The Chicago Teachers' Pension Fund (CTPF) received more than $585 million earlier today, completing the $612.5 million required contribution from the Chicago Board of Education (BOE) for the 2014 fiscal year.
"This is an important step. This payment marks the first time since 2010 that the BOE has made a full payment of its pension obligation," said Jay C. Rehak, CTPF president of the board of trustees and interim executive director. "Our members pay their pension obligations in full with every paycheck – every month, every year – and have never missed a payment. We appreciate the employer doing the same."
"CTPF is a well-managed plan that has generated an 8.86 percent average return over the last 35 years," said Rehak. "Our financial situation has deteriorated because our employer and the state underfunded this plan for decades. As a result, our plan's funded ratio has fallen from 100 percent in 2002 to our current 49.5 percent."
Before 1995, CTPF collected a property tax levy directly from the city of Chicago to fund pensions. Legislation passed in 1995 allowed CPS to divert the property tax levy into its operating budget. Between 1996 and 2005, the BOE collected $2 billion in property tax revenue but did not make actuarially required contributions to support the fund. At the same time, the state of Illinois – which had agreed, in principle, to fund CTPF at 20 to 30 percent of the amount it funded the downstate Teachers' Retirement System (TRS) – has never seen fit to honor that commitment.
CTPF's fiscal situation was exacerbated in 2010 when the Illinois General Assembly passed PA 96-0889, which allowed the BOE to reduce its payments from 2011 to 2013. This pension "holiday" cost CTPF an additional $1.2 billion.
"Our fund has had an actuarially based funding schedule in place for many years, but without a consistent, reliable source of revenue – it means nothing," said Rehak. "Our teachers who do not contribute to Social Security depend on their pensions for financial security in retirement. We hope that this payment is the first of many as our fund pursues full funding."
Chicago Teachers' Pension Fund (CTPF)