View as PDF CHICAGO—Taxpayers United of America (TUA) today released the results of its study of the Chicago Teachers’ Pension Fund (CTPF). The study evaluates data collected for more than 25,000 individual pension recipients through Freedom of Information Act (FOIA) requests, analyzes the overall solvency of the pension fund, and explains how these findings relate to property tax increases for Chicago taxpayers.
“The Illinois General Assembly passed a stopgap budget that threatens to raise the state’s income tax by 30% come this winter,” said TUA Executive Director, Jared Labell. “That budget included opening the door for an additional $250 million property tax hike for Chicagoans, just to help reduce Chicago Public Schools’ budget shortfalls and pension liabilities, although it does nothing to solve the fundamental problem. And don’t forget the historic $588 million property tax increase passed by the Chicago City Council last year. Taxpayers should be alarmed by the vast sums of money flowing to retired government employees, rather than paying for current needs or services, but that’s due to decades of mismanagement by politicians and the unreasonable demands of the Chicago Teachers Union (CTU).”
According to the CTPF’s most recent Comprehensive Annual Financial Report (CAFR) for the year ending June 30, 2015, the unfunded liabilities grew for three reasons during the past twenty years: contribution shortfalls (50%), plan changes and experience (35%), and investment shortfalls (15%). There were 28,114 beneficiaries collecting CTPF pensions, totaling $1.3 billion in pension payments last year. The number of retirees have also increased by nearly one-third in the past decade. There are 29,706 active members currently contributing to the fund, which includes teachers, administrators, certified officials, and other CTPF staff. The average annual salary for an active member in 2015 was $72,565.
“The pension fund’s own analysis states that in the past decade, the number of retired and vested members now exceed active contributors. Government pension payments to CTPF beneficiaries have increased 77% in the last ten years, jumping from $751 million in 2006 to $1.3 billion in 2015. During that same period of time, the total annual return on investments swung as low as -22% in 2009 and as high as 24.8% in 2011,” said Labell.
“But even with annualized return rates of 6.6% during the past ten years, the CTPF funded ratio still remains at an abysmal 51.8%, which represents a net pension liability of more than $10 billion, having increased by a half-billion dollars since the previous year,” said Labell. “These pensions are unsustainable. To fully fund these pensions, the Chicago City Council would have to drastically raise property taxes, far beyond the historic increases they have already approved, however, bankrupting taxpayers and driving property owners out of Chicago is no solution to this financial mess.”
The average retirement age for these former government employees was 61, based on the data TUA obtained through FOIA requests for this study. The average annual pension was $51,454 for these government retirees, whereas the median household income for Chicagoans is $47,831. Perhaps shocking to taxpayers, but 974 of these pensioners collect more than $100,000 annually and 14,420 beneficiaries collect more than $50,000 annually.
“The government pension system is incapable of remaining afloat without massive influxes of tax dollars. Taxpayers should not be expected to foot this bill without serious and systemic reforms to prevent future catastrophic financial conditions arising from this fiasco,” said Labell.
Former Schools Superintendent Manford Byrd tops our list for the highest current annual pension of $190,634. He paid $126,561 into the pension fund while employed, and he will collect a lifetime pension payout of more than $2.5 million, having only contributed a mere 5% to his estimated lifetime pension payout.
Former executive director of CTPF, Kevin Huber, is currently receiving an annual pension of $91,541. His estimated lifetime pension payout tops our study, totaling more than $6.1 million. He paid $235,332 into the pension fund, contributing only 4% to his estimated lifetime pension payout.
Former Deputy Schools Superintendent Robert Saddler retired in 1993 at the age of 59. His current annual pension is $169,225 and he has already collected $2,175,932 in retirement. While employed, he contributed $108,335 to his pension, which is roughly $61,000 less than his current annual pension, so he will have only contributed about 4% to his estimated lifetime pension payout.
Click here to view the list of 25,163 Chicago Teachers’ Pension Fund retirees in this study.
