Another corporate 'civic leader' joins the attack on teacher pensions... Civic Federation attacks Chicago Teachers Pension Fund and proves it's far from neutral 'non-partisan' by joining Civic Committee in ruling class targeting of defined benefit pension plans

Chicago Board of Education member Peggy Davis (above at the May 2010 Board meeting) has long served corporate Chicago, currently as an attorney for Exelon Corporation, but as late as the early 2000s as Chief of Staff to Chicago Schools CEO Arne Duncan. Davis has long complained about the Chicago Teachers Pension Fund's Board of Trustees, on which she serves. Now the Civic Federation is proposing that more management representatives join the Fund's Board of Trustees. Currently there are two (Davis and Alberto Carrero, also a millionaire corporate executive). Substance photo by George N. Schmidt.The Civic Federation, which has long posed as a "non partisan" group that simply performs neutral budget analysis, showed its true corporate Chicago colors in August 2010, when it joined the rest of Chicago's corporate elite in trying to undermine the integrity of the Chicago Teachers Pension Fund. Buried in the Civic Federation's lengthy report on the Chicago Board of Education budget, and ignored by the city's corporate media, was a nasty partisan attack on the composition of the Trustees of the CTPF. According to the Civic Federation, the current balance among trustees (six active duty teachers; three retired teachers; one principal; and two Board of Education members) does not give management enough power, so, according to the Civic Federation, that governance, which has been around for more than 100 years, needs to be changed to give management more voice.

Before continuing an analysis of what the Civic Federation is trying to do, it's necessary to quote their exact words, from their report on CPS finances. The section of the report has been ignored by other media in Chicago, but it is worth quoting in full so that Substance readers can measure the full impact of the attack on the Chicago Teachers Pension Fund under the guise of "fiscal responsibility."

Here is what the Civic Federation says, verbatim (at pages nine and ten of their report):

"Implement Pension Benefit Reforms

"This year, and for the following two fiscal years, CPS is deferring its required pension payment and only contributing the normal cost of employee accrued benefits. This will only exacerbate the District’s inability to pay for its escalating annual employer pension contribution. It is imperative that CPS aggressively seek legislation to curb its rapidly escalating retirement costs. Some of the reforms the district should pursue are listed below:

• A moratorium on new pension benefits: The Illinois General Assembly should impose a moratorium on any new retirement benefits until the pension system has achieved a 90% funded ratio. Until that goal has been reached, we call on members of the General Assembly to hold firm against any new pension enhancements.

• Increase the Employee Share of Pension Costs: Currently, CPS pays for 7% of the 9% employee share of teacher pension costs; teachers pay for the remaining 2%. The Civic Federation believes that employees need to share in the rising costs of public pension plans and recommends that employer and employee contributions be restructured such that employees pay a proportion of required contributions, similar to the new structure of the CTA contributions. A proportional relationship should be set whereby, for example, the employer pays 50% and the employees pay 50% of the annual required contribution. Whether the proportion is 50%/50%, 60%/40%, or some other ratio, it is critical that both parties pay a share of required contributions, and that those contributions relate to the fiscal health of the fund. This would shift more of the escalating pension costs onto employees. This change should be a top priority for CPS when it negotiates a new collective bargaining agreement.

• State Should Align Downstate Teacher Retirement System Contributions with CPS Teacher Retirement Contributions: The State should revise its existing policy with respect to providing different levels of funding for Chicago teacher pensions versus pensions for teachers throughout the remainder of the state. Currently, the State funds the employer pension contribution for all teachers in Illinois, except for those who work for the Chicago Public School district. This treatment is fundamentally unfair to Chicago taxpayers whose tax dollars are used to fund pensions for both downstate and Chicago teachers, while the remainder of the State does not share the burden for funding Chicago teachers’ pensions. The Civic Federation urges the State to adhere to its goal of contributing 20% to 30% of the amount it contributes to the downstate Teacher Retirement System to the Chicago teachers fund.

Reform Governance of the Teachers’ Pension Board

The Public School Teachers’ Pension and Retirement Fund of Chicago is governed by a 12- member Board of Trustees that includes two representatives from the Board of Education, six active members who are not principals, one active principal and three annuitants. Therefore the ratio of management to employee representatives is 2:10, one of the least balanced of the 17 Illinois pension boards recently surveyed by the Civic Federation.

The proper role of a pension board is to safeguard the assets of the fund and to balance the interests of employees and retirees who receive pension benefits and taxpayers who pay for pension benefits. Each party has an interest in the management of the fund. However, the heavy tilt toward employees on the Teachers’ Pension board raises questions about how objective the Board can be in its work. In our view, a pension board should:

Balance employee and management representation on pension boards; Develop a tripartite structure that includes citizen representation on pension boards; and Include financial experts on pension boards and require financial training for non-experts.

