Pension still big issue for Chicago teachers

Fund paying out $1 billion annually. Experts say plan will collapse within a few years.

One of the most vexing problems for Chicago and its teachers went virtually unmentioned during this month’s strike: The pension fund is about to hit a wall.

The Chicago Teachers’ Pension Fund has about $10 billion in assets, but is paying out more than $1 billion in benefits a year — much more than it has been taking in. That has forced it to sell investments, worth hundreds of millions of dollars a year, to pay retired teachers. Experts say the fund could collapse within a few years unless something is done.

“There’s a huge crisis,” said Laurence Msall, president of the Civic Federation, a nonpartisan research organization in Chicago. “The problem does not get easier by waiting. The problem gets bigger, and starts to become an insurmountable obstacle.”

As students returned to the classroom Wednesday following the seven-day strike, both sides found reasons to celebrate. Teachers said the strike sparked an important national conversation about school reform. Union activists said it provided in- spiration for public employee unions that have lost ground nationally. And Mayor Rahm Emanuel secured an extension of Chicago’s school day and empowered principals to hire the teachers they want.

American Federation of Teachers President Randi Weingarten said the strike showed that teachers want a voice in improving schools rather than shouldering the blame for those that are failing.

“The bottom line is ... you had teachers standing up for what they need to teach and what students need to learn,” Weingarten said.

But although the issues that sparked the strike have been resolved, the pressures on teachers’ pensions remain. Like Chicago, many cities and school districts reduced their contributions in recent years to save money. Among the funds for different types of workers, teachers’ plans tend to be shortchanged more often.

In many states — California, New Jersey, Rhode Island and Illinois, among others — pension contributions must be set by state legislators every year, and lawmakers sometimes decide to withhold money from pensions to allow more direct state spending on the schools.

What many Chicago residents may not realize is that their school district also has been paying $130 million a year to cover most of the pension contributions required of the teachers, a practice known as a “pickup,” which became a flash point last year in the collective bargaining battle in Wisconsin.

Officials in Chicago know they have a pension problem, even though it was not front and center in the strike. The state Legislature has said pensions must wait until next year. But Mayor Rahm Emanuel says the system is broken and he is not willing to make any increased contributions until it has been fixed. The mayor said earlier this year that making the larger contributions would lead to “direct cuts in our classrooms.”

“Those cuts mean the average class size will jump to approximately 55 students,” he warned.