Illinois News Network|Report: Severe fixes necessary for Illinois pensions

By on August 1, 2016   /   Illinois Press, Latest, Press  

Taxpayers United of America’s Executive Director, Jared Labell, was interviewed by Illinois News Network about TUA’s 10th Annual Report on Illinois State Pensions and the crushing financial impact the unfunded pensions have on Illinois’ taxpayers.

A taxpayer group has some fixes they say are severe but necessary to shore up the state’s growing unfunded pension liability.
Taxpayers United of America released their 10th Annual Report on Illinois State Pensions. The highlights include more than 15,600 state pensioners collecting more than $100,000 annually. More than 92,300 pensioners make more than $50,000 annually.
Taxpayers United of America Executive Director Jared Labell said for the top 400 pensioners the average pension contributions made over an entire career is only about $40,000 more than what the average annual pension is.
“For many of these pensioners they’re already recouping all of their contributions barely over a year of retirement. They’ve already made that money back,” Labell said.
Labell said something has to be done. “Look, this is not a good situation for any of us, whether it’s for taxpayers or for employees, and some solution has to be cut.”
Labell said some changes could include changing the state Constitution’s pension protection clause or allowing for bankruptcy reorganization to alleviate pension obligations, but even that has its potential problems.
“But it also has some downsides in that politicians may then decide that they can spend frivolously with taxpayer dollars and then bail themselves out by declaring bankruptcy at the end of their term,” Labell said.
The state’s unfunded pension liability is $113 billion and growing.

Back to Top

Chicago Sun-Times | Group warns of more property tax hikes for teacher pensions

By on August 1, 2016   /   Illinois Press, Latest, Press  

Taxpayers United of America’s Executive Director, Jared Labell, and TUA’s recent report detailing how the unsustainable Chicago Teachers’ Pension Fund’s financial failures are leading to historic property tax hikes in the city, were the featured story in the Chicago Sun-Times by columnist Fran Spielman.

CTPF Sun-Times scanMayor Rahm Emanuel has agreed to impose a $250 million property tax increase for teacher pensions on the heels of the largest property tax hike in Chicago history.

But that could be only the beginning of the hits Chicago homeowners and businesses will have to take.

After evaluating data on 25,000 pension recipients, Taxpayers United of America warned Thursday that Chicagoans could be “taxed out of their homes to prop up” a Chicago Teachers Pension Fund with more than $10 billion in unfunded liabilities and nearly 33 percent more retirees than it had a decade ago.

Last year, 28,114 beneficiaries together collected $1.3 billion in pensions from the teachers fund.

The average retirement age was 61. The average annual pension was $51,454 compared with a median household income in Chicago of $47,831.

But 974 of those teacher pensions topped $100,000. Another 14,420 teachers and administrators received retirement checks that exceeded $50,000.

Former Chicago Schools Supt. Manford Byrd was identified as the pension kingpin, the study shows.

He collects an annual pension of $190,634 — with an estimated lifetime payout of more than $2.5 million — even after paying just $126,561 into the fund during his long career with the Chicago Public Schools.

The highest estimated lifetime payout of more than $6.1 million will go to Kevin Huber, former executive director of the Chicago Teachers Pension Fund. Huber gets an annual pension check of $91,541. During the course of his career, he made $235,332 in pension contributions, only 4 percent of his “lifetime payout,” the study shows.

Yet another example is former Deputy Supt. Robert Saddler. He has collected $2.17 million in pensions since retiring in 1993 at the age of 59. His annual check is $169,225. That’s $60,890 more than the $108,335 in contributions Saddler made to the teachers pension fund during his career, the study shows.

Jared Labell, executive director of Taxpayers United, noted that the $588 million property tax increase for police and fire pensions and school construction approved last fall is being phased in over four years.

“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,” Labell said in a news release.

“Taxpayers are understandably shocked by the first round of tax hikes appearing on their property tax bills this summer. Unfortunately, those bills will grow exponentially worse if no action is taken. Taxpayers must demand accountability from CPS, the Chicago Teachers Union, 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.”

Emanuel is still trying to negotiate a contract with the Chicago Teachers Union that includes the equivalent of a 7 percent pay cut.

Teachers have threatened to strike for the second time in four years to maintain the so-called “pension pickup” granted to teachers years ago in lieu of a pay raise.

But Labell maintained that the $250 million property tax increase for teacher pensions that Emanuel agreed to impose in exchange for a $600 million state bailout for CPS “does nothing to solve the fundamental problem.”

“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,” he said.

Teachers union spokeswoman Stephanie Gadlin could not be reached for comment about the Taxpayers United study.

The union has been pressuring Emanuel to propose an array of local tax increases to fund CPS. The mayor has been unwilling to entertain them for fear that it would let Gov. Bruce Rauner and the Illinois General Assembly off the hook.

The most recent comprehensive financial report of the teachers pension fund shows that government pension payments have increased by 73 percent over the last decade — from $751 million in 2006 to $1.3 billion last year. The number of retirees has increased by nearly 33 percent over the same period.

Back to Top

Chicago Teacher Pensions Exacerbate City’s Property Tax Hikes

By on July 28, 2016   /   Illinois, Latest  

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.”

Back to Top