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Chicago teacher pension reform: How did we get here, and where are we headed?

by stacy davis gates and kurt hilgendorf - CTU Legislative  |  12/13/2013

Why do Mayor Rahm Emanuel, the Chicago Board of Education and Chicago Public Schools officials blame Springfield for the district’s budget woes?  Why is the target of their concern being shifted to state legislators? It polls well but makes little sense. Let’s examine why.

FACT: The Illinois General Assembly has provided Chicago Public Schools with every opportunity to make their budget work by giving the district a 13-year break from paying pensions. 

FACT: The district has failed to lobby for a more equitable funding formula, search for new revenue streams or reform programs like TIF that could work better for school districts and redevelopment. 

FACT: The city and the Chicago Board of Education’s answers to the revenue crisis have been to cut, and this year, the cuts will have a devastating impact on classrooms across the city.

FACT: Pensions are NOT the problem.

The problem is a pronounced lack of leadership from the mayor and his handpicked Board of Education.

ILLUSTRATION: CTU Teacher Patricia Boughton on Pensions

Harlan High School teacher and CTU member Patricia Boughton speaks on pensions
at Dec. 9 Day of Action rally at the State of Illinois Building (click on photo for VIDEO)

The state legislature, beginning in 1995, provided CPS with the tools to plug its budget issues and time find new revenue streams and reform the TIF program. The timeline looks like this:

1995—The Illinois State Legislature gave then-Mayor Richard M. Daley the ability to use the once restricted pension levy for operating costs to ensure balanced district budgets. The school district enjoyed a 10-year “holiday” from making any payments into the pension fund. The fund prior to 1995 was funded above 100 percent. It wasn’t until 2005 when the fund dipped slightly below 90 percent that the district resumed payment.

2010—The Illinois State Legislature gave Chicago Public Schools a pension holiday that provided the district with more pension relief so the classrooms in Chicago would not feel any negative financial impact. CPS also was granted additional federal funding from a stimulus appropriation; the district still laid-off more than 1,300 teachers despite pension relief from the state and an infusion of money from the federal government.

2012—The Illinois State Legislature gave CPS an extension on the deadline to publicly announce which schools were slated for closure. CPS stated that schools needed to be closed because of a looming budget crisis and that closing schools would help stymie the deficit.

2013—The Illinois State Legislature did not move on the moratorium on school closings proposed by Chicago legislators, citing that the state wanted to provide newly minted CPS CEO Barbara Byrd-Bennett with the opportunity to govern the district. In short, the consensus was that the state legislature did NOT want to micromanage the school district.


PENSION FACTS

The average weekly Chicago teacher pension is only about $800 before taxes, earned after an average 28 years of service teaching in CPS.

CPS retirees DO NOT collect Social Security and most are ineligible for free Medicare Part A

Chicago taxpayers now pay twice for teacher pensions—once for Chicago’s teachers through local taxes and a second time for suburban and downstate teachers through state taxes.

The Illinois Constitution protects pension benefits against unilateral reductions by the legislature, and the legislature may not diminish or impair pension benefits unless the reduction is in exchange for some other agreed upon benefit.

The Chicago Teachers’ Pension Fund and other municipal pension funds in the city were not included in SB 1 that was passed last week. In fact, the argument has been made that other school districts in the state, like CPS, should be responsible for the pensions of their teachers (cost shift argument).

Furthermore, the state plan passed last week will not fix the CTPF or MEABF as the issues are quite dissimilar. For starters, the proposed revenues at the state level don’t exist in Chicago. Furthermore, the state bill expressly forbids a pension fund from paying for retiree health benefits. If this model were applied to Chicago’s funds, thousands of retired teachers would not only take a huge hit to their future annuity checks, but they would also take a BIGGER hit to their healthcare benefits. Retirees would be forced to pay an additional $8500 per year for health insurance. Clearly, our pension issues do not mirror those of the state. There is a difference between repairing the foundation of a house and the roof of a house. The issues related to the CTPF stem from the 13 years of non-payment CPS was granted by the state legislature in order to fix their budget issues.

Oddly enough, CPS wants the state to bail them out again—they want pension reform. If past behavior is a predictor of future behavior, however, then pension reform from the state will not “fix” CPS. In fact, it will give them yet another blank check to misuse funds and then kick the can down the road and holler “crisis” again next year.

Perhaps it is time to look at the governance of the district: City Hall and the mayor’s handpicked Board of Education. Maybe 327 precincts of voters in Chicago have it right—maybe it is time for an elected, representative, school board.

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Our retirees, who do not receive Social Security and most of whom are ineligible for Medicare Part A, should not be afraid of losing their $42,000 annual pensions. It is completely unreasonable for someone who takes in $800 a week after working 30 years to have to make a decision between refilling their prescriptions and buying groceries.

Chicago Public Schools and the city are, however, right about one thing: The state has to do better with regard to education funding.

Article 10 of the Illinois Constitution states: “The State has the primary responsibility for financing the system of public education,” yet today, more than 67 percent of Illinois school districts report deficit spending. 

Senate Joint Resolution SJR032 will begin to address this issue specifically, and by February 1, 2014, the Illinois General Assembly should have some sort of pathway to create legislation to reform our state’s education funding.

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Our solutions will direct much needed revenue to the district while stabilizing the operating budget and adequately funding the pension fund. We call on our elected officials to:

1.  Reform the TIF Statutes and Ordinances. Directing money toward private beneficiaries at a time when public services are suffering is unacceptable. Returning TIF money to taxing bodies provides vitally important revenue that will prevent unnecessary deep cuts to public services. Commit to reforming TIF laws in order to ensure that our schools are properly resourced.

2.  Renegotiate the district and city’s interest rate swaps. As banks have benefitted from taxpayer-subsidized interest rates at historic lows—after rigging interest rate indexes and the swap market itself—it is unacceptable for the city and CPS to continue in these deals as constituted. Other public bodies have already successfully renegotiated with banks, saving millions of dollars. CPS and city representatives must do the same.

3.  Publicly endorse revenue generating measures like a fair, graduated Illinois income tax. CPS’s financial challenges will not cease until there is additional funding from the state. The only way to generate sufficient revenue in a fair manner is to institute a graduated income tax in the state.

4.  Commit to revenue solutions like:

  • The expansion of the sales tax base
  • Closing corporate loopholes
  • Instituting a financial transaction tax

5.  Use your tremendous influence to organize your colleagues and collectively write letters to and hold meetings with Mayor Emanuel, Barbara Byrd-Bennett, members of the Chicago Board of Education and high-ranking CPS administrators.
 

Chicago Teachers Union