CTPF Supports Conclusion of Bipartisan Think Tank CTBA: Tax Levy Diversion of 1990s, Chronic Underfunding of 2000s Created CTPF Financial Difficulty... Study demonstrates how CPS officials have been lying about the problems of the Chicago Teachers Pension Fund
The financial challenges facing the Chicago Teachers’ Pension Fund can be attributed to nearly 20 years of short-sighted decisions involving diverted tax levies and General Assembly-approved skipped or reduced contributions by Chicago Public Schools — not from benefits now paid to retired teachers or promised to future ones.
That’s one conclusion of a report issued late last week by the Center for Tax and Budget Accountability, a nonprofit, independent research and advocacy think tank committed to ensuring that tax, spending and economic policies are fair. Founded in 2000, the organization is known for its objective analysis of budget-related issues to improve the fiscal health of the State of Illinois. Its bipartisan board of directors includes a mix of institutional money managers, academics, union representatives and business executives.
In its August report, “Analysis of Proposed FY2014 Chicago Public Schools Budget,” CTBA noted that CPS made reduced payments or skipped payments to CTPF which resulted in chronic underfunding during the past two decades.
The CTBA report concluded that had CPS not diverted the property tax revenue that – prior to 1995 – went directly to CTPF, the pension plan would have been nearly 80 percent funded in fiscal year 2011.
CTBA said that while the plan was 96 percent funded in 2002, years of neglect by CPS and the General Assembly had left it only about 60 percent funded in 2011. The plan was 53.9 percent funded at the end of its 2012 fiscal year.
While CPS blames the lack of pension reform in Springfield as the cause of its budget woes, the report said that the district has been well aware of the impending increases in pension payments. Further, CTBA said that, while it’s the responsibility of the employer to pay the annual interest cost of the unfunded liability, CPS’ only action has been an attempt to extend its pension holiday for two more years — a move that would have further eroded CTPF’s funding status.
CTBA also questioned CPS claims that the General Assembly’s failure to enact pension reform puts the Chicago school district in tough financial straits. None of the major bills under consideration would have altered CPS pension obligation, the report noted.
“We’re pleased to see a bipartisan group such as the CTBA study and report the real issues that led to our plan’s financial condition,” said CTPF Board President Jay Rehak. “That CTBA concluded our financial challenges relate to chronic underfunding comes as no surprise to us.
“When the Board of Education convinced Illinois lawmakers to divert the fund’s dedicated revenue into the CPS operating budget in 1995, the underfunding began — and today it continues. Today, CPS owes the plan $8 billion plus $640 million per year in interest alone – the painful result of years of neglect.”
Copies of the full analysis from CTBA on the proposed 2014 CPS budget are available at: http://ctbaonline.org/New_Folder/Education/Aug%202013_Analysis%20of%20CPS_FY2014ProposedBudget.pdf.
Established by the Illinois state legislature in 1895, the Chicago Teachers’ Pension Fund manages members’ assets and administers benefits. The $9.5 billion pension fund serves approximately 59,000 active and retired educators, and provides pension and health insurance benefits to more than 25,000 beneficiaries.