Chicago teachers pension fund expands investigation of charter schools that refuse to pay pension contributions for their certified teachers into the fund
The trustees of the Chicago Teachers Pension Fund at their February 21, 2013 meeting expanded the scope of their investigation into the city's charter schools. As previously reported, preliminary audits of the charter schools showed that Chicago charters are refusing (or neglecting) to pay legally required pension contribution for teachers. The February 2013 decision means that a full audit will be done of all Chicago charter schools and so-called "campuses."
On Thursday, February 21, 2013, Bob Jurinek, the internal auditor of the Chicago Teachers Pension Fund reported to trustees that his ongoing review of charter school operators indicates a widespread problem of inaccurate reporting and under paying of pension obligations by those entities. While Mr. Jurinek noted that only 25 charter operators had been sample audited, each operator was found to have made errors ranging "from minor to egregious." At least 120 Chicago charters (and so-called "campuses") are required to pay into the fund on behalf of certified teachers working at their schools. The participation of charter school certified teachers is required by law.
Trustees told Substance that they were alarmed to hear that Mr. Jurinek had found more than 30 instances of charter school employees not counted as CTPF contributors amongst the sample schools in a few sample months. This under reporting of employees who should be contributing to the Fund but are not costs the Pension Fund thousands of dollars per employee. While such under reporting is to the financial benefit of charter school operators, it is illegal and potentially problematic for the unreported employee and the CTPF itself. At previous meetings, the trustees had heard from the Fund's lawyers that this widespread practice was illegal.
CTPF President Jay Rehak noted that certified charter school teachers are, by law, required to participate in the Fund. He noted that such participation is not optional and cannot be â€œnegotiated awayâ€ by an employee. He further noted that certified charter school employees who are not listed as contributors could potentially retire at some point in the future and expect a pension that has not been properly funded. This could potentially expose the Pension Fund to a pension obligation that a charter school operator has not met, potentially leaving the CTPF with an unfunded cost that it might be required to cover.
Rehak also noted that the problem would be exacerbated should any charter school have become bankrupt or have been shut down by the time the charter school operatorâ€™s underpayment was discovered. The same day as the CTPF trustees met, a Chicago Board of Education hearing on the city's charter schools included an announcement that two Chicago charters would be closed for poor performance.
Trustees voted unanimously by a vote of nine to zero to authorize a formal letter to each of the 120 charter schools in Chicago outlining yet again their pension obligations as proscribed by Illinois law. Three trustees were â€” Board trustees Andrea Zopp and Carlos Azcotia, and Walter Pilditch, who represents retired teachers â€” were not present at the time of the February 21 vote. Trustees further authorized an audit of the charter school operators by an external auditor which the sample has found to be the egregious in their misreporting of pension payments. Mr. Jurinek was also placed in charge of overseeing the external auditorâ€™s review.
The potential loss to the fund is not known, but auditors are authorized to review the books of charter schools not only from the previous year, but from the first day they begin operation. For many schools, this will mean an audit reaching back almost ten years. Any single certified teacher found not to be paying into the system for that length of time will have cost the pension fund tens of thousands of dollars, while â€œsavingâ€ pension school operators many thousands of dollars in payroll expenses. The impact of the audits have the potential to be far reaching and may necessitate legal action.