Every day that Chicago Public Schools goes without much-delayed property tax revenue, the school district is paying $220,000 in interest on short-term loans it took out to make payroll — that’s the equivalent of two teachers’ annual salaries.
So far, CPS officials say the delay has forced them to take out $1.6 billion in short-term loans for operating expenses, like paying staff and keeping the lights on, and another $246 million loan to keep its teachers pension fund solvent.
For these two loans combined, the district will pay $33 million in interest.
Like all government agencies in Cook County, the school district is still waiting to receive the property tax revenue that it was supposed to get in August. The delay is the result of massive and prolonged technical problems as the county attempted to modernize its computer system.
Property tax bills that typically go out in July didn’t get sent out until November. Taxpayers had to pay them by Dec. 15.
The Cook County president’s office says the property tax revenue is expected to be distributed “very soon.”
School board president Sean Harden said it is frustrating to have to incur these interest costs for an issue that’s out of the control of CPS. The school district is cash-strapped with little money in reserves and operates close to the margin.
“Everybody talks about how important educating our students is,” he said. “We want to see the outcomes (such as graduation rate increases and reading scores going up), but then we divert millions to things that don’t give us any return.”
He emphasized that the money the district is paying in interest could be going to students and schools.
CPS didn’t plan to spend as much on short-term loans. District leaders are now trying to figure out how to keep the budget in balance.
“It becomes an almost impossible task for us to manage at the district level when these types of things continually hit us,” Harden said. “There’s no way to really solve for it.”
Cook County officials realized that the delay was squeezing taxing bodies and created a $300 million bridge loan program for smaller taxing districts in suburban Cook County.
But CPS is not eligible for that program, so its only recourse was to turn to borrowing.
Even in a year where property tax revenues come in on time, CPS takes out a short-term loan to manage the mismatch between when property tax revenue comes in and when the district needs to pay salaries and other expenses.
Most years, CPS pays less than $10 million in interest on these loans and quickly pays it back once the property tax revenue arrives in the bank.
In addition to the short-term debt, CPS borrows money to renovate, repair and build new schools. It has $9.1 billion in long-term debt and planned to make $1 billion in payments on it this year.
The debt and interest payments weigh on CPS’ budget. This year, it faced a $734 million deficit that it closed by making cuts, including some crossing guards and central office staff, refinancing some debt and counting on a one-time infusion of cash from the city through special taxing districts called TIFs.