What happened to CPS making pension payments?



Private employers pay into our social security. Why shouldn’t CPS have to pay into the teachers pensions since they do not get social security?

-A reader

Dear reader,

The failure of CPS and the City of Chicago to pay their contribution into the Chicago Teacher Pension Fund is one source of the current problem.

Since 1995 CPS has been allowed to divert their pension payment contributions to pay other expenses.

If an employer in the private sector had skipped out on their Social Security required contribution of roughly 6% they would be in violation of federal law and charged with a crime.

Since 1995 the Chicago Teachers Pension Fund (CTPF) has gone from being 100% funded to around 50% funded.

Teachers currently pay 9% of their salary into the CTPF. 2% is paid directly. 7% was to be paid by the board of education as part of a negotiated agreement. The 7% board pickup of the pension contribution was offered instead of a pay raise.

The CTPF is funded by three sources. It was supposed to be funded by board contributions, teacher contributions and return on investments.

The irony is that CPS teachers are required to live in the city of Chicago. Along with other Chicago public employees they  are asked to pay into the pension system twice:  Once through direct and indirect employee contributions and also as city taxpayers.

To answer your question, CPS is supposed to do what private sector employers do. They have simply refused.

13 thoughts on “What happened to CPS making pension payments?

  1. To answer your question, CPS is supposed to do what private sector employers do. They have simply refused.

    Just out of curiosity, Fred – who is it that is responsible for seeing to it the City obeys the law? Since 2003, the Attorney General has been Lisa Madigan. Know which political party she belongs to?

    • And before that it was Republicans. Same difference. State of Illinois hasn’t made its full teacher pension contribution is 70 years. Bi-partisan pension theft.

  2. Chicago teachers pay into teachers’ pensions in three ways – first as employees, second as tax paying residents of Chicago AND then as tax paying residents of Illinois when their state taxes go towards paying the TRS, the pension fund for all public school teachers NOT employed by CPS. (Of course, this portion of pension intended monies will probably be diverted too. The money is there, it’s spent elsewhere.

  3. For most of the time there has been a CPS pension pick-up instead of a raise in actual salary, it was a win-win for CPS since they could call it compensation but never had to pay it. Now that they have to actually pay it into the pension fund, the rahmonster and the board are acting indignant as if the lazy, greedy teachers are bringing down the system. It is almost comical on their part.

    Perhaps they think many citizens will be fooled by their tricky use of language. But most are common sense people up here and know a scam when they see it. CPS is as unethical and shady as they come. When will we ever get an elected school board?

  4. Wow, so much misinformation here, where to begin?

    1. The 7% pickup included a raise pretty much every year of its existence
    2. Chicago public employees/residents paying pensions twice also were beneficiaries of Daley’s block grants that kept their property taxes lower
    3. CPS teachers hired before 1996 are not required to live in the city, nor are their needs-based counterparts regardless of hire date

    • Nelson,
      1. Compensation bargained for one year becomes part of an on-going compensation package. So the equivalent of a 7% raise (in this case, a contribution to the pension system) gets carried on year after year, even when next year’s raise kicks in. If it is taken away, it becomes a pay cut. That’s how employment contracts work.
      2. Kept property taxes lower than what? For example, Rahm’s 12% property tax increase this year to pay for pensions will be paid by public employees for their own pensions along with everybody else.
      3. http://catalyst-chicago.org/2015/02/end-chicagos-teacher-residency-rule/

      Where to begin? Probably not where you decided to begin.

      • 1. According to the contract, the pick-up is not an “on-going compensation package”.
        2. Those Daley block grants allowed CPS to get a larger share of state ed funding than they were entitled. That meant less money needed from Chicago property taxes to make up the difference and higher property taxes for downstate. It’s a shame he didn’t put those extra funds into the pension system. But take away those block grants, and Chicago homeowners would’ve seen that 12% tax hike in the 1999, not 2016.
        3. The residency rules I mentioned are in the employee handbook: http://policy.cps.edu/download.aspx?ID=179 . For the record, I think CPS teachers should be allowed to live anywhere.

      • 1. Placing quotations around words is not the same as a citation. The pension pickup provision had a sunset, but whoever is feeding you your talking points didn’t tell you what every labor lawyer knows; that the continuation of the pickup past the sunset has the same legal status as contract language. It is called “past practice,” the violation of which is an unfair labor practice.
        2. What’s the point? Taxes could be higher?
        3. Yes. Teachers hired before 26 YEARS AGO are grandfathered with regard to the residency requirement. Again: The point?

  5. Nelson & Fred,

    You are both wrong re Nelson’s #1. The 7% pickup was offered by CPS in lieu of a raise in 1981 and only for 1981 so that CPS could pretend that its budget was balanced for three years, as the SFA required. (if it had been given as a raise in 1981, the budget would have been in deficit in 1983). But once this was done, any reduction in the pick-up , as Fred pointed out, constitutes a de facto pay cut. CPS is required to pay the 7% for FY17 as a past labor practice _until_ a new contract is reached. Then, depending on the contract it could no longer pay it. Of course, teachers are unlikely to accept any contract that constitutes a net pay cut.

    But unlike a private employer re SS, CPS was _not_ legally required to pay the employer 9% into pensions after 1995 unless the funded ratio fell below 90%. What was legally permissible, however, was not fiscally prudent as everyone with any fiscal sense — including CTU — pointed out at the time. CTU was against the “no payments if above 90%” but the ILGA chose otherwise. Once it did fall below 90%, around 2004, CPS began to pay its catch up as scheduled starting in FY2006, as the law required. Then, when the pension catch-ups proved too expensive following the 2008 downturn, the ILGA granted it a pension holiday in 2010, kicking the can down the road to today.

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