We urge CPS to seek reform of the Teachers’ Pension Fund governing structure through the General Assembly to ensure greater balance of interests.

The Civic Federation attack on the teachers' pension fund came four months after a similar attack cost the CTPF more than a billion dollars in contributions owed by the Chicago Board of Education, and less than two weeks after the head of the ultra-right wing "Civic Committee of the Commercial Club", Eden Martin, took to the Op Ed pages of both the Chicago Tribune and the Wall Street Journal to voice his claims that Chicago teachers pensions are a financial problem for the city.

The Civic Federation's pretense of being a "non-partisan" advocate for more budget transparency and accountability enables it to gain media attention whenever it comments on a public services budget. Above, Laurence Msall of the Civic Federation testifies at a meeting of the Cook County Board in January 2007. Contrary to what the Civic Federation claims, its budget analyses generally conform to corporate Chicago's party line. Substance photo by George N. Schmidt.The contrast between the facts and the party line of corporate Chicago is visible in the current budget itself. While preaching fiscal responsibility, the Civic Federation and the Civic Committee are both ignoring the explosive debt burden CPS has been taking on. They are also ignoring the danger of derivatives investments that CPS has taken on, probably because their leaders are corporate executives who have long been promoting such financial activities, despite the enormous risks.

The supposedly non-partisan Civic Federation has long gone along with Mayor Richard M. Daley’s version of what should be done with CPS finances. In August 2008, for example, the Civic Federation simply echoed the Board of Education’s official position when Daley ordered the Board not to raise local property taxes.

Alberto Carrero, a retired banker and millionaire, is the second Board of Education trustee on the Board of the Chicago Teachers Pension Fund. Carrero and Peggy Davis are the only trustees who are not elected by a constituency of the CTPF, and now the Civic Federation is proposing to increase management votes on the CTPF trustees, ignoring the fact that the pension fund is managed by democratically elected representatives of the major groups in the Fund (six teacher trustees; three retired teacher trustees; and one principal trustee). Substance photo by George N. Schmidt.At the time, CPS was facing future problems with the budget and could have raised the local property tax without a major inconvenience to local taxpayers. Yet in an August 27, 2008 press release, the Civic Federation wrote as follows:

“The taxing restraint shown by the Chicago Public Schools $6.2 billion FY2009 proposed

budget stands in stark contrast to the enormous property and sales tax increases imposed

by other Chicago-area governments in the past year. For the first time since FY1999, CPS

will not raise its property tax levy to the maximum amount allowed under the tax cap law.

“Instead the District will balance its budget through spending reserve funds and through

management savings. Civic Federation President Laurence Msall announced the

Federation’s position in support of the CPS budget at a public hearing held today at

Chicago Public Schools headquarters.

“Chicago’s citizens are currently facing serious economic hardships, such as a City

unemployment rate that stood at 8.2% in June. By freezing its property tax levy, Chicago

Public Schools has shown praiseworthy responsiveness to taxpayers’ concerns. CPS will

spend $100 million in reserves to balance its budget, which would still leave a total fund

balance of 10.7%, well within the Government Finance Officers Association

recommended levels of 5 to 15%.

In August 2009, the Civic Federation's Laurence Msall ignored the Board of Education meeting at which the 2009 - 2010 budget was approved. Instead, the Civic Federation was represented by Lise Valentine (above left). Substance photo by George N. Schmidt.“The Federation’s analysis found that responsible management actions also allowed CPS to give taxpayers a break. Since FY2006, CPS has reduced staffing levels by 2,820

positions, including the elimination of 489 positions planned for FY2009. This is a prudent response to the District’s declining enrollment and looming financial challenges. In addition, CPS has successfully contained employee health care costs at a time when other governments across the nation are experiencing significant health care cost increases. Budgeted health care costs will fall by 1.8% in FY2009 due to a combination of more stringent auditing and review of claims and reduced staffing.

““Chicago taxpayers can look forward to a respite from the punishing tax increases of the past year,” said Laurence Msall, president of the Civic Federation. “While CPS faces daunting fiscal challenges in the future — especially from exponential growth in pension expenses — the Federation commends the superior financial management that made this good news budget possible.”

“However, the Federation urges CPS to follow through on pledges to produce a capital

improvement plan (CIP). The Federation’s analysis commends the District for providing

additional capital information in its FY2009 budget. But this data still falls far short of the detailed, comprehensive, multi-year information citizens and public officials need to

assess the District’s multi-million dollar capital program that is already underway. The

Federation urges CPS to continue to build upon its existing capital disclosures….”


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