World | Thu Mar 3, 2016 1:12am EST

Chicago schools fast running out of cash as standoff with Illinois governor worsens

CHICAGO | BY KAREN PIEROG AND DAVE MCKINNEY

Chicago’s cash-starved public schools' district may be choked off from more loans and find itself unable to meet a $676 million pension payment in June because of a deepening legal dispute with Illinois’ governor.

The state’s school board, stocked with Republican Governor Bruce Rauner’s appointees, is expected to declare Chicago’s school system in “financial difficulty” as early as April under an Illinois law authorizing state takeovers of financially distressed school systems. Rauner, who is seeking to take over the schools' district, contends that finding would bar the nation’s third-largest public school system from further borrowing.

Chicago Public Schools (CPS), which only just borrowed $725 million through a bond sale, says it is exempt from the law, thus keeping Rauner and his State Board of Education from dictating financial decisions involving the system, including its ability to borrow additional funds.

CPS plans to tap an existing $370 million credit line with Barclays Bank to help pay its June 30 pension obligation, according to Moody’s Investors Service analyst Mark Lazarus. But that could also be in jeopardy because of Rauner's stance.

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