All Illinois taxpayers on the hook for CTU’s 244-sick-day pension sweetener
A provision included in the bargaining agreement reached between Chicago and its teachers union will allow teachers to trade up to 244 unused sick days for pension credits – billable to all Illinois taxpayers.
The Chicago Teachers Union ended an 11-day walkout Oct. 31 with a contract worth at least $627 million – but that doesn’t capture the full cost.
Excluded from Chicago Public Schools’ estimate are the pension costs that will result from new support staff, double-digit pay raises for existing members and a provision that increases teachers’ maximum number of pensionable sick days to 244 from 40.
As part of the new CTU bargaining agreement, teachers can store up to 244 unused sick days to trade for pension credits, which all Illinois taxpayers – not just those in Chicago – are on the hook for.
As Wirepoints points out, a 2017 education funding change saddled state taxpayers with the “normal cost” – or cost of benefits accrued in a given year – for all Chicago Public School pension enrollees. That means newly earned benefits, not counting unfunded liabilities, will be paid by taxpayers across the state, not just the city in which they were earned.
Teachers typically work about 170 days a year, meaning a full 244 unused sick days could bring retirement more than a year early, on top of a sweetened pension.
This change will undoubtedly undermine Chicago teachers’ already unsustainable pension system. With an average retirement age of 55, most CPS teachers contribute less than 2% of their salary toward their own retirements. The average Chicago teacher earns back those contributions only five months into retirement. The remainder of their lifetime pension benefits is largely billed to taxpayers, most of whom must contribute far more and receive far less from their own retirement funds.
CPS pensioners collect annual pensions worth up to 75% of their final career salary. Educators who enrolled in the Chicago Teacher’s Pension Fund prior to 2011 earn a 3% pension increase that compounds every year, meaning within 25 years those pensioners will be collecting double what they received in their first year of retirement.
Some political leaders disingenuously call those automatic raises a “cost-of-living adjustment,” a term typically applied to growth tied to the rate of inflation. The raises have far outpaced inflation.
High-and-rising pension costs have strained CPS teachers’ pension system, commanding a growing share of scarce education dollars and threatening the retirement security of younger teachers. The Chicago Teachers’ Pension Fund’s more than $13 billion in debt is highest among the eight city-related retirement systems. Despite saddling Chicagoans with a property tax burden that ranks among the highest in the nation, the teachers’ pension system is only 45% funded.
Pension experts consider a funding ratio of less than 60% to be “deeply troubled,” while a 40% funding ratio may be a “point of no return.” If the Chicago system’s funding level slides just slightly farther into the red, it might never be able to pay off its debts without structural changes, painful layoffs or service cuts.
One prominent picket sign during the CTU strike read “where are the funds?” The answer: pensions. Despite the state increasing its funding to CPS by $291 million – not the $1 billion erroneously reported by CTU – the pension system’s unsustainable demands consume a growing share of that state funding.
Of course, the new sick day provision is just one way in which the contract will strain the teachers’ pension system. The $62 million in automatic salary increases, on top of $5 million in salary increases for senior-level teachers, will mean higher pension benefits and greater strain on the underfunded system.
The students may be back in school, but the fiscal security that can keep them there remains threatened and taxpayers face greater uncertainty from unaffordable pension costs and the dysfunction that comes with it.