Chicago teachers are officially on strike and lost in the media reporting, on a national level, their pension fund is rapidly heading towards bankruptcy.Illinois and Chicago media has covered it exhaustively. Over at my now hibernated site, Hoosier Econ, I addressed issues of the entire Chicago Public School system with posts such as 1/3 of school students in CPS are illegal immigrants and audits of CPS finding administrators thousands of dollars spent on luxury items.
Just how bad is their pension system? Back in 2016, the folks over at the Illinois Policy Center shared some information:
Given the size of CPS, any CPS-related bankruptcy would have a serious impact on the credit of the city of Chicago, which has already been downgraded to junk.
CTPF’s funding level has collapsed due to pension holidays, which shorted the pension system by almost $3 billion over the course of two decades.
There are now more inactive employees and beneficiaries in CTPF than there are active workers paying into the pension fund.
Beginning in 2018, Chicago taxpayers were hit with another tax increase to fund CPS. Here’s a snippet from WTTW.com:
Chicago homeowners will pay about $225 million more in property taxes this year to Chicago Public Schools, much of that going to fund teacher pensions.
Accountability says the entire pension crisis was created by lawmakers who constantly allowed government to either short or not pay into the system at all. Chicago Public Schools skipped pension payments in the CTPF every year from 1995 to 2005. The system, which had been 100 percent funded, is now around 50-55 percent funded and carries a $9 billion unfunded liability.
Also, since 1980, Chicago teachers contribute relatively little to their pension: only 2 percent per year. The average social security contribution for private sector workers is a little over 6 percent.
Chicago Tribune published a more dire pension debt estimate($2 Billion more in debt) and how pension costs are eating into operating costs of schools just a few months later in March 2018:
Less aggressive investment return estimates have carved an additional $1 billion hole in the severely underfunded pension system for Chicago teachers, reviving questions about how a retirement plan for tens of thousands of public workers can survive without additional money from taxpayers.
Consultants for the Chicago Teachers’ Pension Fund now conclude the system is about $11 billion in the red and faces an even steeper climb to comply with a state law that requires it to be 90 percent funded by 2059, financial documents show.
By 2026, under the pension fund’s latest projections, the annual payment to the fund will be roughly $1 billion.
Ballooning pension costs have already strained school coffers, but still were not enough to keep the district’s unpaid retirement debts from growing. By this summer, the pension fund estimated its assets cover only half of the benefits its members have earned.