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1. When the agreements were written, it was assumed that Chicago's population would continue to increase based on past decades. They were wrong.
2. Past politicians neglected putting money into the system. It's kind of like if you don't pay your mortgage for a year, spend that money on dumb stuff, then have to pay 12mo worth of mortgage in a large chunk. It will be nearly impossible to accomplish.
I feel sorry for some pensioners, but others I do not. I'm sure there are many people who were given outrageously high salaries and are now collecting over $100K a year by simply driving a CTA bus.
Agreed. This is why I hate pensions. Just stop worrying about the Illinois pension debt cause there's no mathematical way they can or will be paid back so why lose sleep over it as taxpayers. The only options are 1. Bankruptcy 2. Constitutional amendment to reduce them once people realize we're at bankruptcy 3. Taxing pensions and funneling 100% of proceeds into future pension benefits to create a compounding reduction effect. For outta staters just call it an "admin fee".
When will the music stop? Normal interest rates will rise to 7-8% in about 2-3 years and Illinois with it's junk status will be at 10%+ and we can't afford to borrow money to pay past due bills at that rate so that's when $%^&@ will hit the fan.
And 3. The teachers' representatives for putting the short term glitz of bigger raises ahead of bargaining for properly funded pensions. In other words, they put that first component (way) ahead of the third, to apply the teachings of jackmccullough. So the pain of fixing it should be allocated evenly, IMHO.
By refusing to make necessary, and often, any, pension contributions, the taxpayers of Chicago and Illinois (other also underwater pension plans), both Chicago and Illinois may be on the path towards bankruptcy. It's hard to imagine how bankruptcy won't involve some combination of tax increases AND service cuts or fees for services.
Chicago and Illinois likely can accomplish nothing, at least outside of bankruptcy, regarding its state and local pension plan obligations until its Constitution is amended, as the Illinois Constitution protects public pension plans to a much greater extent than either in Michigan and certainly other states.
<<Michigan, for example, has a constitutional provision that protects benefits accrued to date while Illinois’ constitution says accrued and future retirement benefits are protected. These kinds of specific protections make it impossible (barring extreme circumstances) to change an employee’s retirement benefit. This rigidity is why unfunded pension liabilities in these states (Illinois in particular) are so alarming – because the law essentially prohibits the legislature to making any changes that could decrease that liability. The law only allows for changes to future employees, whose benefits are of course not included in that unfunded liability.>>
Here's a key factoid about the Chicago Teachers Pension Fund from a teacher's perspective:
<<21 years: The length of time a new, 25-year-old Chicago teacher must remain teaching before her pension will finally be worth more than her own contributions. The vast majority of teachers will leave before then. Chicago teachers are in a different pension plan than other Illinois teachers, but these numbers are comparable to the state system.>>
For those who don't understand why teachers earn so little from their pension contributions, here's the explanation:
<<These formulas provide only meager benefits to teachers with less than 20 or 30 years of experience. These teachers will earn benefits worth less than the value of their employer’s contribution, and, in fact, many will get $0 in retirement contributions from their employer.
On the other end, a small fraction of teachers will get considerably more than this. Teachers who stay for 20 or 30 years in their state will qualify for pensions worth far more than the actual contributions made on their behalf, and their pensions will afford them a comfortable retirement.
But most teachers lose out from this arrangement. The average is deceiving.>>
My hunch is that other states and even Illinois school districts may be diverting the best teaching candidates away from Chicago, partially by emphasizing higher salaries in relation to cost of living, better working conditions, AND better pension plans.
<<Statewide, the schools serving the highest concentration of low-income students receive only half of the state average per-pupil expenditure on teacher pensions. And, around 60 percent of those low-income, poorly funded schools are in Chicago. In other words, the teacher pension system is compounding Illinois’ funding issues.
Teacher pension systems compound inequitable school funding for a variety of reasons. In Illinois, the biggest problem is that Chicago operates its own teacher pension system separate and apart from the state fund. In other words, Chicago, which has the highest concentrations of high-poverty schools, receives practically no pension funding from the state. And with fewer resources and a smaller tax base at its disposal, Chicago typically contributes to the fund at an even lower rate than the state. The result is a wide disparity in school funding becomes even wider after accounting for pension spending.
Other factors also contribute to the problem. For example, higher-poverty schools tend to have higher student-teacher ratios. They also have more new teachers (with lower salaries). Many of these younger teachers will leave before qualifying for a pension, and therefore will forfeit their state or district contributions.>>
It's sad that many posters in this forum apparently view Chicago's teachers as the enemy. This article explains how Chicago residents are being short-changed by the State of Illinois.
By refusing to make necessary, and often, any, pension contributions, the taxpayers of Chicago and Illinois (other also underwater pension plans), both Chicago and Illinois may be on the path towards bankruptcy. It's hard to imagine how bankruptcy won't involve some combination of tax increases AND service cuts or fees for services.
