Paul Vallas resumes teacher bashing and union busting career with Crain's opinion piece...

Former Chicago Public Schools "Chief Executive Officer" Paul Vallas during the ill-conceived election campaign of "Quinn-Vallas" in October 2014. Less than a year after he helped bring down Governor Pat Quinn's administration (a duo, actually, since Quinn made the bigger mistake), Paul G. Vallas was back in his historical union busting mode, opining in Crain's Chicago Business that Chicago had to reduce its payments to the Chicago Teachers Pension Fund (CTPF) and undermine even further the well being of the union teachers of Chicago. In his Crain's Op Ed, Vallas repeats the claim that the main reasons for the problems of the CPS budget are in Springfield and calls upon the Chicago Board of Education to renege on the "pension pickup", a part of the salary of Chicago's union teachers for thirty years.


Here's how to get CPS out of debt, once and for all

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Chicago Public Schools Paul Vallas Education Opinion & Columnists Opinion



Chicago Public Schools remitted its $634 million pension payment at a down-to-the-wire deadline June 30. To make that payment, it borrowed $200 million. Now 1,400 employees face layoffs. It's a horribly painful way to do business and prompts an equally horrible question: Will CPS be forced into more layoffs to address its $500 million structural operating deficit, which, combined with the pension shortfall, brings CPS' budget hole to $1.1 billion?

Clearly, the system's financial policies need an overhaul and a comprehensive solution. Separating pension debt from the operating budget and dealing with those problems separately should place the focus on solving the pension problem once and for all. If that can be accomplished, the district can address its massive operating deficit, in an effort to avoid gutting educational services.

Illinois Senate President John Cullerton's measure for the state to contribute more to the Chicago Teachers' Pension Fund, or CTPF, this year and going forward is the most critical component of the solution. The state must commit to nothing less than covering normal costs, plus inflation. Gov. Bruce Rauner had proposed a similar measure but with strings attached.

Whatever legislation is adopted must unconditionally pick up normal costs without other budgetary offsets. In other words, the state must maintain its current meager CTPF subsidies with no programmatic grant or aid cuts. This solves the CTPF's future pension-funding issues while reducing CPS' annual pension obligation by about $200 million annually and capping payments needed to eliminate existing unfunded liabilities.

In exchange, CPS must fulfill its 20-year-old promise to restore the 0.26 percent segregated pension levy when pension funding fell below 90 percent. Restoring that levy would generate $162 million, plus inflation, annually to fund CTPF. This levy would require reprioritizing CPS' budget to ensure that educational services are maintained.

Part or all of the pension pickup, in which the school system covers pension contributions for teachers and administrators, must be eliminated. Full elimination would generate $166 million annually. Going forward, the teachers' contribution should be direct-deposited to CTPF with every paycheck. This is far more acceptable than mass layoffs and sounder from a legal perspective than reducing earned benefits.


If fully eliminating the pension pickup is not politically possible, alternatives include phasing in the elimination over time or partly eliminating it while offsetting losses with annual tax-increment financing surpluses—or, as a last resort, borrowing from CPS' share of future “uncommitted” TIF revenue.

Along with direct deposit of teacher pension contributions, state and local CTPF contributions must be permanently remitted monthly, instead of as an annual lump sum. This would eliminate the CTPF's need to liquidate assets to make payments and would improve interest earnings. In return, the deadline for reaching 90 percent funding of actuarial liability by 2059 could be delayed 10 years and the 90 percent target reduced to 80 percent. This would result in a $92 million reduction in annual pension obligations.

Finally, imposing a CPS-authorized capital property tax levy would generate $50 million annually, adjusted for inflation. This would free up $50 million in general state aid in the CPS operating budget that the district is using to fund debt service. Money could be diverted to CTPF contributions without taking resources out of the classroom.

This approach would go a long way toward permanently solving CPS' pension crisis without more devastating layoffs. It would relieve CPS of future unfunded pension liabilities and come close ($670 million) to fully addressing the state-mandated contribution to meet the state's statutory actuarial liability goal. It would give CTPF “state funding equity” with teachers statewide. This would improve long-term pension investment earnings and likely accelerate achieving the statutory funding goal. From a budget standpoint, CPS would have to replace only the $162 million diverted from existing revenue as a result of the restoration of the dedicated pension levy. This is far more manageable than making this past year's $634 million payment that will increase substantially every year.

This shared sacrifice would give CPS breathing room to construct a long-term plan to address the operating budget. Implementing a solution that ends borrowing and deferring obligations to cover overspending, stabilizes finances long term and protects critical programs and support needs to happen now. This pension solution is a critically important first step.

Correction: This story has been updated to correct the amount of money that would go toward funding the state-mandated contribution to meet the statutory actuarial liability goal.

Paul Vallas, former CEO of Chicago Public Schools, is a consultant at DSI Civic Financial Restructuring in Chicago.


July 7, 2015 at 10:04 AM

By: Margaret Wilson

Pension Payments

I do not know how many of the younger teachers (new to the system regardless of age) know how the pension pickup began. It was during negotiations over a long strike (2 or 3 weeks) when they offered this instead of a raise. In the years after this settlement, the money owed to the pension fund was only paid one or two times prior to this last payment.

In terms of state funding, ours is one of the few state constitutions which states that the primary responsibility for funding the educational system falls on the state not the local educational district. Even though Chicago contributes more tax money to Springfield, we never see a fair amount coming back to us (in fact, the legislators talk about how much the city is draining the rest of the state)!

Another part of the problem is, that under IDEA and later amendments, the federal government was supposed to fully fund special education by the year 2000 (with a gradual increase every prior year). We are still waiting for that commitment to be honored.

July 7, 2015 at 6:41 PM

By: Bob Busch

Pension Payments

Perhaps the State didn't pay into our pension because it was a local pension from the 1890's while the state pension did not start until the 1930's

Do you realize the CPS gets well over 50%of its total budget from non local sources? No wonder Emanuel did not swap a state take over of CPS pensions for elimination of block grants. If anything CPS gets more from the state than anyone else, not less.

July 11, 2015 at 8:24 AM

By: Margaret Wilson

Pension Payments

Bob, While I agree that we get more from the state then smaller population areas but it is nothing compared to the amount that residents of Chicago put into the state. When you divide the number of people by the total amount of population, you will see that your figures are not accurate.

The bottom line is the State Constitution states that the state is responsible for funding all districts within the state. If that was done, you would see fair less difference between the wealthier suburbs (predominately white) and the lower income neighborhoods.

I am aware that our pension plan is separate and believe it should stay that way but CPS could better afford its pension obligations if the state was meeting its mandated obligations.

July 12, 2015 at 7:37 AM

By: Bob Busch

Funding Gap

I was under the impression Chicago gets more money from the state than any other district.

Only Chicago even comes close,in fact Chicago receives over half its total revenue from outside the city.

The economic engine of Chicago does little ,if any to support the school districts outside it's boundaries.My wealthy White

district receives 87% from our local property taxes.Out tax rate is very high,Chicago's is very low that disparity also neds to be fixed.

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