CPS will go further into debt to pay for upgrades at receiving schools

CPS will borrow money to pay for upgrades at receiving schools. That's the major reason CPS is on the hook for $25 million annually over the next 30 years.

April 12, 2013

Chicago Public Schools will save less money by closing schools than the district originally indicated. The difference has to do with the way CPS plans to finance building upgrades at receiving schools.

CPS officials have promised parents that if the district closes 53 grammar schools, the designated receiving schools will have new amenities—including libraries, air conditioning, iPads. School officials originally said they’d pay for those things using capital funds that had been destined for the closing buildings. “Redirected capital funds that would otherwise be spent on these schools will instead be used for capital investments in welcoming schools,” said one district press release.

But a different picture is emerging. The district now says it will sell new bonds to pay for the $155 million in capital investments at the receiving schools. It’s devoting another $11 million to fixing up proposed turnaround schools, buildings where all staff is dismissed but students stay, and $51.3 million for buildings where schools will move in together. The total amount raised through the bond sale will be $329 million.

About one-third of the bond proceeds will be used for investments unrelated to school actions. The district is borrowing $40 million to buy textbooks aligned with new “Common Core” standards, for instance, and has earmarked $15.4 million to set up modular units at 13 schools to serve as full-day kindergarten rooms.

CPS officials have said they will save $43 million annually in operations by shutting down 54 schools. That’s just under 1 percent of the total operating budget.

But the cost of debt service on the new bonds is $25 million annually for 30 years, CPS says. A district spokesperson confirmed CPS did not factor in debt service costs when calculating savings to be achieved by closing schools. But he bristled at the suggestion that the estimated savings from closing schools should be lowered.  

“It wouldn’t be accurate to say that if we weren’t consolidating underutilized schools, that we wouldn’t have any of these costs,” the spokesman said. He said he is authorized to speak to media but not to have reporters print his name. “There are still buildings that need to be upgraded, there are still programs we’d like to implement. There are still labs we’d like to put in these schools.  And libraries and air conditioning. Many of these things are things that we would want to do anyway.”

However, just a year ago, CPS released a bare-bones capital budget that began, “Given the District’s limited resources and current fiscal crisis…”

The $364 million supplemental budget, released Saturday morning, more than triples the $109 million capital budget CPS had approved last spring.

CPS will make its first payments on the new bonds in 2015; part of an expected debt service obligation of $580 million that year. Nearly all debt payments in Chicago are paid for with general state aid, which also funds teachers and classroom materials. In one budget document published last year, school officials ackowledged, "We face a continuing challenge to balance the day-to-day classroom needs with the need for quality education facilities."

Budget watchdog Ralph Martire of the Center for Tax and Budget Accountability says yes, the debt payments do cut into the cost savings realized by closing schools. But, he says, “There really isn’t a facile way to make a straight line determination that here’s how much you save, here’s how much it costs, and here’s your net. It’s always a lot more complex than that.”

CPS says the bond proceeds will go toward things that will make “tangible and meaningful impacts on the quality of education of our children.” The board of education must vote on the bond issuance and on the amended capital budget; both votes are slated for April.