Tuesday, September 3, 2013

Does this sound familiar? Chicago Teachers' Pension Fund Was Chronically Underfunded


Chicago Teachers' Pension Fund cites Center for Tax and Budget Accountability
(CTBA) report on Chronic Underfunding  


“The Chicago Teachers' Pension Fund, which manages a $9.5 billion pension fund
serving around 59,000 active and retired educators and provides pension and
health insurance benefits to more than 25,000 beneficiaries, cited CTBA's recent
analysis of the proposed FY2014 Chicago public schools budget in a press release
this morning that might interest you. Here is what they had to say:
“‘TPF Supports Conclusion of Bipartisan Think Tank CTBA: Tax Levy Diversion of    
1990s, Chronic Underfunding of 2000s Created CTPF Financial Difficulty   

“CHICAGO, Sept. 3, 2013 /PRNewswire/ -- The financial challenges facing the    
Chicago Teachers' Pension Fund can be attributed to nearly 20 years of    
short-sighted decisions involving diverted tax levies and General Assembly-
approved skipped or reduced contributions by Chicago Public Schools --
not from benefits now paid to retired teachers or promised to future ones.

“That's one conclusion of a report issued late last week by the Center for Tax
and Budget Accountability, a nonprofit, independent research and advocacy
think tank committed to ensuring that tax, spending and economic policies
are fair. Founded in 2000, the organization is known for its objective analysis   
of budget-related issues to improve the fiscal health of the State of Illinois. 
Its bipartisan board of directors includes a mix of institutional money managers,
academics, union representatives and business executives.  

“In its August report, ‘Analysis of Proposed FY2014 Chicago Public Schools Budget,’
CTBA noted that CPS made reduced payments or skipped payments to CTPF which
resulted in chronic underfunding during the past two decades. 


“The CTBA report concluded that had CPS not diverted the property tax revenue    
that - prior to 1995 - went directly to CTPF, the pension plan would have been
nearly 80 percent funded in fiscal year 2011.  

“CTBA said that while the plan was 96 percent funded in 2002, years of neglect
by CPS and the General Assembly had left it only about 60 percent funded in 2011. 
The plan was 53.9 percent funded at the end of its 2012 fiscal year. 

“While CPS blames the lack of pension reform in Springfield as the cause of its   
budget woes, the report said that the district has been well aware of the impending
increases in pension payments. Further, CTBA said that, while it's the responsibility
of the employer to pay the annual interest cost of the unfunded liability,
CPS' only action has been an attempt to extend its pension holiday for two
more years - a move that would have further eroded CTPF's funding status.

“CTBA also questioned CPS claims that the General Assembly's failure to enact    
pension reform puts the Chicago school district in tough financial straits. 
None of the major bills under consideration would have altered CPS pension
obligation, the report noted.

“‘We're pleased to see a bipartisan group such as the CTBA study and report
the real issues that led to our plan's financial condition,’ said CTPF Board President
Jay Rehak.  ‘That CTBA concluded our financial challenges relate to chronic
underfunding comes as no surprise to us.

“‘When the Board of Education convinced Illinois lawmakers to divert the fund's    
dedicated revenue into the CPS operating budget in 1995, the underfunding began
- and today it continues.  Today, CPS owes the plan $8 billion plus $640 million
per year in interest alone - the painful result of years of neglect.’”

Click here for full analysis from CTBA on the proposed 2014 CPS budget.

                                                                  *****

Approximately $15 billion was stolen from the Teachers Retirement System of Illinois. This amount does not include the possible investment income that would have been earned.

Looking at the differences between what was received and what should have been paid is especially significant by decades:
FY 1970-1979

Actuarial Requirement -- $1,741,648,000 Actual Payment -- $1,144,593,000 Not Paid and Owed -- $597,055,000

FY 1980-1989

Actuarial Requirement -- $3,938,171,000 Actual Payment -- $2,191,340,000 Not Paid and Owed -- $1,746,831,000

FY 1990-1999

Actuarial Requirement -- $9,221,060,000 Actual Payment -- $6,779,300,268 Not Paid and Owed -- $2,441,760,000

FY 2000-2009

Actuarial Requirement -- $15,887,886,000 Actual Payment -$9,579,881,000 Not Paid and Owed -- $6,308,005,000

FY 2010-2014

Actuarial Requirement -- $16,792,765,000 Actual Payment -- $13,124,345,000 Not Paid and Owed -- $3,668,420,000

Not Paid to the Teachers’ Retirement System by the State of Illinois: $14,762,071,000.

Source for information on TRS: Bob Lyons, TRS Trustee

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