CTPF Pays $4 Million to Recoup $1 Million
The Chicago Teachers Pension Fund (CTPF) paid its lawyers almost $4 million to collect a little over $1 million the charter schools owed to the Fund.
This rather extraordinary revelation was discussed at the August 27, 2024 Finance and Audit Committee meeting. This committee, which is chaired by Trustee Mary Sharon Reilly and includes Jacquelyn Price Ward, Paula Barajas, Tammie Vinson and Quentin Washington, oversees management of the fund and its operations. This includes making sure payments from Chicago Public Schools and charter schools are on time.
The Fund said it paid $3,735,538 to complete 50 audits and 39 of these audits were issued to the charter schools concerning any problems paying their employee pension contributions. The total contributions received as a result of these audits were $1,638,000.
There was silence until one Trustee cried out that the emperor had no clothes.
"We're spending all this money on the audits, it's good,” Trustee Maria J. Rodriguez said. “So the balance, I mean, come on let's face it, we're spending all this money on the audits, it's good we got a million dollars, it's great, but the cost to get that million was three times as much. So what do we do about this so that doesn't happen."
I mean, come on let's face it, we're spending all this money on the audits, it's good we got a million dollars, it's great, but the cost to get that million was three times as much. So what do we do about this so that doesn't happen."
While Trustee Rodriguez asked the question, laughter started to break out among some of the trustees.
The Fund said they are starting to move more of their audits internally so that their staff within the department will take on more audits to control the costs of high cost outside vendors. CTPF Director Carlton Lenoir said in addition the Fund plans to move from a full 100 percent audit to a sample audit (which means less audits).
“So the sampling in addition to the auditing in house is going to bring those dollars down dramatically,” Lenoir said.
(Former CPS Chief Arne Duncan used this word ‘dramatic’ constantly to explain how his turnaround model to close public schools and fire teachers and replace them with charter schools would ‘dramatically’ improve CPS. The Turnaround Model that went national when he became President Barack Obama’s Education Secretary was eventually discredited.)
“Why didn't we do this before?” Rodriguez asked.
Lenoir said before there were only nine charters and now there are over a hundred, so that's why they had to get outside auditors to assist. Now they're trying to bring that back in because of the expense.
“We talked earlier during my term about bringing the auditing back into CTPF,” Trustee Price Ward said. “I think we can do it better than anyone else ... I think that a lot of effort has to be done because you know this is not cost effective and it's almost 4 times (more expensive) to get one million dollars.”
I think that a lot of effort has to be done because you know this is not cost effective and it's almost 4 times (more expensive) to get one million dollars.”
Lenor said when they do these audits they don't know what they're going to find. But the statutes give them the authority and they want to make sure they don't have any members who are out there serving the students and not getting the service credit so the audits are necessary to make sure everyone is covered by the plan.
“We're gonna do it smarter,” the director said emphatically.
How will this work?
The Fund Director said they will hire more staff, they already filled vacancies, there will be more training, they are contracting with an auditor and brought in a second auditor and they cut their budget by $100k. He said they started to audit Learn Charter and then they went in house and redid everything in house with internal sources.
Trustee Quentin Washington jumped in to back up the Director.
“Some things you can afford to do and some things you can't afford to do,” he said. “Because we had under and over reported members (and) because we will pay later.”
Trustee Rodriguez said they may be doing better and catching up, but they're still so far behind. “It’s no party celebration.”
The Trustees discussed other charter schools that were delinquent in making their pension payments. The Committee approved an additional 90 days for Perspectives Charter School to make its payments that they said was a result of the Fund not properly monitoring the charter school. The Fund said it set up a new technical system to avoid these mistakes in the future.
Trustee Price Ward asked about Urban Prep which is challenging CPS decision to close the charter school because of financial and sex abuse problems. CPS can close Urban Prep because the charter schools are not a part of the school closing moratorium that is in place until 2027, a trustee stated.
“They're using our money,” Trustee Reilly said. “How long can we be settling? It keeps dragging on. They're buying time to not pay off, and we're losing money we could be investing. We're losing money for our members. Their attorneys (are) playing back and forth. It's a ping pong game.”
CTPF Chief Legal Officer Daniel Hurtado said it’s difficult when a school refuses to cooperate and disputes how much is in arrears. Maybe they could breathe a little more fire, but they have made some progress, he said. Now CPS will cooperate. CPS is now agreeing to hold back the charter money that it owes in delinquent payments to the Fund. (This was challenged by CPS Trustee Tanya Woods at earlier board meetings who wanted more leeway for the charters).
“Pension contributions that are delinquent (we) put pressure on charters to pay it,” Hurtado told the committee. “CPS has now agreed to revoke that provision money and put pressure on charter schools to cooperate with us or CPS will withhold that money from the charter schools, and give it to CTPF. And we've been seeing some results where some of these schools are starting to work with us.”
This reminded me of the deal the union made with the ruling forces to destroy the Pension Fund. Mayor Richard Daley and his henchman Paul Vallas got the teachers union to agree to divert its pension payments in order to pay for operations such as teacher raises. Eventually CPS got away with not paying up to a billion dollars to the pension and now it’s only 47 percent funded and they whacked the new teachers by giving them a far worse pension via the Tier 2.
Trustee Reilly said she remembered when YCCS or Youth Connection Charter Schools was established under Mayor Daley in 1997 which is the only charter school focused on serving the dropouts and other at-risk students at 17 campuses. She said his CPS Schools Chief Paul Vallas (who ran in the last Mayor race and lost) thought they could dump all these programs into YCSS so they wouldn’t have to pay their contributions. Some charters that have closed did not pay their pension obligations.
The attack on public pensions seems to mirror the corporate world where companies cut their workers' pensions and forced them to invest individually in the market, while they diverted their pension funds into funding their operations, while fattening the CEO and other high up executives’ compensation packages.
Something the Mafia was notorious for doing but now appears to have gone mainstream.