August 25, 2009
Today the Civic Federation released its analysis of Chicago Public Schools’ proposed FY2010 budget. On page 61 of the analysis we discuss the District’s dramatically escalating annual pension contribution costs. The District’s statutorily-required pension contribution was $177.8 million in FY2009. In FY2010 it will jump to $307.5 million, a one-year increase of $129.7 million or 72.9%.
But this is just the beginning.
The outlying years paint a grim picture for the District’s finances. In FY2011, just one year from now, the District’s annual pension contribution will total $536.3 million, an increase of $358.5 million or 201.6% over the FY2009 contribution amount. What’s most surprising about the recent actuarial projections for the District’s pension fund is not the steep employer contribution increase in the immediate years, it is the fact that this increase does not level off in the outlying years. Looking forward to FY2027, the District’s annual contribution jumps at an alarming rate each and every year, rising by at least $18 million and up to nearly $30 million, until FY2027.
This staggering increase in CPS’s annual pension contribution is due in large part to a substantial decline in the value of the investments held by the fund. Other contributing factors that may be leading to the Fund’s overall failing financial health include decreased state funding for annual pension contributions and contractually-required increases to teacher salaries. These factors, combined with a legislatively-required ramp up of the District’s pension contribution to ensure that the Chicago Teachers Pension Fund is 90% by FY2045, have created a perfect storm that has led to a pension funding crisis for Chicago Public Schools and its employees.
The Civic Federation calls on the Illinois General Assembly to rectify this situation. Just like the recent reform for the Chicago Transit Authority employee pension system, the General Assembly must take action to legislate an affordable pension system that fairly compensates the teachers who serve Chicago’s students. The Civic Federation strongly urges the General Assembly to undertake both funding and governance reforms for the Chicago Teachers Fund to help prevent future funding crises from arising and protect the retirement funds for Chicago’s teachers.