Chicago Public Schools has a new “balanced” budget for the coming year.
Of course, the $9.9 billion CPS budget can be considered balanced only through willful disregard for gaping holes that still need to be filled. The Chicago Board of Education set aside no money to make a $175 million payment toward pensions for nonteaching CPS staff. The budget makes no provision for costs of a new teachers contract, either.
A 4% pay raise under a new contract could cost the district an estimated $120 million, according to a CPS memo reported by Chalkbeat Chicago. But sources knowledgeable about the ongoing negotiations warned me a 5% pay increase in the first year is likely, which would add tens of millions more in unbudgeted cost.
The holes will deepen next year, when a tide of federal pandemic funds that supplied $233 million for this year’s budget runs out.
Big problems can create openings for big ideas, and John Cullerton, the former state Senate president, has one.
As Cullerton sees it, there’s a way to shift CPS pension obligations to the state’s Teachers’ Retirement System, or TRS — unloading direct pension costs that pull more than $100 million from the CPS budget in most years. Annual proceeds from a Chicago property tax levy that generates roughly $550 million toward teacher pensions would stay in the CPS budget, too.
Beyond the budget impact, a merger could improve governance and investment performance for Chicago teachers’ pension funds, too.
It’s a political long shot, for sure. But Cullerton served for years as president of the Illinois Senate and in 2011 helped pass one significant pension reform, the so-called Tier 2 plan, which has saved the state billions. He also pursued creative ideas — such as making a “consideration” payment to state workers in lieu of pension benefits — that never became law.
Cullerton retired from the Senate in 2020. Though he now is a lobbyist, his registration records show no indication he lobbies for any entity that might benefit from CPS or statewide pension reform.
I first became aware of Cullerton’s idea for merging teachers’ pension funds in meetings I’ve had with pension experts since publishing a series of Tribune columns last year about fixing the state’s pension problems. Time and again, Cullerton has brought up his idea about merging the Chicago Teachers’ Pension Fund, or CTPF, into TRS.
He believes a pensions merger could be wrapped into a push for statewide pension reform.
A key proposal from the Civic Committee of the Commercial Club of Chicago would introduce a temporary, 10-year surcharge on income taxes — 0.5% for individuals and 0.7% for corporations — to help pay down the state’s $140 billion in pension debt.
Gov. J.B. Pritzker has proposed his own plan, one that would take longer and save less money but would not need a tax hike.
Pritzker is one key person Cullerton has talked to about his idea. Illinois House Speaker Emanuel “Chris” Welch and Senate President Don Harmon, too. Each has expressed interest, he said, and each also described political prerequisites that would need to be met: an ability to draw at least one Republican vote, for example. Support from downstate lawmakers would be needed, too.
A decades-old anomaly in state law makes CPS teachers the only public school teachers in Illinois not covered by the state retirement system. Cullerton’s plan would eliminate the anomaly, adding nearly $700 million in annual costs, in addition to around $300 million state taxpayers already kick in.
The Chicago teachers’ unfunded pension liabilities of more than $13 billion would need to transfer to TRS, too — another potentially significant obstacle.
Cullerton believes the sums could be found within state budgets that now exceed $50 billion a year.
Alternatively, Cullerton sees an opening to tie the state’s cost for a CTPF-TRS merger to the Civic Committee proposal. Lawmakers willing to vote for a tax surcharge for statewide pension reform could be persuaded to add a few tenths of a percent for CPS pensions, too, he argues.
I’m not certain it’s all as doable as Cullerton thinks, but he’s the one who has turned the legislative sausage grinder before, not me.
A proposal likely would need to overcome opposition from the powerful Chicago Teachers Union, which seems wedded to a dedicated Chicago pension plan that has a governing board and pension managers it can influence directly. And costly sweeteners likely would be needed to draw Republican and downstate votes.
Regardless of the challenges, the idea of a CTPF-TRS merger merits serious discussion. Late last month, a nonprofit called Kids First Chicago floated the notion, among other options, for increasing CPS revenues.
There may be an opening to tie into state pension action that’s already in the air: There’s a push under way to address problems with the statewide Tier 2 pensions, which are not keeping pace with Social Security benefits.
The Tier 2 problem must be fixed. And any legislative action potentially creates an opening for some sort of “grand bargain,” the likes of which this state has not seen lately.
Timing is important in policy and politics. The CPS budget crunch will worsen and continue to create headlines over time — some of them likely this fall. The Tier 2 issue will engender serious discussion about broader pension reform. The Civic Committee proposal or Pritzker’s plan could be drawn into the mix.
The lame-duck session in January, before the new legislature is sworn in, could create a political opening. Add it up, and it’s possible a CTPF-TRS merger could find its way into an ongoing, broader discussion of statewide pension reform.
David Greising is president and CEO of the Better Government Association.
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