CHICAGO, July 23 (Reuters) - The Chicago Board of Education on Wednesday approved a $5.76 billion fiscal 2015 operating budget that relies on an accounting maneuver to bulk up available reserves to eliminate a nearly $1 billion deficit.
The budget for the nation's third-largest public school district, which serves 400,000 students, extends the district's revenue recognition period by 60 days - a move that is expected to increase reserve funds that will be tapped to balance the spending plan.
Chicago-based Civic Federation, a government finance watchdog group, on Wednesday blasted the Chicago Public Schools (CPS) for "artificially" inflating revenue to get through the new fiscal year.
"The budget is balanced only by an accounting gimmick that allows CPS to book more than 12 months of revenue into a single fiscal year," report by the Civic Federation said.
The school system acknowledged that it was buying time with this budget.
"This is a one-time fix that allows the district to prevent further cuts to school budgets in the absence of increased state funding or comprehensive pension reform from (the Illinois Legislature)," CPS said in a statement following the budget vote.
The district's pension contribution for the new fiscal year that began July 1 is $634 million, the largest ever single-year CPS pension payment, equal to about $1,600 per student or 11 percent of the operating budget.
Like the city of Chicago, the school district is under increasing financial pressure from escalating pension payments and both have had their credit ratings downgraded as a result.
Most recently, Moody's Investors Service in March dropped CPS' rating to Baa1 with a negative outlook from A3.
While the state legislature has enacted cost-saving pension reforms for two of the city's four pension funds, lawmakers have not passed reforms specifically for CPS pensions.
The district has acknowledged that its future financial outlook is "grim," projecting a $1.14 billion deficit in fiscal 2016 that would grow to nearly $1.4 billion in fiscal 2017. It also projects that state funding will continue to fall in the coming fiscal years.
CPS is also diving into reserves to cover $78 million of the nearly $604 million of payments due in fiscal 2015 on its $6.4 billion of outstanding bonds, according to budget documents. (Reporting By Karen Pierog; Editing by Ken Wills)