Illinois lawmakers focus on funding fix for Chicago schools

By Dave McKinney

SPRINGFIELD, Ill., May 27 (Reuters) - A funding fix for the fiscally challenged Chicago Public Schools is taking center stage in the final days of the Illinois legislature's spring session, with the Democratic-led Senate passing two bills on Friday.

The nation's third-largest public school system has relied on borrowing and bank lines of credit to limp through the current school year and is facing a $1 billion fiscal 2017 budget deficit largely due to escalating pension payments. The district's credit ratings have been slashed to "junk," leading to ballooning borrowing costs.

With CPS officials demanding an end to the state's insufficient and "discriminatory" funding formula, the legislature, which ends its spring session on Tuesday, has been hit with a flurry of plans. There is no consensus on which one may ultimately survive.

Over Republican objections, the Senate on Friday passed a bill enabling CPS to get around a property tax cap by allowing the Chicago City Council to boost property taxes by as much as $175 million with the money earmarked for teacher pensions, which would also receive $205 million from the state. The bill keeps fiscal 2017 funding for all schools at fiscal 2016 levels and ensures more money would flow to districts that would gain under Republican Governor Bruce Rauner's school funding plan.

Rauner in February proposed boosting per-student funding in K-12 public schools to $6,119, the highest level in seven years. For CPS, the governor's plan would result in a funding drop of $74.4 million in general state aid based on lower enrollment and other factors.

Senate Democrats on Friday also passed their second major overhaul of the school funding formula this month, with Republicans labeling it a bailout for CPS.

An earlier funding revamp aimed at giving districts with high percentages of poor students an adequate and equitable share of state money also included more money for CPS.

All of the legislation is headed to the Democratic-controlled House, which passed a budget this week that includes an additional $700 million to address funding inequities among K-12 school districts, with CPS getting a funding boost of nearly $500 million.

Tim Nuding, Rauner's budget chief, told reporters on Friday that he recommends the entire House budget be vetoed.

Chicago Mayor Rahm Emanuel, who controls CPS, issued a statement thanking lawmakers for passing bills, which "represent significant steps toward creating fairness in funding for students living in poverty across Illinois." (Additional reporting by Karen Pierog in Chicago; Editing by Matthew Lewis)