'People Soft' outsourcing debacle could cost Chicago schools millions of dollars in penalties... Teacher Pension Fund finally sues Chicago Board of Education over botched payroll information

More than two years after the first problems arose affecting thousands of retired Chicago teachers and principals and potentially affecting tens of thousands, the Chicago Teachers Pension Fund (CTPF) on July 27, 2009, sued the Chicago Board of Education, asking the court to order the school board to straighten out its payroll information.

The trustees of the Chicago Teachers Pension Fund (CTPF) discussed a number of issues at their June 16, 2009 meeting. One month later, they voted to finally file a lawsuit challenging the failure of the Chicago Board of Education to provide the fund with accurate payroll information on retiring teachers and principals for the first time in more than 100 years. The lawsuit was filed by the Fund's attorneys, Joseph Burns (above, second from right). Left to right above: Fund vice president Reina Otera, Fund President John O'Brill, Attorney Joseph Burns, trustee James Ward. Substance photo by George N. Schmidt.The lawsuit, entitled "Board of Trustees of the Public School Teachers Pension and Retirement Fund of Chicago v. Board of Education of the City of Chicago" (09CH25730) demands that the court order the Chicago Board of Education to provide the CTPF accurate payroll information so that the fund can pay retirees and others entitled to benefits accurately.

The lawsuit maintains that since 2007, CPS has been unable or unwilling to provide the CTPF with accurate information. The law maintains that the Board of Education has a fiduciary duty by law which it has been breaching since it instituted its new payroll system in March 2007 and began failing to provide the Fund with accurate information about employee work and contributions to the Fund.

Harm to the Fund and to 'thousands of teachers'

"This action is based on the failure of the Board of Education of the City of Chicago ... to provide payroll information and certifications necessary to calculate the pensions of retiring teachers and surviving spouses and to calculate refunds to former teachers," the lawsuit begins. "This failure has scuased and continues to harm Plaintiff [the CTPF] and thousands of teacher retirees who are adversely affected by the underpayment of the pensions that they have earned teaching Chicago's public school children."

According to the lawsuit, beginning in March 2007, the Chicago Board of Education failed to provide the pension fund with accurate monthly information enabling the fund to calculate exact pension eligibility for teachers who were retiring (or leaving the system and attempting to draw their pensions) and for the survivors of pensioners who died.

One of the teacher trustees on the Fund, Maria Rodriguez (above, covering her face) remained a teacher trustee after she took a leave of absence from her teaching job to go to work full time as a field rep at the Chicago Teachers Union. At more than a dozen points during the public portions of the June 16, 2009 meeting of the Pension Fund, Rodriguez masked her face rather than be photographed. Substance photo by George N. Schmidt. "As of July 2009," the lawsuit states, "the Fund has not received the information required to finalize the pensions of all of the teachers who retired prior to June 30, 2007 or to determine the refunds due to former teachers or due to the beneficiaries of a deceased teacher. As a result, some retirees from 2007 are being paid estimated pensions and terminated or deceased employees have not received accurate refunds."

The lawsuit reports that 875 teachers retired or were otherwise eligible for pensions in June 2008. This was in addition to the 1,950 eligible from June 2007. Because some of those who retired were able to get the Board to correct their individual records, not all of the 2,825 individuals are still being affected by the problem.

According to the lawsuit, the cause of the problem was that in March 2007, the Board of Education instituted a new software program ("People Soft") that has since then failed to do the jobs required of it.

The Pension Trustees (which includes two members of the Board of Education, Peggy Davids and Alberto Carrero) had previously tried to resolve the matter without going to court, despite growing demands from pensioners and some trustees that a lawsuit be filed. The trustees voted as late as January 2009 against a motion to file the lawsuit, but finally approved it at the July 2009 meeting — 26 months after the problem began.

The minutes of the July 2009 meeting of the Pension Trustees were not yet available at the time this article was written. A person at the Pension Board with knowledge about the operations of the pension fund confirmed that the trustees voted to file the lawsuit at their July 2009 meeting. That person asked to remain anonymous because the person is not approved to speak publicly about this matter. Pension Fund executive director Kevin Huber was on vacation at the time the lawsuit was filed and did not respond to e-mail requests from Substance for further information.

According to the minutes of the most recent meeting at which the litigation issue was raised, the following took place:

"January meeting of the Trustees. Motion to File Lawsuit as Drafted Regarding CPS Payroll Issues Failed

A motion was made by Mr. Ward, seconded by Ms. Reilly, that the lawsuit against CPS prepared

by our attorney two months ago and requiring that CPS comply with the Illinois Pension Code

regarding certification of payroll data be filed in the appropriate court forthwith. Discussion

ensued. Mr. Huber addressed questions raised by the Trustees. The motion failed by the

following roll call vote:

Ayes: Ms. Goff, Ms. Nelson, Mr. Ward, Ms. Williams-4

Nays: Mr. Carrero, Ms. Davis, Mr. Kotis, Ms. Otero, Ms. Reilly, Ms. Rodriguez-6.

Abstentions: None.

Ms. Goff stated for the record she appreciates all the effort Mr. Carrero has made.

Mr. Kotis stated for the record he believes Messrs. Carrero and Huber will work through the

issues at the least expense to the Fund.

Ms. Nelson stated for the record that she agrees with Mr. Ward that 1-1/2 years has gone by and

perhaps something else needs to happen.

Ms. Otero stated for the record she believes it will be costly. She is unsure whether filing the suit

is going to resolve everything as quickly, and really make a difference.