“Taxpayers are understandably shocked by the first round of tax hikes appearing on their property tax bills this summer,” said Labell. “Unfortunately, those property tax bills will grow exponentially worse if no action is taken.”
“According to the Cook County Clerk’s office, the average 2015 Chicago property tax bill rose by 12.8% to $3,633.19, which is more than a $400 increase from the previous year. Last year’s historic property tax hike will be implemented over the next four years, so Chicagoans haven’t even begun to feel the worst of it. Combine those scheduled increases with other proposed property tax hikes for teacher pensions and other city employees, and the result is a toxic blend of bad news for Chicago’s finances and taxpayers,” said Labell.
“Now is the time for taxpayers to talk to their neighbors, their elected officials, and other property owners. Taxpayers must demand accountability from CPS, CTU, the Chicago City Council, and Mayor Emanuel. If we do not act now, taxpayers risk being taxed out of their homes to prop up the city’s insolvent teachers’ pension fund.”
Taxpayers United of America’s Executive Director, Jared Labell, was quoted by Sangamon Sun about Illinois Auditor General Frank Mautino’s state and federal investigations into questionable campaign spending.
Following a recent move by Illinois lawmakers to have Illinois Auditor General Frank Mautino removed from office amid state and federal investigations into questionable campaign spending during his tenure as state representative, questions have been raised about whether Mautino should lose his pension if convicted.
Legal experts said he should.
“If convicted, he absolutely should lose his pension,” Jared Labell, executive director for Taxpayers United of America (TUA), said. “Term limits take on a new meaning in Illinois, considering how many government officials end up serving terms in jail.”
Under Illinois Pension Forfeiture Law, pension benefits of any public employee can be revoked for any felony conviction related to official duties. The final decision on whether to revoke such benefits is left to the trustees of individual pension funds.
Other states are pursuing stricter pension-forfeiture laws. In New York, legislators are pushing a pension-forfeiture bill that would allow any state public official convicted of a felony related to public office to be stripped of all pension benefits.
Currently, New York law permits the state to strip away pension benefits from state officials convicted of crimes related to their public office who were hired after Nov. 13, 2011 — when a 2011 ethics-reform law became effective. But under current law, the state cannot touch pensions of state officials hired before then, regardless of convictions.
Things are different, however, in the Land of Lincoln, as former Gov. George Ryan found out.
Following his 2006 conviction on 18 counts of criminal activity, the General Assembly Retirement System of Illinois (GARS) Board voted to suspend Ryan’s pension. Although he appealed the board’s decision to the Circuit Court of Cook County, arguing that he should not be deprived of pension benefits accrued from his years of government employment prior to his criminal conduct, the court upheld the board’s decision, and Ryan lost all pension benefits.
Ryan’s case is proof that Mautino may very well lose his entire pension accumulated over 24 years of service in the General Assembly.
Mautino began serving as auditor general in January after being appointed by the General Assembly in October. Shortly after taking office, questions began surfacing after probes into his campaign records as a member of the General Assembly revealed questionable spending.
Mautino’s disclosure reports revealed more than $200,000 spent on gas and vehicle repairs over a span of 11 years at Happy’s Super Service in Spring Valley, which is Mautino’s hometown, and more than $200,000 in irregular payments to Spring Valley City Bank since 1999.
Labell said TUA did not support Mautino’s appointment to auditor general last year because he was “a terrible steward” of tax dollars while serving in the General Assembly. So naturally, as a taxpayer advocacy group, the idea of Mautino serving as auditor general “seemed ridiculous to us,” Labell said.
Earlier this month, 20 Republican legislators filed a joint House resolution, HJR 158, calling for Mautino’s removal from office. The lawmakers have asked House Speaker Michael Madigan (D-Dist. 22) to bring the resolution to the House floor at the General Assembly’s next scheduled meeting.
“If the public outcry is sufficient, he can be forced out of office by the loss of public trust,” Labell said. “Once government officials are under serious investigation and uncooperative, I see little reason for taxpayers to rejoice to subsidizing their income.”
