A year after being cut to junk by all three major bond-rating companies, Chicago’s school system has won an influx of state aid, secured extra tax money for its pensions and quieted speculation that the crisis is so severe that bankruptcy is inevitable, Bloomberg News reported on Friday. But as the Chicago Board of Education seeks permission to borrow as much $945 million, the nation’s third-largest district is far from in the clear. This year’s budget will only balance if teachers agree to pay more into their retirement plan and the gridlocked Illinois legislature passes an overhaul of the state pension system. School officials are still trying to secure needed credit lines to help pay bills and borrowing costs have ballooned after repeated downgrades, adding to the financial squeeze. The system with almost 400,000 students is struggling to address one of the biggest crises in the $3.7 trillion municipal market, one that’s been decades in the making. For years, officials borrowed to pay bills, skipped pension payments and drew down savings, leaving the schools with nearly $10 billion of unfunded retirement liabilities and $7.6 billion of debt. The interest and principal alone will consume more than 10 percent of the budget.
