Ruiz and Cawley appear before pension trustees to propose a deal... CTPF looks to approve Board plan to spread out 2016 and 2017 pension payments....
The Chicago Teachers Pension Fund (CTPF) heard from three top financial officials on the morning of July 1, 2015, following the cliffhanger payment of the full $624 million that Chicago Public Schools owed to the fund for the 2015 fiscal year. The payment came on the final day of the fiscal year, which ended June 30, 2015 at midnight. CTPF officials had planned to sue the Board of Education had the Board failed to pay the full amount (which was in the August 2014 FY 2015 Budget approved by the Board...).
The pension trustees have established a committee to look into the terms of the new payment plan, and the committee will report to the Pension Fund's July 15, 2015 trustees' meeting.
CTPF STATEMENT:
CPS Offers Funding Proposal to CTPF
This morning the Chicago Teachers' Pension Fund (CTPF) Board of Trustees met in a special meeting where representatives of the Chicago Public Schools (CPS) presented a proposal to create a short-term employer payment plan. At the meeting, CPS Interim Chief Executive Officer Jesse Ruiz, Chief Administrative Officer Tim Cawley, and the City of Chicago's Chief Financial Officer Carole Brown outlined a proposal which would not reduce pension funding, but would help CPS close a $500 million budget gap for 2016.
Under the terms of the proposal, CPS would discontinue its practice of making a single annual pension payment on the last business day of the year and would instead make monthly payments to CTPF, beginning in January 2016 and continuing for the next 10 years.
This new funding schedule would defer approximately $500 million of the FY 2016 payment into the FY 2017 fiscal year. The proposal requires CPS to pay interest at 7.75% on the deferred amount and requires $750 million in collateral to secure the agreement.
Following a period of discussion and debate, the board voted to communicate its general support for the proposal, and authorized a subcommittee of the Board of Trustees to continue negotiations and discussions with CPS. The subcommittee is expected to meet in July and will make a recommendation to the full board later this month.
"We were encouraged to see representatives of CPS at our meeting this morning and appreciate the opportunity to openly discuss payment security for the Fund," said CTPF Board of Trustees President Jay C. Rehak. "While we still have concerns about this proposal, we look forward to working through these issues so that our members' interests are protected and our Fund receives all the revenue necessary to meet the pension commitments made by CPS."
"Under the current statute, CTPF receives revenue once a year, on the last business day," said CTPF Executive Director Charles A. Burbridge. "This proposal revises the payment schedule, but ensures that we have a monthly revenue stream and provides security and interest on a deferred amount, which is reassuring for our members."
The subcommittee is expected to make a recommendation in advance of the full board meeting on July 16, 2015.
