$80 million deficit may mean no school in Chicago next fall

Joseph Mahran manages his $1.4 billion business from the second floor of the Chicago Board of Education building.

As the school board's chief financial officer, he is facing an $80 million budget deficit. Under state law, Chicago schools cannot open in September with a deficit. And their credit rating is nil.

The board hired Mr. Mahran when it almost went bankrupt in 1980. Since then he has hired top-level managers, used the services of retired corporate executives, and instituted an internal reporting system.

''I run my operation without consideration of politics,'' says the former deputy controller of New York. ''I give my advice solely on the basis of fiscal prudence.''

But Chicago politics has muddied school finances from the start. Mayor Jane Byrne is pressuring Mahran and the board to hire a politically favored consultant to manage school real estate.

And when Superintendent Ruth Love recommended closing 20 under-enrolled school facilities to cut costs, Mayor Byrne pressured the school board to keep open one in her old neighborhood. All of them are now scheduled to stay open.

Civic leaders say the schools are at a financially critical point again.

''I'm afraid that we shall continue to drift from one crisis to another until we . . . decide on . . . whether there will continue to exist a public school system in our city,'' said the Rev. Kenneth Smith, former school board president.

Five factors threaten the future of public education here:

* Property taxes. Mayor Byrne and other politicians refuse to raise property taxes for education in this election year, even though the school board lost one-quarter of its taxes during the 1980 fiscal crisis.

* The Legislature. Gov. James Thompson has proposed cutting $35 million from education aid to help restore state finances. His call for higher liquor taxes to fund education was killed by business lobbyists.

* The Teacher's Union. The state-appointed Chicago School Finance Authority has told the board to stand up to the union this year. In recent decades the union won almost every salary and benefit battle.

Last year the board sold Midway Airport to help pay for increased payments to the union pension fund. The union demands a similar payment this year, which would raise the board's deficit to $157 million.

* Parochial Schools. Parochial school enrollment in this city, in the nation's largest Roman Catholic archdiocese, is on the rise after a long decline.

Fears about federally ordered desegregation and the quality of teaching have made some public school families switch to private schools or the suburbs.

* Accountability. Many blacks feel that the schools are out of their control. Sixty percent of Chicago public school pupils are black.There are only three black members on the 11-member board, which Mayor Byrne appoints. The board's desegregation plan further centralizes the system, weakening local ties to schools.

On the positive side, Ruth Love's leadership and the desegregation plan's innovative programs are raising school morale.

Local leaders suggest that long-term solutions to the system's woes include increased state income taxes, lean union contracts, a metropolitan school taxing district, a school board appointed by civic groups or popularly elected, and more power for principals and parent councils.

But in the short term, just keeping schools open will take a real surge of the city's ''I Will'' spirit.

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