Ill. schools look to loan program to combat no state budget

By Deanna Bellandi

CHICAGO – Dozens of Illinois school districts had inquired by Thursday about a loan program that could bail them out if government aid payments are late because of the budget wrangling in Springfield. But the program isn’t as simple as the free money touted by Gov. Rod Blagojevich.

Not all schools will need the money and the state may be stuck covering the cost of interest for what Blagojevich touted as “no-interest loans” to schools.

The Illinois State Board of Education says Blagojevich will have to ask the Legislature for money to pay the interest costs associated with the program. Blagojevich has told the Illinois Finance Authority to make up to $175 million available to schools.

But what if lawmakers say no?

“That’s a good question,” said IFA spokeswoman Diane Hamburger. “I have no comment.”

    Sign up for our newsletter!

    Justin DeJong, a spokesman for Blagojevich’s office of budget and management, was optimistic.

    “We can’t imagine why lawmakers wouldn’t support an additional appropriation that will help Illinois school districts start out the year on the right foot,” DeJong said.

    Hamburger said the state finance authority Tuesday approved up to $175 million for the local school district note program. The money would come from the capital markets, and the state board of education says on its Web site that five major banks have offered to lend money.

    Some of the state’s 873 school districts are considering the possibility of taking out loans to make up for any interruption that might occur because the state is currently operating without a budget. Comptroller Dan Hynes has said that means he doesn’t have the authority to process about $170 million in school aid payments scheduled to be mailed Friday.

    The loan program won’t be needed if a budget is approved and school districts get their state aid.

    State Board of Education spokesman Matt Vanover said about 50 school districts have inquired about the program since Blagojevich unveiled it Monday and the state board sent out letters to local school superintendents.

    The Aug. 6 letter from state education superintendent Christopher Koch said the loan program would come at “no additional cost” to local districts and that “interest on the funds would be paid by the State of Illinois.”

    Districts can apply for the loan program by filling out a one-page application that asks three questions, including how much cash a district will have available if it doesn’t get the first August state aid payment.

    All school districts are eligible to apply. But because schools get local, state and federal funds, some wealthier districts may have a less immediate need to make up for any interruption in state money, Vanover said.