments have led to drained reserves, debt dependency and junk bond ratings for the nation’s third-largest public school system.
The CPS budget also assumes a $269 million boost in local funding that the district said it is working with the city to identify.
Matt McGrath, a spokesman for Mayor Rahm Emanuel, who controls the school system, said there is no answer yet on a local source.
“What I can tell you is that any local solution will not come at the expense of the city’s long-term financial stability,” he said, adding that the mayor promises CPS students will have a full school year.
Moody’s Investors Service put Chicago’s Ba1 junk credit rating under review last month for a possible downgrade, citing the potential the city could extend financial help to its cash-strapped schools.
The amount of CPS cash-flow borrowing in fiscal 2018 would be about the same as fiscal 2017’s $1.55 billion, according to budget documents. Claypool said the district has no immediate plans for selling bonds for capital needs.
CPS, which projects an 8,000 enrollment drop this school year, has set an Aug. 28 budget vote by its board. The district said the spending plan can be revised once the state puts a school funding formula in place. (Editing by Frances Kerry and Diane Craft)