The Chicago Teachers Pension Fund (CTPF) is in a lot of trouble.
GRS, the actuarial firm for CTPF, was asked to determine the outstanding unfunded liability after the infamous pension holiday.
The Fund that was once 100 percent funded in 2000 is now only 46 percent funded after the Chicago Public Schools was allowed to defer its pension contributions to operating costs.
The Fund set a goal to restore its funding ratio back up to 90 percent by 2045 after the Pension Levy was restored in 2017.
But despite the restored pension levy in which the money is no longer diverted to CPS operating costs, CTPF is still only 46 percent funded.
Why is the big question I’ve been asking myself and other trustees.
We finally got the answer at the April 27, 2023 CTPF Board Meeting.
GRS said by 2011 the Chicago Board of Education finally started to contribute what is needed to be 90% funded by 2045. But the Tier 2 state law that was enacted and resulted in reduced pension benefits for CPS employees hired after Jan. 1, 2011, also reduced the required CPS contributions to a fixed amount for 2011, 2012, 2013, to what the legislature thought would be normal costs.
And they pushed back the 90 percent funding goal from 2045 to 2059.
And that’s why the CTPF continues to be woefully funded today despite the restored pension levy.
“Most of the contributions to the fund will come in future years,” the actuarial scientist told the CTPF.
The Teachers Pension Fund is projected to increase its funding ratio by less than 4 percent over the next 15 years.
It’s kind of like telling your kids they may have to pay all your college and mortgage debts when they become adults because you have no intention to.
The Teachers Pension Fund is now 46.8% funded, and it will only increase to 50% in 2037, and then be expected to increase 40% in the final 22 years.
“As a result the funding ratio will remain very low until the very end,” GRS told the CTPF Trustees. “We don’t endorse this, it puts more burden on future taxpayers, and it is less than a sound actuarial contribution in coming years.”
Retired Teacher Trustee Mary Sharon Reilly estimated that unfunded liabilities amounting to $3.2 billion is probably how much was stolen from the Fund.
“The whole thing is absurd,” she said. “It should never have been allowed in the first place, and it’s getting worse.”
She noted that the Teachers Retirement System (TRS) funding ratio is a little lower than the CTPF, but they get all their money from the state, and Chicago does not. That means many school districts can spend more money on the kids and not pensions.
“The Chicago taxpayer will eventually get hit by this,” she said. “So what is the answer? Is there an answer?”
Teacher Trustee Phil Weiss noted that Illinois lost 131,000 people which means less people who contribute to the Pension Fund. He asked if it was realistic to think they will get the money they need to fund the Chicago Teachers Pension Fund.
“That’s more a legal or political question,” the GRS rep said with a nervous laugh.
Retired Trustee Maria J. Rodriguez asked Trustee Reilly if there was a vote to allow CPS to take the Pension Holiday.
Reilly said yes because she was a Trustee at the time the Amendatory Act was passed and it was her understanding that this was what the Chicago Teachers Union wanted.
“We didn’t have much choice in this matter,” Reilly said. “We believed that it would work. How stupid we were.”
CTPF Director Carlton Lenoir said the Chicago Teachers Pension Board of Trustees never voted on the Pension Holiday. He said this after Reilly said Lenoir was around at the time when the horrible teachers pension deal went down.
In fact the last two CTPF Directors hired were around when the Pension Holiday was negotiated. Former Director Charles Burbridge (2015 - 2020) even boasted while he worked at the Teachers Pension Fund that he helped engineer the disastrous pension deal for teachers when he worked under former CPS Chief Paul Vallas, according to one CTPF insider.
Reilly said it was understood that teachers would not get a salary increase if they did not approve the deal to divert CPS pension payments to operating costs. She noted the House of Delegates met only five times during the school year at the time the 1995 Amendatory Act was passed which also took away the teachers bargaining rights (CTU got a law passed to restore its bargaining rights that were taken away by the Amendatory Act in 2021).
“The understanding was teachers would not get a salary increase if they did not approve this,” Reilly said. “We were so naive back then. Remember we didn’t meet too often, we only met 5 times a year. And if we wanted any progress for teachers we had to vote for it. We didn’t realize what it really meant. We were sold a bill of goods. At that time we lost $2 billion, they stole from us. The second time was (former CPS CEO) Ron Huberman in 2010 when he delayed some of our pension funding by another $1.3 billion.”
The Trustees who discussed and asked questions about this problem were Retired Teacher Trustees Maria J. Rodriguez and Mary Sharon Reilly, and Active Teacher Trustee Phil Weiss.
“I have to give kudos to Maria for initiating this,” Retired Teacher Trustee Lois Nelson said.
Trustee Rodriguez, who was the only independent candidate elected, has been asking questions and initiated a forensic audit of the Fund because of its precarious finances. The results of the audit are expected to be released soon.
According to CTPF Director of Communications Michelle Holleman, CTPF lost $3.2 billion in revenue from its employer from 1996 through 2005 and 2011 to 2013 it was deprived of critical revenue and the opportunity to benefit from additional investment returns.
“Lacking stable sources of revenue, CTPF liquidated assets and relied on investment earnings to pay pension obligations,” Holleman wrote in an email. “Decades of concern from CTPF members and a funded ratio dipping below 50% demonstrated the critical need for change.”
“We had a funded ratio in 2000 of about 100% (in 1999 it was $103%),” Reilly said. “I remember our attorney was asking how to give that back to our members. Little did we think. How do we fix this? It’s the billion dollar question.”