After repeated inquiries from legislators for Mautino to respond to their requests for information, many began calling for his resignation amid looming investigations by the U.S. Attorney’s Office and the Illinois State Board of Elections.
“I think those calling for resignation now are trying to move the story to its logical conclusion, even without full due process, perhaps in an effort for him to receive a reduced sentence,” Labell said. “Perhaps it’s because the investigation is dragging on or it’s just political posturing. But in any case, there’s enough corruption in Illinois politics to go around, and on behalf of beleaguered taxpayers, we’re happy to see officials resign.”
Attorney Eugene Keefe of Keefe, Campbell, Biery & Associates said that Mautino “will certainly lose” his pension if convicted and said his firm did not support Mautino’s appointment, which he chalked up to being “wholly political.”
Keefe said the cloud of suspicion looming over Mautino is troubling.
“They are calling for his resignation as the evidence, gossip and stories about him and his use of campaign funds are very embarrassing,” Keefe said.
Taxpayers United of America’s Executive Director, Jared Labell, was quoted by American Legislative Exchange Council about pension reform.
State Budgets
Illinois: Governor Signs Stopgap Budget — But Relief from Stalemate Proves Temporary
A deal cut by Illinois lawmakers and Governor Bruce Rauner will keep state government running for another six months. Just minutes after the spending measure was signed, the two sides resumed trading barbs.
Massachusetts: Baker ‘Rightsizes’ the State Budget
Governor Baker signed a $38.92 billion state budget last week, after cutting $256 million from the original bill. The savings resulted from roughly 300 line items and 500 earmarks vetoed.
North Carolina: Governor Signs State Budget
Governor Pat McCrory signed a $22.3 billion state budget into law on Thursday. The budget includes raises for teachers and state workers, as well as a middle class tax cut.
Pennsylvania: Vape Shops Hit Especially Hard by New Taxes in State Budget
In the aftermath of product-specific tax hikes, “vape shops” across Pennsylvania are struggling to remain afloat. Vaporized nicotine is often used by those looking to quit smoking, and yet it is treated the same as cigarettes under the new law. Even nicotine-free vapor products are now heavily taxed.
Texas: Budget Dance Begins
It’s time for the “Texas Budget Two-Step,” according Watchdog.org’s Mark Lasheron. The dance began with a joint letter from the Governor, Lieutenant Governor and Speaker of the House to every government agency, calling for 4 percent reductions in their spending requests. Various interests groups have already responded with panic.
Pension Reform
National: The Funding of State and Local Pensions: 2015-2020
A new study from the Center for Retirement Research at Boston College finds the funded status of state pension plans further declined in 2015 under new GASB rules. The study authors warn that, if markets fail to recover this year, “funding will drift lower.”
California: CalSTRS Tanking Teachers Pensions to be Politically Correct
The California State Teachers’ Retirement System has pledged to invest heavily in “low-carbon strategies” both at home and abroad. “The losers will be the retirees and the taxpayers,” writes the California Political Review. “CalSTRS, the teachers’ pension system does not even pretend to be investing for the betterment of the retirees.”
Illinois: State Pension Reform Needed to Avoid ‘Catastrophic’ Fate
A new report from Taxpayers United of America (TUA) confirms the unsustainability of public pensions in Illinois. Jared Labell, TUA’s executive director, specifically faults Article XIII, Section 5 of the state constitution, which “unfairly chains generations of taxpayers to an uncontrolled financial burden created by the disastrous decisions of politicians in Springfield.”
New Jersey: Pension Reform at a Crossroads in the Garden State
Erica Jedynak asks her fellow New Jerseyans: “Do we have the courage to reform a broken pension system that’s driving us towards insolvency?”
Rhode Island: Worried About Risk, Pension Fund Managers Mull Conservative Investment Approach
General Treasurer Seth Magaziner stressed the need to be “a little more risk-averse,” but did not say projected returns should be lowered accordingly.
