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Budget Order Extended as Chicago Stalemate Continues

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The stalemate over a solution to the Chicago schools' budget crisis continued last week, as a federal judge gave the system another 10 days to operate without a balanced budget.

Saying that he was reluctant to intervene in local and state affairs but had little choice, U.S. District Judge Charles P. Kocoras extended a temporary restraining order that he had granted on Sept. 13.

"Innocent and powerless children should not be held hostage to the inability of our governmental and educational leaders to agree on a solution to the present crisis,'' the judge wrote in an order issued last Thursday.

The order came just hours after a marathon bargaining session held in the office of Mayor Richard M. Daley failed to produce a breakthrough.

Mr. Daley had spent weeks arguing that the school board and the Chicago Teachers Union should get together to solve the district's financial problems. But the Mayor decided last week to get personally involved in trying to broker a settlement as the judge's first order allowing schools to open through Sept. 23 was due to expire.

Negotiations Continue

Any solution to the system's $298 million budget shortfall will require both agreement on a teaching contract containing concessions and passage of a state legislative package to allow the system to raise new money.

Gail Purkey, a spokeswoman for the teachers' union, said that its negotiators remain willing to talk and that the union has agreed to about $46 million in concessions. The union and the school board remain about $28 million apart.

The concessions include a restructured schedule in the high schools, an agreement that teachers will make the same contributions toward their health-care costs as other city employees, and the suspension of a bonus program that paid teachers extra money for additional coursework.

The school board and the union are still wrangling over other issues, including the board's request to use $55 million from the teachers' pension fund over each of the next two years to help balance the district's budget. Supporters of the move argue that the pension fund, which is funded by a tax levy, has more than enough money in it.

But the union counters that the fund is not backed by the state and that any money taken from it should be paid back with interest.

Attempts by Mayor Daley to get the legislature to approve his budget-balancing plan for the schools have proved futile. The plan calls, in part, for the city's School Finance Authority to issue $300 million in bonds.

State legislators have become caught up in political squabbling and have been reluctant to come to the aid of the unpopular Chicago schools.

Last week, the state Senate passed a bill that is widely regarded as a slap at Mr. Daley rather than a real attempt to end the fiscal crisis. It calls for changes in work rules for teachers, large cuts in the state compensatory-aid money that goes directly to Chicago schools, and a Chicago referendum on an income-tax increase for schools that would be held on the same day as the Mayor's re-election bid.

The crisis also has provided ammunition for critics of the city's schools, such as the Illinois Educational Choice Coalition, which is pushing for a school-voucher program throughout the state.

The coalition last week invited former U.S. Secretary of Education William J. Bennett to speak at a press conference. Mr. Bennett, who in 1987 called the Chicago schools the nation's worst, last week pronounced them "probably still the worst'' and "truly rotten.''

Second Financial Collapse?

In the face of gridlock in the legislature, the Chicago school board has asked Judge Kocoras to step in and order the changes that it has been unable to win from state lawmakers and the teachers' union, including shifting the pension money and allowing the bond issue. (See Education Week, Sept. 22, 1993.)

The board's logic in seeking intervention by the federal court is that the district's desegregation order is imperiled by the fiscal uncertainty. The judge did not address that issue in his order last week, however.

The School Finance Authority, which was created by the legislature to oversee the school system's finances after the district went bankrupt in 1979, filed a court brief opposing both the board's requests for temporary restraining orders and its motion for a more permanent remedy.

"The authority strongly believes,'' its brief states, "that the path on which the temporary restraining order has set the school district can lead only to financial disaster and ultimately to the second financial collapse of the Chicago public schools in 15 years.''

Designs for Change, a local education-research and -advocacy organization, has filed a brief arguing against the board's request to use state compensatory-aid money to balance its budget.

Donald R. Moore, the group's executive director, argued that taking the money intended for low-income children--many of whom are members of minority groups--would in fact undercut the desegregation program.

Even if Judge Kocoras decided to become more deeply involved in the case and granted the school board's request, that action alone would not end the district's financial predicament.

Diana Nelson, the president of Leadership for Quality Education, a business-oriented group supporting school reform, warned that bonds offered under a federal judge's order might not sell well, because investors might worry that an appeals court could overturn the ruling.

Ms. Nelson said Chicagoans are divided over whether another restraining order would be helpful or would simply take the pressure off the local negotiators and the legislature.

"It flies in the face of logic and common sense that continued extensions will force a settlement,'' she said.

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