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Are Chicago schools learning the right lesson from pension crisis?

By   /   August 23, 2013  /   No Comments

By Benjamin Yount | Illinois Watchdog

SPRINGFIELD — Chicago’s public schools are finally having to pay a more accurate pension bill, but some Illinois lawmakers

RIP, RIP, RIP: A New Civic Federation report rips the Chicago schools budget.

RIP, RIP, RIP: A New Civic Federation report rips the Chicago schools budget.

wonder if school leaders are learning their lesson.

Chicago’s schools are tapping into previously off-limits reserve funds to patch a nearly $1 billion dollar budget gap this year.

CPS is going to spend $6.6 billion, but only has $5.5 billion on hand to pay its bills. That budget gap is projected to get worse next year, and the year after that, and all the way to 2020 according to a new report from the Chicago-based Civic Federation.

Why? Pensions.

The Civic Federation, a non-partisan group that advocates for better and smarter government, rips Chicago’s schools for not having a plan to deal with an explosion in pension costs.

“CPS cannot afford its existing pension system,” the Civic Federation report states. “The $404 million funding cliff created by the contribution holiday has damaged the already unstable fiscal health of CPS.”

Chicago schools must find $404 million more for pensions this year because CPS has paid only a fraction of its true pension costs for the past three years.

Chicago schools shelled out pension payments of $187 million in 2011, $192 million in 2012 and $196 million last year. This year the payment skyrockets to $600 million.

Illinois lawmakers were asked to extend the pension payment holiday, but quickly said no back in May.

State Rep. Will Davis, D-Homewood, wrote Illinois’ education budget. He said Chicago schools are likely to ask again for a pension holiday.

“I wouldn’t say that we wouldn’t consider it,” Davis said. “An issue of that magnitude needs a little time. You need to work it a little

BE HONEST: Davis wants real information from CPS before the state will help.

BE HONEST: Davis wants real information from CPS before the state will help.

bit. I don’t see why it wouldn’t come back in (October’s) veto session.”

But Davis said Chicago schools must do more than just ask state lawmakers for a pension bailout.

“At some point they gotta say ‘This is what we want, these are our reforms’,” Davis said. “At some point CPS has to have an honest conversation about where they are, without doing anything else, and then let’s work on the other things that they want to do.”

David Miranda, a spokesman for Chicago’s schools, said the district has always been honest with state lawmakers about what it needs.

“We will continue to rigorously push for pension reform as we did last session,” Miranda said.

CPS wants an overhaul of its pension system, similar to the failed plan in Springfield that would have imposed cost of living adjustment changes, a higher retirement age, and had teachers pay more for their own retirement.

Davis said CPS needs to realize the state is going to ask all schools, including those in Chicago, to pay more of their own costs in the next few years.

State Rep. Jeanne Ives, R-Wheaton, said if Chicago schools are looking for pension tweaks, the district is not learning the right lesson.

“Defined benefit plans are unsustainable,” Ives said Friday.

Ives is one of a handful of lawmakers that wants to end Illinois’ five defined benefit pension plans

DETROIT? Ives says without big reforms, Chicago is headed for bankruptcy.

DETROIT? Ives says without big reforms, Chicago is headed for bankruptcy.

and replace them with a 401k style retirement plan.

“We have to have big (pension) reforms, or Chicago will be the next Detroit,” Ives said.

She also noted some people understand that, and are looking to act.

“Kudos to Mayor (Rahm) Emaunel,” Ives said of Chicago’s Democratic leader. “He is right to say delay is not a strategy.”

Contact Benjamin Yount at Ben@IllinoisWatchdog.org and fund him on Twitter @BenYount.

 

 

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