Teacher pension fund trustees pass landmark decision... Fund managers must now disclose ties to union busting charter schools, other attacks on public education
The Chicago Teachers Pension Fund (CTPF) passed a motion earlier this month which will require all prospective fund managers to disclose any relationship they may have with charter schools. The measure, passed by an 8 – 4 vote, was the result of a motion put forth by Teacher Trustee Jay Rehak in March 2010, seconded by Teacher Trustee Lois Ashford but tabled at that time, only to be resurrected by Retiree Trustee James Ward and seconded by Mr. Rehak in April.
After queries from Chicago Teachers Pension Fund trustee Jay Rehak (above, second from right at the fund's November 2009 meeting), the fund voted in April 2010 to disclose ties of fund managers to charter schools which are non-union. Voting with Rehak on the proposal were Lois Ashford (second from left) and Linda Goff (right). Those voting against included Alberto Carrero (a Board of Education trustee), Board trustee Peggy Davis, Principals' trustee Chris Kotis, and one of the retiree trustees, Walter Pilditch. Substance photo by George N. Schmidt. The vote followed a legal opinion, provided by CTPF legal counsel Joe Burns, which indicated that it was in the best interest of the fund to be familiar with any relationship potential fund managers had with charter schools.
Despite objections from Board of Education Trustee Peggy Davis, the Pension Board voted in favor of the motion, with all six Teacher Trustees joining Retiree Trustee Ward and Retiree Trustee Mary Sharon Reilly to form the majority. Board Trustees Davis and Alberto Carrerro were joined in their dissent by Retiree Trustee Walter Pildich and Principal Trustee Chris Kotis, according to the CTPF.
The vote evolved from a CTPF Investment Committee meeting in February when questions arose concerning Andre Rice, the director of Muller and Monroe, who is managing some of the teachers’ pension money, while sitting on the Board of Directors of the University of Chicago Charter Schools.
Several teacher trustees questioned employing a money manager who works with a charter school where none of the teachers are unionized. Charter schools are seen by many in the public education sector as union busting entities that replaced older unionized teachers with younger teachers, many of whom must work longer hours at less pay who can be easily fired should they complain about work conditions. Sources familiar with the University of Chicago charter schools have told Substance that they seem to have a particular plan to drive out teachers once they have served four or more years in the schools.
The ultimate question was how will this affect the teachers pension fund from earning money. It was noted at the meeting in Februarty that charter teachers do pay into the teachers pension fund — but only if they are certified. A law that opened up the cap for more charter schools in Illinois now mandates that 75 percent of teachers in charter schools must be certified. Prior to the new law, some charter schools had fewer than 50 percent certified teachers. In many cases, the percentage of qualified administrators is even lower than the percentage of certified teachers.
Pension Fund attorney Joseph Burns (above, right) gave the pension board a legal opinion stating that it was legal for the fund to require the charter disclosure. Two of the trustees in the photograph above voted for the motion (James Ward, far right, and Mary Sharon Reilly, second from right). Peggy Davis, third from right, a Board of Education trustee, voted against the motion. Substance photo by George Schmidt.There are other current money managers, including Northern Trust Bank, which is currently being sued by the CTPF for risky investments, who have ties to charter schools, CTPF Director Kevin Huber said.
"You may not like their politics, but they have a fiduciary responsibility," Huber told the Board at the Feb. meeting. "How much time are they putting into the charter school and how much time have they put into our fund."
Trustee Jay Rehak, who spearheaded the vote, is a recently elected trustee to the pension board. Along with Lois Ashford, he ran on the CORE slate for election to the pension board in October, upsetting the incumbent trustees who were supported by the United Progressive Caucus (UPC) within the Chicago Teachers Union.
CORE is currently contending with four other caucuses in the Chicago Teachers Union election May 21. Rehak noted earlier that Muller and Monroe’s current $35 million investment is losing money after five years.
"In light of the fact that Muller and Monroe has lost the Pension Fund 17 percent of its investment on an annualized basis, perhaps Mr. Rice has been too busy working on the Board of Directors of the University of Chicago Charter School and he has lost sight of making the Pension Board money."
The legal opinion expressed in the memo that was provided to Substance after a Freedom of Information Act request stressed that future pension fund managers must have "complete and undivided loyalty to the beneficiaries and participants."
"A not for profit organization involving public education which operates a charter school is a party in interest because it is an employer whose employees are covered by the Fund," Burns wrote in the memo. "Contributions owed by the employer are Fund assets, and under the Illinois Pension Code, the Board has the authority to conduct payroll audits of a charter school to determine the existence of any deliquences in contributions to the Fund. A fiduciary (CTPF money manager) who is on the board of directors of the charter school could arguably be in a conflict of interest in the case of a deliquency, if the employer maintainted control over the Fund's asset, denied the liability, and forced the Fund to pursue collection activity."
The legal opinion further noted there is a difference for a "fiduciary" or money manager "donating on a corporate or personal basis to a not for profit that has no problems with deliquent payments." In this case, "Trustees have complete discretion to determine whether to require disclosure of financial support to or formal involvement with not for profits relating to education that are not parties in interest. In such a case, the potential for a conflict of interest is a matter of principle, not of legality."
The question of principal was thus decided in the 8-4 vote that will now require all future pension fund money managers to disclose their ties to charter schools — something more and more teachers are now seeing as entities being used to replace public education with private operators using tax money to gut the union and its protection of teacher pensions, seniority rights, salaries and other benefits won after hard labor struggle over the years.
[Full disclosure: Substance reporter Jim Vail is currently running on the CORE slate for elementary functional vice president in the May 21 CTU election.]