Chicago and Illinois likely can accomplish nothing, at least outside of bankruptcy, regarding its state and local pension plan obligations until its Constitution is amended, as the Illinois Constitution protects public pension plans to a much greater extent than either in Michigan and certainly other states.
<<Michigan, for example, has a constitutional provision that protects benefits accrued to date while Illinois’ constitution says accrued and future retirement benefits are protected. These kinds of specific protections make it impossible (barring extreme circumstances) to change an employee’s retirement benefit. This rigidity is why unfunded pension liabilities in these states (Illinois in particular) are so alarming – because the law essentially prohibits the legislature to making any changes that could decrease that liability. The law only allows for changes to future employees, whose benefits are of course not included in that unfunded liability.>>
Here's a key factoid about the Chicago Teachers Pension Fund from a teacher's perspective:
<<21 years: The length of time a new, 25-year-old Chicago teacher must remain teaching before her pension will finally be worth more than her own contributions. The vast majority of teachers will leave before then. Chicago teachers are in a different pension plan than other Illinois teachers, but these numbers are comparable to the state system.>>
For those who don't understand why teachers earn so little from their pension contributions, here's the explanation:
<<These formulas provide only meager benefits to teachers with less than 20 or 30 years of experience. These teachers will earn benefits worth less than the value of their employer’s contribution, and, in fact, many will get $0 in retirement contributions from their employer.
On the other end, a small fraction of teachers will get considerably more than this. Teachers who stay for 20 or 30 years in their state will qualify for pensions worth far more than the actual contributions made on their behalf, and their pensions will afford them a comfortable retirement.
But most teachers lose out from this arrangement. The average is deceiving.>>
My hunch is that other states and even Illinois school districts may be diverting the best teaching candidates away from Chicago, partially by emphasizing higher salaries in relation to cost of living, better working conditions, AND better pension plans.
<<Statewide, the schools serving the highest concentration of low-income students receive only half of the state average per-pupil expenditure on teacher pensions. And, around 60 percent of those low-income, poorly funded schools are in Chicago. In other words, the teacher pension system is compounding Illinois’ funding issues.
Teacher pension systems compound inequitable school funding for a variety of reasons. In Illinois, the biggest problem is that Chicago operates its own teacher pension system separate and apart from the state fund. In other words, Chicago, which has the highest concentrations of high-poverty schools, receives practically no pension funding from the state. And with fewer resources and a smaller tax base at its disposal, Chicago typically contributes to the fund at an even lower rate than the state. The result is a wide disparity in school funding becomes even wider after accounting for pension spending.
Other factors also contribute to the problem. For example, higher-poverty schools tend to have higher student-teacher ratios. They also have more new teachers (with lower salaries). Many of these younger teachers will leave before qualifying for a pension, and therefore will forfeit their state or district contributions.>>
It's sad that many posters in this forum apparently view Chicago's teachers as the enemy. This article explains how Chicago residents are being short-changed by the State of Illinois.
Why is asking a group to take some rightful responsibility for an impossible situation "making them the enemy?" I don't understand. The CTU was complicit with the CPS in a pension holiday which lasted from 1998-12. They didn't have to allow that to happen. Yet they wanted the raises.
Agreed. This is why I hate pensions. Just stop worrying about the Illinois pension debt cause there's no mathematical way they can or will be paid back so why lose sleep over it as taxpayers. The only options are 1. Bankruptcy 2. Constitutional amendment to reduce them once people realize we're at bankruptcy 3. Taxing pensions and funneling 100% of proceeds into future pension benefits to create a compounding reduction effect. For outta staters just call it an "admin fee".
When will the music stop? Normal interest rates will rise to 7-8% in about 2-3 years and Illinois with it's junk status will be at 10%+ and we can't afford to borrow money to pay past due bills at that rate so that's when $%^&@ will hit the fan.
How about paying them down incrementally and then financing the remainder with pension obligation bonds?
How about paying them down incrementally and then financing the remainder with pension obligation bonds?
Depending on the cost of that it may be worth looking at. All options should be explored.
I don't think anyone's out to screw our teachers. Well, least I'm not. I just think a solution is necessary and it is going to take some pain, and the parties need to share in that because it was created jointly. It's in insult to our intelligence to just blame the city and paint the teachers as mere innocent bystanders.
How about paying them down incrementally and then financing the remainder with pension obligation bonds?
How do you incrementally pay down or finance approx. $250 billion??? Especially when you haven't had a budget surplus in decades??? Face it, it's mathematically impossible and the pensions will never be paid back so might as well not worry about it until Illinois declares bankruptcy. Then most of you can decide whether you want to stay or move outta state. The only impact to the average Joe in Illinois will be cratering home prices depending on if bankruptcy rulings require even higher taxes. I worry about home prices a LOT because I own several investment properties in Chicago but I've come to realize that Chicago isn't going anywhere and it will always be a desirable city with the diversified economy, lake, infrastructure, history etc. which only a few other cities like New York and Boston can offer. So as long as you're in Chicago in a decent neighborhood you're fine. Everywhere else is in Illinois is up in the air...
