School projects in limbo as state money dries up

By Diane Rado, Tribune staff reporter. Tribune staff reporters Ray Long and Tracy Dell'Angela contributed to this report
Chicago Tribune
November 16, 2004

Thornton Fractional's high school district recently began renovating its aging schools, which are in such bad shape that some science labs have no running water.

But administrators in the southern Cook County district now fear state construction grants could fall through, halting their project.

In Will County, Joliet school officials have suspended some of their building projects, unsure they'll get state grants they need to help pay for the work.

Elsewhere, districts lucky enough to have enough local funds have finished projects while their state grant applications have languished on waiting lists.

Over seven years, school districts have come to depend on state building grants. But even as districts have come under increasing financial pressure, the state's fiscal health has faltered, disrupting the school construction grant program and generating distrust around the state.

In recent months, cash flow problems have delayed $144 million in grant payments to 45 districts, state records show.

A new legislative analysis, due to be released this week, shows potential problems in repaying bonds already issued to pay for the construction grants. Telecommunications excise taxes--the main source of funds to pay off school construction bonds over the years--have declined by $30 million since 2002, as cable modems and other technologies change the landscape.

Meanwhile, state lawmakers have yet to agree on a plan to extend the program, which has run out of money for new grants. Estimates show at least $6 billion in school construction needs remain in Illinois.

Discussions are expected to continue in Springfield this week, but lawmakers have little hope for an agreement.

"It's frightening, because I had a compact with my taxpayers," said Robert Wilhite, superintendent of Thornton Fractional High School District 215, where voters approved a $19 million bond proposal in 2002 to match a state grant.

The school construction grant program was approved by lawmakers in 1997 to help districts such as Thornton Fractional, where 78-year-old North High School in Calumet City has antiquated boilers, inadequate electrical systems and broken water pipes.

The program has since awarded some 500 grants totaling $3.1 billion to help districts build new schools, renovate aging buildings and add thousands of classrooms to relieve overcrowding. The state grants must be matched by local funds.

With its massive school construction needs, Chicago has been awarded 20 percent of the grant dollars issued each year. This budget year, the district balanced its budget on the assumption it would get an additional $110 million.

If that $110 million does not arrive, Chicago school officials said Monday that they would have to delay projects including three school additions costing $64 million and $14 million worth of boiler repairs at four other schools.

The state never promised to fund the grant program indefinitely or even to cover all school construction needs. But the program has enjoyed strong support from Gov. Rod Blagojevich and his predecessors, George Ryan and Jim Edgar. Lawmakers have authorized bonds three times to pay for the grants, the last time in 2002.

As their own finances have deteriorated--more than 80 percent of districts now have deficits--local school officials have become increasingly dependent on the grants.

The last round of new construction grants was issued in September 2003, with a handful of grants awarded after that for emergency projects.

Two dozen districts entitled to about $150 million in grants are still on a waiting list that dates back to 2002. An additional 231 applications are in the pipeline.

In addition, the state has made only partial payments on about 100 grants totaling $849 million because districts are still in the construction phase and don't get their money all at once. Fourteen other districts are still in the design phase and have not begun receiving grant payments totaling $102 million.

In Thornton Fractional District 215, Supt. Wilhite remembers the hoopla when then-Gov. George Ryan visited the district in 2002 to award a grant. A band played and the governor handed over a giant-sized, $19 million check. District officials say they got about $1.6 million in summer 2003. But when they sent paperwork Oct. 5 for more money, they were told there wasn't enough cash.

Karen Shoup, school construction administrator at the Capital Development Board, which distributes the grants, said the agency was waiting for the state to issue more bonds to cover the payments requested by districts.

Bond sales took place in September, and again last week, she said. Thirteen districts will be paid as result of last week's sale, agency records show. Thornton District 215 will get the largest amount, $8.9 million, followed by Aurora West Unit District 129 in Kane County with $7 million.

After the September bond sale, 35 districts got late payments totaling $106.5 million, state records show.

Becky Carroll, a spokeswoman for the governor's Office of Management and Budget, said bond sales were delayed in part because of recent changes in bond-sales procedures.

But bond experts at the bipartisan Illinois Economic & Fiscal Commission, a legislative fiscal watchdog, say there is concern about issuing more school construction bonds because tax revenues designated to pay them back may be insufficient.

The telecommunications excise tax, combined with liquor and cigarette taxes, should bring in about $200 million this budget year to make debt payments, according to a new report. The payments, however, are estimated at $192.6 million without including the amount needed to cover the September and November bond sales.

Debt payments also will rise as the state issues the rest of the bonds authorized for the current program--$478 million of school construction bonds have yet to be issued, according to the state comptroller's office.

Carroll, from the governor's office, stressed that the state would have to use general revenue dollars to fill the hole should revenues be insufficient to cover debt payments.

She also said the state intends to issue the remaining school construction bonds, and that Blagojevich is committed to continuing the program. The governor proposed an additional $2.2 billion over four years.

That proposal was rejected, in part because Republican lawmakers were concerned that the state didn't have the money to pay back new bonds.

As it stands, lawmakers are not optimistic that school construction and other capital projects will be approved in the session scheduled to end Thursday.

The situation leaves some local officials disillusioned.

Supt. Diane Cody of Winfield Elementary School District 34 in DuPage, said the state broke its promise to her district, one of the two dozen on a 2002 waiting list, entitled to grants but never awarded them.

She said the district expected $2.3 million, but had to cut back construction plans.

Officials at Joliet Public Schools District 86, also on the 2002 waiting list, decided to delay construction until they get their $27 million grant.

"We're not going out and spending additional money with our architects until we know something for sure," said assistant superintendent for business Troy Whalen.

FUNDING NEEDS

- 24 districts were entitled to grants totaling about $150 million dating back to 2002, but had not received them when money ran out.

- An additional 231 grant applications are pending.

GRANTS BY REGION

1998-2004, in millions

Chicago $623.6
Suburban Cook $456.9
Will $235.5
Lake $180.4
Kane $151.5
DuPage $111
McHenry $91.8
Total $1.8 billion

*Grants issued in 2004 were for emergency applications only.