CFL News
September 02, 2011

Not teachers’ fault pensions are underfunded

An op-ed from the executive director of the Chicago Teachers' Pension Fund says teachers are the victims in the pension crisis, not the culprits

Source: Chicago Sun-Times

By Kevin B. Huber

I understand that the public feels angry because they must pay for public pensions when their own retirement savings have been so greatly diminished because of a poor economy.

It’s easy to blame the victim and harder to face the truth. The truth is that assaults on public pension benefits mislead the public and ignore the real problem: employers have knowingly neglected their responsibility to fund pensions for decades.

The average Chicago Teachers’ Pension Fund (CTPF) retiree earns $42,000 per year after investing 28 years of service in the Chicago Public Schools. Yet teachers have become the scapegoat for the Chicago Board of Education and State of Illinois’ financial woes.

The Chicago Public School (CPS) system recently released its budget and must increase taxes to help ease deficits. This action has again ignited cries for “reform” as various organizations decry the cost of Chicago teachers’ retirement benefits.

I cringe when I hear “reform” referring to pensions. Reform means a correction of an abuse. When you correct an abuse, you go after the abuser — not the victim. The abuses in our pension system come from years of underfunding pensions — not from teachers earning modest benefits guaranteed by the Illinois Constitution. Yet the teachers are continually attacked.

Pension fund mechanics are simple and have provided stable retirements for Chicago’s teachers for more than 116 years. CTPF collects revenue, invests it, and distributes it in the form of pensions. Revenue for pensions comes from four sources: teacher contributions, employer contributions, State of Illinois contributions and investment earnings.

Teachers do not contribute to or receive Social Security retirement benefits. Instead, teachers contribute 9 percent of their salary toward retirement. By comparison, Social Security benefits are based upon a 6 percent contribution. While many have complained that teachers’ pensions are too generous, these individuals should recognize that teachers contribute 50 percent more to their retirement than the average Social Security member.

CTPF’s current financial difficulties stem from a lack of employer contributions. When financial crisis struck CPS in 1995 and again in 2010, the Illinois Legislature allowed CPS to redirect money that should have been put aside for pensions into the CPS operating budget. These actions deprived the pension fund of $3 billion and will inevitably cost future taxpayers well over $12 billion. On Aug. 31, CTPF filed a lawsuit against CPS to make certain it fulfill its 2011 obligation.

The State of Illinois also has failed Chicago’s teachers. While the suburban and downstate pension system will receive over $2.5 billion in annual support for 2011, CTPF will receive no state funding.

Various pieces of “reform” legislation have been proposed, but they all fail to recognize the real solution: mandated employer funding. Proposals to reduce benefits are the equivalent of raindrops in Lake Michigan. We must eliminate the illusion that the hard-working middle class, including teachers, caused the financial problems that plague the state and city. Legislators, well-meaning community groups, and the CPS system must face the fact that years of short-term thinking and conscious neglect of the pension fund have led to today’s difficult financial position. The public needs to know the truth. Pensions did not cause this problem, a failure to plan for the future did.

Kevin B. Huber is executive director of the Chicago Teachers’ Pension Fund.