Master the CPS Pension Crisis in 5 Easy Steps

Playing Teacher (Prang Co. lithograph), Courtesy Library of Congress.

Should we sympathize with the Chicago Teachers Union (CTU)?  On Friday, the teachers walked off the job and took to the streets, ostensibly on a crusade, not principally for their own benefit, but for the sake of increasing education funding more generally.  Union boss Karen Lewis, looking jaunty, proclaimed, ‘We’re dying a death of a 1,000 cuts,’ implying that teachers were among Governor Bruce Rauner’s victims, and that all would be well if only the union could squeeze more money out of the state and its taxpayers.

Yet, if a report of the Illinois Policy Institute is correct, the financial woes of the Chicago school system and its teachers are largely internal and have been brought on by themselves.  The Chicago Teachers Union has been complicit in the ruin of the pension system established to provide retirement security, allowing money to be diverted from the fund while accepting overly generous increases in working teachers’ salaries.  Meanwhile, the Chicago Public Schools (CPS) leadership has so mismanaged its finances that a pension system that was fully funded in 1999 now represents a $9.5 billion liability, despite the fact that, over the same period, public funding for CPS has increased at 150% of the rate of inflation, when calculated on a per-student basis.

The IPI’s report, published in late 2015, analyzes the funding of teachers’ pay and pensions over several decades.  It explains the arrangements that have created the pension crisis while debunking some leading claims about where the solution lies.

1. Pension pick-ups:  In 1981, when Ruth Love was CPS superintendent, the district and teachers agreed that the district would pay the part of the teachers’ pension contributions.  Instead of pension contributions coming out of teachers’ pay, a part of their share would come out of the schools’ general operating funds.  These pension “pick-ups,” which continue today, amount to a loss of operating revenue of $1.266 billion over the last decade.  Meanwhile, the pick-up has not been counted as part of the CPS’s mandated contribution to the pension fund.

2. Pension holidays: On two occasions, in 1995 and again in 2010, the General Assembly allowed the CPS to forego paying in to the teachers’ pension fund as mandated.  The first of these ‘pension holidays’ lasted from 1995 to 2006.  During this period, the school system diverted all the money that should have gone for pensions (amounting to $1.5 billion) into its general operating funds.  During the second pension holiday, from 2011 to 2013, the CPS diverted another $1.3 billion from the pension fund.

3. Colossally bad management: While the public is constantly being told that the schools’ problems stem from under-funding, the IPI claims that ‘Tax-payer provided revenues for the Chicago Public Schools have more than doubled‘ between 1997 and 2014, rising from $2.6 to $5.3 billion annually.  Meanwhile, the size of the student population has dropped by about 7 percent, from a high of roughly 383,000 students in 2003 to 355,634 students in 2014.  In 2014, the CPS received revenue of $15,011 for each child enrolled.

4. Unwise salary increases: The lifetime compensation of CPS teachers is the highest in the nation, relative to other major urban school systems.  A beginning teacher with a BA earns $51,092 a year.  Salaries increase rapidly during the first decade of service, so that teachers with 10-14 years of service earn an average pay of over $84,000 per year.  The salary structure increases the pension benefits of teachers earlier in their careers, enhancing the payout to younger ‘retirees.’  In 2014, over 72% of teachers in the Chicago schools had less than 14 years’ seniority.  The pension fund’s pool of beneficiaries is increasing, while the number of teachers paying into it is declining, another factor pushing it toward insolvency.

5. Reckless borrowing: It’s hard to escape concluding that the Chicago schools have been terribly mismanaged. Between 1998 and 2014, despite enjoying many years of pension ‘holidays,’ the CPS sank ever more deeply into the red, borrowing instead of confronting its true fiscal constraints.  CPS indebtedness totaled $6.2 billion in 2014.  Its bond offerings have been floated at ever higher rates of interest, even as its bond rating tanks.  Today, nearly eight percent of the CPS budget goes right to debt payments.  Another 68 percent goes to compensation costs, leaving just 24 percent for all the other expenses of running the schools.

Image: “Playing Teacher”
(1890 Prang Company lithograph)
from this source.

