Q&A about the Chicago Teachers Pension Fund.

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Teacher Jay Rehak chairs the CTPF board of trustees.

-From CTUnet

What is Chicago Teachers Pension Fund (CTPF)?

The Chicago Teachers Pension Fund was established by the Illinois state legislature in 1895 as The Public School Teachers’ Pension and Retirement Fund of Chicago (CTPF) is the administrator of a multi-employer defined benefit public employee retirement system providing retirement, survivor, and disability benefits for certain certified teachers and employees of the Chicago Public Schools.

Currently, CTPF is governed by a 12-member Board of Trustees; six are elected by the teacher contributors (current teachers), three are elected by the annuitants (retired teachers), one is elected by the principal contributors, and two are appointed by the employer (Chicago Board of Education).

Why is there a problem with pension funding?

The Chicago Board of Education has dodged payment.  In 1995 Illinois law placed the responsibility with the Chicago Public Schools to make sure that the CTPF was 90% funded by 2045. The pension fund was already close to 100% funded at the time. The only reason that the CTPF went from nearly 100% funded in 1995 to 58% funded now is because CPS took successive pension holidays and paid nothing for 10 years into the pension and asked for pension relief in April of 2010 in the amounts of $400 million per year until 2013.

The underfunding of the pension was not a result of excessive pension benefits or inadequate employee contributions — teachers and paraprofessionals have dutifully paid our fair share for over 100 years. Between 1995-2005 CPS collected more than $2 billion in pension tax revenue and contributed zero to the pension fund. However, within 40 years it is fully possible to increase the funding of the pension to the required 90% level without any change in the benefit structure.

The State of Illinois also has failed Chicago’s teachers. While the suburban and downstate pension system will receive over $2.5 billion in annual support for 2011, CTPF will receive no state funding.  The state has not provided CTPF with 20-30% of the funding it provides to the Teachers’ Retirement System (TRS).

Do teachers contribute to their pension?

Yes.  Teachers contribute 9 percent of their salary toward retirement.   A bill being considered in Springfield (SB512) would increase teacher contributions from 9 percent to 12.75 percent.

Do teachers get social security on top of their pensions? 

No.  Teachers do not contribute to or receive Social Security retirement benefits. Instead, teachers contribute 9 percent of their salary toward retirement. By comparison, Social Security benefits are based upon a 6 percent contribution. While many have complained that teachers’ pensions are too generous, these individuals should recognize that teachers contribute 50 percent more to their retirement than the average Social Security member.

Wouldn’t it be cheaper to put teachers into Social Security?

Under Social Security, a teacher would pay 6.2 percent of salary; the district would pay a matching 6.2 percent. Currently, a teacher pays more: 9.4 percent and the district pays less: .58 percent. A 2007 study showed that moving teachers into social security would cost the school districts an additional $3 billion in the first 10 years (2008-2018).  If Social Security had been implemented in 2004, the additional cost would have been more than $900 million a year.  This lack of Social Security coverage saves taxpayers billions of dollars in payroll costs each year.

What about moving teachers into a defined contribution plan (AKA 401k)?

This plan would not address the fact that our pension system is underfunded.  In addition, new teachers who were put into a defined contribution plan would bear all the risk.  For example, if you only had a defined contribution plan and retired in the middle of the financial crisis, you would have, through no fault of your own, been unable to afford retirement.

Aren’t pension benefits high?

The average Chicago Teachers’ Pension Fund (CTPF) retiree earns $42,000 per year. Of the 87,000 retired teachers in Illinois, almost 1 in 5 (17,269) receive a pension that’s less than $20,000.   Remember that people receiving a pension have spent up to 35 years educating students and are reliant on the pension promised to them many years ago by the state.  Yet teachers have wrongly become the scapegoat for the Chicago Board of Education and State of Illinois’ financial woes.

15 thoughts on “Q&A about the Chicago Teachers Pension Fund.

  1. Teachers and retired teachers control the CTPF with 9/12 seats. Your argument seems to exonerate them of all blame. The 13 years of pension holidays were a huge mistake and at the very core of today’s financial issues. It is absolutely *NOT* hindsight bias to say that pension holidays are and were a horrendous idea. Why do the CTPF trustees bare no blame? They had an explicit fiduciary responsibility and acted recklessly allowing the fund to get $10B in debt and approach 50% funding.

    • In 1995 CPS convinced the Illinois legislature to divert the dedicated CTPF levy into the CPS operating budget. How is this the fault of the CTPF?

      • They are trustees. By definition, they have a fiduciary responsibility over the pension fund. They should have been up in arms screaming and/or striking as the situation got out of control. Why even have trustees of a pension fund if gross mismanagement of the fund is not their responsibility? Instead, after allowing this to happen for 10 years, they turned around and allowed another 3 years of pension holidays. This is gross negligence. They are teachers. They are CTU members. This should have been the #1 contract issue for the last 10 years (or 20 years).

