Illinois’s quest to take over Chicago’s schools intensified as Governor Bruce Rauner said the state can block the district from borrowing in the municipal-bond market, a claim the nation’s third-largest school system rejects, Bloomberg News reported yesterday. The Illinois State Board of Education is investigating the finances of the district, which is facing projected deficits of $1 billion a year through 2020, and the Republican governor is pushing for legislation to strip the city of its control. The system has routinely relied on bond sales to help cover operating costs and push debt payments further off into the future. “If it determined that any school district was in financial duress, the state board has the right — the legal authority — to block any debt offerings,” Rauner said on Monday. “The state board has not ever chosen to do that for the city of Chicago. I hope that never becomes necessary, but we’ve got to be ready to take action and step in.” The Chicago Board of Education is struggling to avert insolvency after years of borrowing, drawing on its reserves and shortchanging the workers’ pension fund, which is causing its annual retirement payment to soar. With a junk credit rating, the board sold $725 million of bonds this month for yields as high as 8.5 percent, more than twice that demanded from most credit-worthy state and local governments.