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The Teachers’ Example

Winslow Homer, The Noon Recess (Courtesy Library of Congress)

Today, children enrolled in the Chicago Public Schools are learning to do without their teachers.  The teachers are not in the schools today because they, as union members, decided to teach us all a lesson by not showing up to do their jobs.  Instead of teaching, they chose today, April Fools Day, to stage what they ironically refer to as a Day of Action.  Yes, this day, when they do not show up to do their jobs.

No doubt the teachers have legitimate grievances, but so do taxpayers.  The teachers want the school district and the state government to bend heaven and earth to give them an agreeable contract.  The school district is teetering on bankruptcy.  Teachers’ unfunded pensions are an underlying cause.  The teachers deserve pensions and rightly fault the politicians for failing to invest in and protect the pension funds, as obligated.  But the funds that should be there simply aren’t.

Taxation is increasing to help cover ballooning pension obligations.   Meanwhile, the school budget is being cut.  Education in the present is being sacrificed to preserve the benefits of retired and retiring teachers.  The teachers’ union doesn’t speak to this issue.  Yet, to all appearances, Peter is being robbed in order to pay Paul.  The teachers are going to squeeze Peter and everyone around him, hoping that enough money can miraculously be conjured to go around.

The Day of Action is a farce, because it does not solve the problem.  It doesn’t bring antagonistic parties any closer to agreeing on what to do about a desperate lack of money.  Instead it diminishes the public’s sympathy and respect for teachers and the difficult work they do.  How not to behave: this is all Chicago teachers have taught on this April Fools.

Big Bill Haywood

Union leaders Adolf Lessig and Big Bill Haywood (Courtesy Library of Congress via Flickr Commons)

There’s something raw about the history of the 1910s, a period of depression and unrest, when Americans were engaged in an anxious quest for alternatives.  It was a period of activism, when anti-capitalist sentiment and true human suffering allowed organized labor, still in its infancy, to make significant strides.  At the center of these trends were redoubtable labor leaders like Big Bill Haywood (right), shown here in 1913 with his fellow activist Adolph Lessig.

William Dudley Haywood (1869-1928) was one tough customer, a sometime socialist who helped found the radical labor organization known as the International Workers of the World (IWW), or ‘Wobblies.’  Founded in 1905, the IWW was radical in seeking to organize workers of all types and nationalities, even unskilled workers, in contrast to the other, more exclusive, ‘trade’ unions of the day.

Haywood was born in Utah and by age 15 was working in western copper mines.  By 1900, he had an invalid wife and two children and had gotten involved in the labor movement, skyrocketing to the top of the Western Federation of Miners, a militant union that in 1903 pitted itself against the Colorado mining industry and the state’s government in a bitter strike lasting nearly three years.

Aligned for a time with the fledgling Socialist Party, Haywood ultimately fell out with that group over strategy.  By 1910, his chief interest lay in directly mobilizing masses of people in IWW-led strikes and protests, believing this the surest path to structural change.Big Bill Haywood & followers in Paterson, NJ (Courtesy Library of Congress via Flickr Commons)

Haywood was involved, for instance, in the famous 1912 textile strike in Lawrence, Massachusetts, also known as the Bread and Roses strike, whose centennial is now being commemorated.  Lawrence’s textile workers included large numbers of women and teens, and many persons of foreign birth.  Their protests aroused national sympathy, particularly when children of striking parents were sent to New York City for safekeeping.  The strike ended after three months, with workers gaining many concessions to their demands.

The 1912 textile strike in Lawrence (Courtesy of the Library of Congress via Flickr Commons)

Haywood’s star began to set during WWI, when the IWW’s on-going militancy and vision of international solidarity jarred with wartime industrial demands and an accompanying tide of national feeling.  In 1917, Haywood and 100 other IWW officials were arrested on charges of wartime sedition, found guilty, and sentenced to lengthy prison terms.  Freed on bail while appealing conviction, Haywood fled to the Soviet Union, where he entered on an ignominious final chapter and died of alcoholism and diabetes a decade later.

His ashes are interred partly in a wall of the Kremlin, while others were sent back to Chicago to be buried in Waldheim Cemetery near the remains of the Haymarket martyrs.

Images: (top to bottom) Adolph Lessig and Big Bill Haywood, from this source;
Haywood and followers in Paterson, NJ (1913), from this source;
and a scene from
the Lawrence textile strike (1912), from this source.

RELATED ARTICLES:
May Day Meditations, Our Polity.
The Strike That Shook America 100 Years Ago, History.com.