Ms. Reilly stated for the record she feels the expenditure of the money may not get the Fund any

further if the suit is filed.

Ms. Rodriguez stated for the record she voted based on the attorney’s recommendation and


Ms. Williams stated for the record that anyway the Trustees vote involves risk, and she wanted to

take the chance of erring on the side of the members that are not being paid.

Mr. Carrero addressed the Board and stated he is very positive that the matter will be resolved

within a reasonable period of time. He stated CTPF should expect to receive more positive

reports by the end of February. He stated he understands the retirees’ situation, and that is why

he and Ms. Davis have been so involved."

According to the source, the patience of the trustees had finally run out by July 2009. The lawsuit asks that the Board of Education immediately correct the problems in its payroll reporting and that it also pay damages in excess of $300,000 to the CTPF. The lawsuit also asks that the Board of Education be required to pay interest in the statutory amount of nine percent to all retirees who have not received their full pension as a result of the Board of Education's problems. The Board of Education had no issued a public statement on the lawsuit as of August 1, 2009.

Shortly after he became Chief Executive Officer of Chicago's Public Schools, Ron Huberman began promoting Robert Runcie (above, at the June 27, 2007 meeting of the Chicago Board of Education). By June 24, 2009, Huberman was ready to propose that the Board make Runcie the "Chief Administrative and Chief Operating Officer" of CPS, a new position that pays $179,000 per year. Runcie's record as Chief Information Officers includes his development of the program to outsource information processing at a cost of hundreds of millions of dollars during the years that Arne Duncan was CEO. Among Runcie's projects were the "People Soft" payroll system that is the subject of the Pension Fund lawsuit against CPS and the current changes in the Board of Education's "Extended Pay" payroll system. Substance photo by George N. Schmidt.The response of the administration of CEO Ron Huberman may well be gathered from his recent administrative appointments. Since January 2009, Huberman has proposed that the Board spend more than $1 million hiring his former staff from the Chicago Transit Authority. Of those experienced CPS administrators who were not purged by Huberman and fired or forced to retire in May, June and July 2009, one key person received a major promotion.

ON June 24, 2009, Huberman proposed that the Board promote Robert Runcie to the newly created post of "Chief Administrative Officer/Chief Operating Officer" at an annual salary of $179,166.67, according to BOARD REPORT 09-0624-EX10 — APPROVE APPOINTMENT OF CHIEF ADMINISTRATIVE OFFICER AND CHIEF OPERATING OFFICER EFFECTIVE MAY 1, 2009, AND RATIFY ALL LAWFUL ACTIONS TAKEN AS CHIEF ADMINISTRATIVE OFFICER AND CHIEF OPERATING OFFICER SINCE MAY 1, 2009 (ROBERT RUNCIE). As the Board's Chief Information Officer, Runcie was responsible for the outsourcing of computer operations during the years of the administration of Arne Duncan. Among Runcie's most significant projects were the "People Source" outsourcing of payroll and the current changes in the Board's "extended pay" system.

Significant damages asked

The lawsuit asks that the Board of Education be ordered to correct the problems it has allowed to go on for more than two years, and pay damages both to the pensioners who have not received their correct pensions and to the Pension Board for its costs in trying to fix the problems that CPS created.

In the main complaint, the requests are as follows:

"WHEREFORE, the Pension Fund asks the Court to order the Board of Education (a) to pay interest to each retiree, surviving spouse, beneficiary and contributor entitled to a refund, at the rate of 9% per annum, or any higher rate as may be set forth in the General Interest Rate provision of the Illinois Interest Act (815 ILCS 205/4), on any sum otherwise payable by the Fund to the retiree, surviving spouse, beneficiary, or contributor, or that was delayed as a result of the Board of Education's failure to meet such deadline or obligation as a result of the breach of fiduciary duty by the Board of Education; (b) to retain an outside accounting firm chosen by the Fund (at the Board of Education's expense), which will provide, if necessary, a calculation and certification prepared manually from a review of each retiree's and contributor's wage records and personnel files; (c) to provide the required certified payroll information to the Pension Fund in the future on a monthly basis, and (d) to reimburse the Pension Fund for the extra administrative expenses is has incurred since March 2007 as a result of the breach of fiduciary duty by the Board of Education."

Final edited version of this article posted at August 1, 2009, 3:00 p.m. CDT. If you choose to reproduce this article in whole or in part, or any of the graphical material included with it, please give full credit to SubstanceNews as follows: Copyright © 2009 Substance, Inc., Please provide Substance with a copy of any reproductions of this material and we will let you know our terms — or you can take out a subscription to Substance (see red button to the right) and make a donation. We are asking all of our readers to either subscribe to the print edition of Substance (a bargain at $16 per year) or make a donation. Both options are available on the right side of our Home Page. For further information, feel free to call us at our office at 773-725-7502.


March 4, 2011 at 2:54 PM

By: Patrick Waldron

Pension board sues Board of Ed: what happened?

I am one of the affected teachers. What happened with this lawsuit? Does this mean I will not see my pension contributions until this case is settled? This article was over a year and a half ago.

May 7, 2011 at 7:30 PM

By: Rose Ann Fitzgerald

Summer Paid not included in Pension Salary Average

I was a teacher for for 24 years. The last 8 eight years of my 24 years of service, I was a teacher/scheduler. As a scheduler, I worked during the summer months. When i retired my status was still a scheduler. However, my summer pay was not calculated as part of my pension salary average. How can this be corrected?

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