CHICAGO, IL — The Chicago Public Schools (CPS) pension “crisis” is a manufactured one. Even Senate President John Cullerton has said as much in public. Over the past 35 years, the Chicago Teachers Pension Fund (CTPF) has outperformed most mutual funds averaging over 8.6% return, including the years of the recession.
In 1995 the responsibility for pension payments was transferred from the Chicago City Council to CPS. This move removed a dedicated tax levy for making payments. CPS promptly began taking pension holidays, and a pension once funded at over 100% was reduced to 50% funding.
Now CPS faces balloon payments to catch up, all while crying poor. The reality is CPS has created their own poverty through convoluted spending priorities. For example in just the past 10 years, spending on private contracts has increased 122% to $1.4 billion dollars. They continue to open new charters while closing neighborhood schools due to “lack of funds.” But the Board signed a “no-bid” contract to SUPES Academy, an educational consulting firm that had employed former schools CEO Barbara Byrd Bennet, which alone cost $20 million. Bennet and CPS are now under federal investigation for this.
Waste and corruption run rampant. CPS borrowed money from investment banks, signing “swaps contracts” to do so. Now the interest rate on these “swaps” has turned toxic, but CPS refuses to renegotiate toxic swaps, even though they have cost over $500 million and will continue to cost the school system as much as $450 million more.
Mayor Rahm actively seeks to reduce pension benefits, claiming the need for “shared sacrifice”. But when questioned on renegotiating toxic swap deals (like Los Angeles City Council did last August), he says, “There’s a thing called a contract.” Pension benefits are guaranteed by the Illinois state constitution—is this not also a contractual obligation?
CPS’ appointed school board dares not call for additional revenue—everyone is expected to march in lockstep with the mayor.
CPS was hoping that the Illinois Supreme Court would uphold the benefit reduction for Teacher Retirement System, but that did not happen. Now the only option left is to raise revenue. The Chicago Teachers Union has consistently promoted several new revenue sources and cost saving measures. Perhaps it’s time for lawmakers to give them serious consideration.