Let's clarify the "contributions" issue -- the formula for things like normal defined benefit pensions for people who work in traditional trade unions is pretty easy to understand: if you work long enough you get a FIXED amount. For the Teamsters who put in 25 years they'll get $30k a year. They have access to a 401k, which is defined contribution plan, where the more of their earnings that they personally set aside, along with whatever is "matched" by employers, has the potential to grow tax free. Teamster Pensions: What You Need To Know Folks who work in the private sector are also going to get Social Security which is funded by a tax that results in half of the 12.4% showing up on employee paychecks and the other half being paid by employers. The formula is a little complicated but for many people will be something pretty close to $30k a yr, there is a chart that shows how what how your salary impacts your benefits --http://retireby40.org/early-retireme...urity-benefit/
It should be obvious that the paltry 2% that is being "taken out" of paychecks for CTU members is grossly inadequate to cover the more than $70k/yr that the typical recently retired teacher will receive for the rest of their lives.
Quote:
The average pension for a recently retired career teacher is $71,717 ... It’s also more than double the maximum Social Security benefit that private-sector workers who reach full retirement age can receive ($31,700).
It is laughable that folks in the private sector would be "sticking up for their union brothers & sisters" without having a CLUE as to how different the systems really are!
Why is asking a group to take some rightful responsibility for an impossible situation "making them the enemy?" I don't understand. The CTU was complicit with the CPS in a pension holiday which lasted from 1998-12. They didn't have to allow that to happen. Yet they wanted the raises.
I suspect, that the teachers were told, repeatedly, that the pension funds would be made up retroactively.
My firm belief is that politicians should be held accountable at all times for what employees are paid, and AT ALL TIMES, they should fund any promised retirement benefits.
Actually, Chicago and Illinois pale against the actions of the federal government. E.g., the federal government underpays military personnel with promises of good pensions and retirement health benefits (VA), but funds NONE of these future promises at the time the liabilities are incurred.
Of course, at some point the federal government's massive debt level combined with even more massive unfunded liabilities, will put the federal government under massive financial duress, negatively impacting the economy (research "crowding out," stagflation, and double digit mortgages in the 1970s/1980s).
Back in the 1970s and 1980s, the federal government had relatively low levels of debt compared to today and most federal debt was owned by Americans. None of this no longer is true.
When the federal government finally is thrown into a vicious cycle, the impact will magnify the financial shenanigans practiced in the last several decades by political entities such as Illinois and Chicago.
The presumption of the persons blaming the teachers is that they were overpaid and overpromised. That seems a pathetically weak argument when NO contributions were being made to pension plans in several years.
Americans are making the decision that they would rather pay athletes, entertainers, financial managers, corporate executives, etc., massive fortunes, than pay even living wages to teachers.
Obviously, the result will be a drastic drop in the quality level of teachers, likely resulting in large class sizes and poor instruction that provides ever worse educational results. Private schools, boosted by vouchers, will proliferate, but only those serving the wealthy paying large tuitions will provide a quality education. Universal education, a bedrock of American democracy, will cease to exist.
The process already is underway, championed by Republicans nationwide, often with no public hearings.
Those who really believed in public education would let the markets ascertain what compensation was needed to attract quality teachers, and then pay them accordingly. That is not happening.
It should be obvious that the paltry 2% that is being "taken out" of paychecks for CTU members is grossly inadequate to cover the more than $70k/yr that the typical recently retired teacher will receive for the rest of their lives.
Teachers and boards of education across the country negotiated to have salary increases reduced in exchange for the boards of education paying some portion or all of the teacher contributions to pension plans.
Why?
Because it made no difference to the cash flow of the boards of education whether the cash was paid as salary or to the pension plan.
For teachers, however, the difference was that they didn't have to pay federal, state and local taxes on the "pick-up" amount paid by the boards of education. This is no different than the millions, if not tens of millions, contributed by corporations to some individual executives in the form of pre-tax contributions to retirement plans or "Rabbi Trusts."
Those who advocate eliminating the pick-ups, without increasing teacher salaries, are merely advocating for the slashing of teacher compensation. What would these advocates of eliminating the "pick-ups" do if their compensation was cut 7 percent?
Ironically, mandating teacher employee contributions of 9 percent, with an increase of salaries to offset this reduction, now would cost boards of education more money, and teachers should take this deal. Why? Because, as documented in an earlier post, a disproportionate share of all teacher pension contributions in Chicago go to pay for past benefits that were unfunded. The return for active teachers on the pension contributions made on their behalf is paltry. This also is likely why boards of education don't want defined contribution plans (401(k)s), because this would divert pension assets disproportionately to new teachers away from dealing with the unfunded liabilities.
For those who actually believe in quality public education, and teacher-haters do NOT believe in quality public education, the question is how much does quality public education cost, and whether it's a higher priority than the hundreds of billions we spend annually in foreign adventures or sometimes pro sports venues. A quality public education system would pay what it costs to hire and retain quality teachers.
Last edited by WRnative; 03-31-2018 at 08:54 AM..
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