CHICAGO (Reuters) - The Chicago Board of Education on Wednesday approved a controversial budget and moved ahead with plans to sell $1 billion of bonds despite the school system's "junk" credit ratings.
The seven-member board, appointed by Chicago Mayor Rahm Emanuel, unanimously approved the nearly $5.7 billion fiscal 2016 budget and bond sale with no public discussion.
The spending plan came under attack on Tuesday by government finance watchdog the Civic Federation, which urged the board to reject the budget because it relies on one-time revenue and $480 million in pension relief from the state of Illinois to help erase a $1.1 billion deficit.
Chicago Public Schools (CPS), the nation's third-largest public school system, has said it would have to increase $200 million in cuts already planned or turn to more borrowing if state pension relief is not realized.
Up to $1.04 billion of bonds will be used to restructure outstanding debt and free up $200 million for the new budget and fund $536 million in improvement projects. The bond issue will also convert $275 million of variable-rate debt to fixed rate and pay termination fees for related interest rate swaps, according to a presentation to the board by CPS budget director Ginger Ostro.
Escalating public pension costs and budget deficits have pushed the ratings on more than $6 billion of the school district's debt into the "junk" category. Investors demanded hefty yields for CPS debt sales earlier this year.
Plans for selling the unlimited-tax general obligation bonds were not immediately available from school officials.
(Reporting By Karen Pierog; Editing by Bill Rigby)