Brown: State might have to fix city teacher pension problem
By Mark Brown email@example.com July 19, 2013 11:32PM
Updated: August 22, 2013 6:52AM
The Chicago Teachers Union doesn’t want to talk about cutting retirement benefits unless Chicago Public Schools agrees to increase revenues (translation: raise taxes) to help fix an ailing teacher pension fund.
At Chicago Public Schools, nobody wants to talk about raising taxes while the union won’t agree to reductions in pension benefits.
That’s the crux of the standoff that so far has prevented the two sides from negotiating a solution to a pension funding crisis that threatens to further cripple the school system.
“That was the stumbling block,” CTU vice president Jesse Sharkey conceded Friday after another dark day at CPS with layoff notices going out to more than 2,100 school employees, half of them teachers.
The bad news for city teachers is that pretty much every union representing state workers started from the same bargaining position only to later drop the demand as the pressure mounted for a pension solution.
CPS officials are intent on passing a pension-reform bill patterned after whatever legislation state lawmakers eventually agree upon to fix the state pension systems.
They expect that to include some combination of increasing the retirement age and employee pension contributions, while capping the salary on which a pension could be based and reducing annual cost of living adjustments. The resulting savings could be significant for CPS — as much as $250 million in the first year.
The union hasn’t identified what cuts, if any, it would be willing to accept.
“We’re not negotiating against ourselves,” said Sharkey, criticizing CPS for trying to solve its financial problems on the backs of retirees.
It’s true that the workers and retirees would be forced to bear the burden of making the pension system solvent, but that’s what is happening to the other government workers as well.
Although each pension fund has its own history and special circumstances, it’s difficult to imagine a scenario under which Chicago teachers could convince lawmakers that their pension fund is sufficiently unique to warrant a significantly different approach.
The Chicago teachers pension system is in its current crisis in part because for the past three years CPS was allowed to pay into the fund far less than what it owed — the result of an earlier attempt to avoid the day of reckoning.
Next year, the pension payment is scheduled to jump to about $600 million from its current $200 million, which is helping to drive the budget cuts that led to Friday’s layoffs.
But Sharkey argues there’s another factor at play — and another solution.
“I think it’s time to address the fact that our public school system is insufficiently funded,” Sharkey said.
CPS could pursue a number of options for added revenue, but higher property taxes should probably be “part of the picture,” Sharkey said. He noted that the property tax rate paid by city taxpayers is now among the very lowest in Cook County.
CPS sources contend a union proposal to increase property taxes to fix the pension-funding shortfall would result in the largest tax hike in the city’s history, which doesn’t much interest them. “Not do-able,” they say.
While I don’t see Mayor Rahm Emanuel increasing property taxes to pay for teacher pensions, it’s possible he could agree to a property tax increase to support the educational mission of the schools. If he had the pension savings, he might be able to sell it. It was notable last month when City Hall reporter Fran Spielman reported the mayor wouldn’t rule out lifting the school property tax cap.
Teachers obviously would be a major beneficiary of such a move because it’s their members who are losing their jobs and their classrooms that are being disrupted by the cuts.
Another factor in the teacher pension negotiations is a desire by the union to safeguard retiree health care, currently subsidized by the pension fund. That subsidy is quickly becoming inadequate to meet rising health-care costs. This is actually an area where there is some hope the two sides can work together to create a mechanism similar to the CTA Retiree Health Care Trust, established in 2009 in response to that agency’s pension problems.
Legislative leaders so far have prevailed on the Chicago teacher pension combatants to attempt to work things out for themselves.
But eventually, just as in the state pension battle, it’s likely the Legislature will have to impose a solution on the warring parties.