CHICAGO (Reuters) - Illinois Senate President John Cullerton on Tuesday proposed legislation aimed at providing pension funding relief for the Chicago Public Schools, while meeting Governor Bruce Rauner's call for a local property tax freeze.

The bill, set to be heard by the Senate Executive Committee on Wednesday, would require the state to pay a much bigger share of Chicago teachers' pensions and reduce the nation's third-largest public school district's contributions going forward.

Illinois would kick in $199.2 million by Oct. 1, completing payments for fiscal 2015. For fiscal 2016, which ends June 30 next year, the state would owe an additional $207 million. The amount of future annual payments would be calculated based on actuarial data.

The bill would cap payments made by the school system itself at $207 million in fiscal 2016 and $211 million in fiscal 2017. Payments due in fiscal 2018 through 2063 would be in amounts that would bring the funded ratio for the Chicago Teachers' Pension Fund to 90 percent by 2063. The current funding ratio stands at 51.5 percent.

The legislation also puts into place a two-year freeze on local property taxes sought by Rauner, a Republican.

The bill from Cullerton, a Democrat, also addresses a property tax freeze by putting one into place for levy years 2016 and 2017, although the city of Chicago and Chicago Public Schools would be excluded from the 2016 freeze. In levy year 2018, the bill caps property tax increases at the lesser of 5 percent or the consumer price index, except for Chicago schools and home-rule governments like Chicago.

The state previously had appropriated $62.1 million for payments to the Chicago teachers fund in fiscal 2015, according to fund documents.

Chicago's schools are struggling with a projected $1.1 billion hole in the district's next budget, due largely to escalating pension payments.

Last week, contract talks between the school system and the Chicago Teachers Union broke off, according to a union official. The current contract expires at midnight.

On Tuesday, the Chicago Public Schools made its full $634 million payment that was due by midnight by borrowing $200 million.

The school system must now make $200 million in cuts, said Chicago Public Schools interim Chief Executive Officer Jesse Ruiz.

"While school will start on time, our classrooms will be impacted," Ruiz said.

(Reporting by Karen Pierog; Editing by Lisa Shumaker)