      • You are just wrong about it. The courts have ruled that funding the system does not have the same constitutional guarantees as the right to contractual and constitutional payment protection. The trustees had no power to require payment into the fund. There was no gross mismanagement by the trustees. You made that up. You present no evidence. The problems facing both the Chicago Teachers Pension Fund and the state Teacher Retirement System are entirely the fault of failure to make adequate payment. I suspect you have another agenda.

      • My only agenda is to understand the CPS budget issue as a CPS parent.

        My argument is not about the contractual/legal guarantees of funding. I understand that is messy. I’m also not charging mismanagement of the funds received. But, I am absolutely charging gross negligence as a fiduciary. Anyone with a fiduciary responsibility who manages a fund that goes from 100% funded to 50% funded has not done their duty. To think otherwise is absurd. Where was the outrage by the CPTF trustees over the pension holidays? Where is it now? As for evidence, it is a fact that for 13 of the last 20 years the vast majority of the required retirement money for solvency was not deposited and it is hard to find evidence that the trustees did anything about it. See the definition of fiduciary.

        All of this is disgusting. CPS, CTU, CTPF, and the politicians all share a portion of the blame for creating this mess. I just wish they would actually *listen* to each other and work on real solutions to get us out of this mess. Instead they just talk at each other.

      • The problem for you is that you change your argument more quickly than Chicago changes weather. You did charge the CTPF with mismanagement. Go back and read what you posted. Let me say it again: The CTPF does not have the legal right to force payment by CPS into the pension fund. Neither does the board of trustees of TRS. That is why both pensions systems are underfunded. “Ourtrage” is not a solution. CPS must pay what they owe.

  2. Read todays’s editorial in Chicago Tribune by Diana Furchtgott Roth about adding to section 113 of US Bankruptcy code which could give Congress the ability to override state constitutions protecting pensions. If this were enacted all public pensions would be subject to reduction at the legislatures whim. Bond holders and creditors would be protected of course. Only public pensions would be renegotiated or dropped and those already retired would bear the huge burden of a severely reduced or eliminated pension. Other state debt remains.
    I can see Rauner pushing Congress for this relief. Funny, that this legislation, If enacted does not take into consideration why the pensions are underfunded..just that they are a drag on the state’s economy and their payment damage state services.

    • No one group can be singled out to pay a debt owed by all. Bankruptcy is constitional but singling out pensioners and exempting others is not. Bond holders are pushing this idea to counter the fact that in bankruptcy pensions are usually left almost
      Whole. Debtor classes can be treated differently but no class can be exempted. The proposal is just an attempt at intimidation.

      • And ironically the only group monetarily punished is the group from whom they originally stole. It’s as if a bank diverted your mortgage payment for years then forecloses your property for non-payment.

  3. It sounds like the Trib has lost its mind completely now. How does this match with states rights. I think there are serious 10th and 11th amendment issues. This is and has always been a plot by the top 0.1 percent to divert attention from their truly corrupt and I’ll gotgotten gains. They have lost the issue and their minds

  4. I see this woman worms for a front Group and is an entrail reader not a lawyer. Its The contract clause of the consititution that prevents it.

  5. http://www.rightwingwatch.org/content/manhattan-institute-policy-research
    Thought I would add a little more to the latest nonsense. That is who is behind it .
    Here are some very good reasons it is nonsense. Just for a city to go Chapter 9 it needs state approval. Illinois does not give that . > So since Congress cant change the State of Illinois Constitution ..This is silly but as we know reality and Pension Thieves have little in common so…we keep an eye on them.

    And if they harass us we should go after them since many of these crooks have profited off our pension funds….perhaps they should have to refund their fees …well our funds are getting smart and kicking some to the curb…….Well here is once great killing field
    http://www.nakedcapitalism.com/2016/04/dan-loeb-of-third-point-foresees-a-hedge-fund-killing-field-2.html

    I hope Fred enjoys all the hate mail this will spew

  6. In response to “Congress can solve Illinois’ pension crisis:”
    Evidently, the Manhattan Institute free-market conservatives only defend contracts, property rights, and competition when it suits them. It is my understanding that most of the “pension” payment actually goes toward paying the outrageous interest on the debt, yet they defend the bondholders/bankers contract rights against the rights of workers to receive what they’ve worked for and earned.

    They also love competition – as long as it’s the consumers and the states who compete against each other – pushing prices up, up, up, and wages down, down, down as opposed to corporations competing against each other. The Manhattan Institute’s Center for Medical Progress opposes allowing the federal government to negotiate Medicare part D drug prices.
    They need to reread Adam Smith.

    • If you go to Forbes as your source of information you will not know much. There data isn’t just misleading. They are wrong. Read me instead.

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