CTU president Karen Lewis calls employee-pension contribution issue “strike-worthy”
The president of the Chicago Teachers Union defied the school board to require teachers to pay more of their own retirement costs.
Karen Lewis, president of the Chicago Teachers Union, or CTU, said asking Chicago teachers to contribute their own money toward their retirements is “strike-worthy.”
However, this contribution arrangement is the standard for nearly every other worker, government and private-sector employee alike. Retirement savings come from three components: employee contributions, employer contributions and investment returns.
But CTU officials think Chicago teachers should be the exception to that rule.
Chicago teachers are supposed to chip in 9 percent of their salaries toward their retirement savings each pay period. But the school district – and by extension, taxpayers – pays the majority of employees’ pension contributions. According to the Chicago Public Schools, or CPS, fiscal year 2015 budget:
“Employees also are required by statute to contribute 9 percent of their salary to pensions (called the ‘employee contribution’). However, CPS pays 7 percent of the 9 percent for a total of $134 million budgeted in FY15 for participants in CTPF. Non-teacher employees are part of a separate municipal pension system. CPS also pays 7 percent of the 8.5 percent employee contribution for these employees, at a cost of $40 million in FY15.”
Requiring CPS teachers and non-teacher employees to cover the employee portion of their pension contributions would save CPS $174 million a year. And that’s just what the Chicago Board of Education has proposed.
But the CTU opposes that proposal, arguing that the pickups were negotiated in the early 1980s as a substitute for a salary increase. According to the Chicago Sun-Times, “The union said CPS agreed in 1981 to pay for 7 percent of the 9 percent of each CTU member’s pension contribution in lieu of a raise the board said it couldn’t afford at that time.”
But of the nearly 30,000 CPS employees today, only about 300 worked for the district during that contract negotiation. That means only 1 percent of current CPS employees were actually there when the agreement was signed.
The teachers benefiting from the negotiation have done nothing wrong. But all CPS employees need to realize their employer is on the brink of financial collapse.
CPS faces a budget deficit of over $1 billion. Moody’s Investors Service and Fitch Ratings have both downgraded CPS’s credit, dropping its rating to junk. And recently, when CPS issued more bonds, it paid a steep penalty compared with similarly rated bonds.
Ending teacher pickups is a simple, responsible way for CPS to save $174 million annually. It’s not out of line to ask employees to pay their share of the costs associated with their own retirement benefits. That’s the standard across most industries, public and private. And the pension benefits for CPS employees are generous: Employees can retire as early as age 55 with only 20 years of service, or they can choose to work longer to reach the maximum pension benefit, which equals 75 percent of their final average salary, with automatic increases every year for life.
A $174 million reduction in CPS spending would only make a small dent in CPS’s $1.1 billion budget deficit. But it is a good example of a sensible reform than could save taxpayers real money and help modernize an outdated retirement system.