Free Republic
Browse · Search
General/Chat
Topics · Post Article

Skip to comments.

Chicago Teachers Pension fund paid out $1.5 billion in '16, earned $7.8 million
Chicago CIty Wire ^ | May 21, 2017 | LocalLabs News Service

Posted on 05/22/2017 8:40:22 PM PDT by Attention Surplus Disorder

The Chicago Teachers' Pension Fund (CTPF) paid out $1.5 billion last fiscal year, mostly on benefits to retirees.

But it only earned $7.8 million on its investments, according to a filing it made with the Illinois Department of Insurance.

The Chicago Teachers' Pension fund operates like a Ponzi Scheme, but it is allowed to do so because the fund is taxpayer-backed. Bernie Madoff's private Ponzi scheme cost investors $18 billion; he received 150 years in prison. The Chicago Teachers' Pension fund operates like a Ponzi Scheme, but it is allowed to do so because the fund is taxpayer-backed. Bernie Madoff's private Ponzi scheme cost investors $18 billion; he received 150 years in prison. | Wikipedia In addition, it cost CTPF $35.8 million in investment expenses to earn that $7.8 million, according to the filing, meaning it actually lost $28 million between July 1, 2015 and June 30, 2016.

Years like 2016 elucidate how the fund, which is supposed to pay for the current retirements of some 28,000 former CPS teachers and administrators as well as provide future benefits to another 29,000 active ones, is running out of money, and time.

At $10.1 billion, CTPF is less than half the size actuaries say it needs to be to earn enough investment returns to pay its obligations.

Because it isn't, Chicago taxpayers and current CPS employees have been propping up the fund. Their annual contributions aren't invested but, rather, used to pay expenses and current beneficiaries.

This fact isn't expressly admitted by CTPF. But so long as the fund remains undercapitalized, it remains a fundamental reality.

Such a scheme would be illegal in the private sector. But among public employee pensions, especially in Chicago, its commonplace and tolerated. For now.

$16 billion short

A Local Government Information Services (LGIS) analysis of CTPF's investment performance and spending found that over the past decade, it paid out $7 billion more than its investments earned.

Between 2007 and 2016, the fund earned $5.1 billion while it spent $12.1 billion.

The fund's official asset base decreased by only $1 billion-- from $11.1 billion to $10.1 billion-- thanks to contributions by active CPS employees and Chicago property taxpayers on the CPS employees' behalf.

They ponied up another $5.55 billion, money CPS employees were led to believe was being invested for their own retirements. In truth, its being used to pay benefits for teachers who retired 10 or 20 years ago.

Left to exist on its own investment returns, like a private fund would, the Chicago Teachers' Pension Fund would be less than half the size it claims to be today-- just $4.1 billion-- LGIS found. That's short $16 billion, compared with the state's actuarial analysis.

Three more years like 2016, and CTPF at its true size would be more than just insolvent. It would be completely out of cash.

Property taxes: the trump card

City of Chicago property taxpayers have proved CTPF's reliable backstop, paying $3.7 billion toward Chicago teacher pensions since 2007, or an average of $310 annually per Chicago household.

That number is trending upward, and quickly.

The last three years, CTPF has received nearly double-- $587 annually per Chicago household, just for teacher pensions. To be sure, over the past three years, taxpayers have made record contributions-- between $600 and $700 million per year.

But it hasn't made a dent.

CTPF's overall liability grew 38 percent from 2007 to 2016, as higher paid teachers retired and active ones earned higher and higher salaries. The fund owed $14.7 billion in 2007; it owes $20.3 billion today.

Annual payouts to beneficiaries have risen 61 percent since 2007, from $906 million to $1.46 billion. The average CPS teacher salary has risen, too, by 58 percent, from $59,458 to $94,064.

At today's rate of beneficiary growth, the CTPF stands to shell out $8.6 billion to retirees over the next five years, or 85 percent of its current asset base.

Investment returns won't be close to enough to pay the bill.

The past five years, CTPF has earned $3.2 billion. The five years before that, it earned $1.9 billion.

----

Chicago Teachers Pension Fund liabilities are rising

Teacher compensation and retiree benefits are growing, as the number of active CPS teachers falls and the number of CPS retirees rises.

# Teachers Avg. CPS Teacher Comp* # Retirees Avg. Retiree Benefit 2016 29,243 $94,064 28,398 $51,546

2015 29,706 $96,420 28,114 $50,601

2014 30,654 $91,351 27,722 $50,130

2013 30,969 $76,026 27,440 $48,848

2012 30,366 $76,466 25,926 $47,544

2011 30,133 $76,286 25,199 $46,288

2010 33,983 $72,498 24,601 $44,766

2009 31,455 $71,825 24,218 $43,280

2008 32,089 $66,809 23,920 $41,838

2007 32,968 $61,634 23,623 $38,372

Source: Illinois Department of Insurance

*Teacher Comp includes taxpayer-funded pension contribution but not health care benefits. Numbers are not indexed for inflation.

Property taxpayers and teachers prop up the Chicago Teachers' Pension Fund.

The fund cannot pay for teacher retirements on its investment returns alone. So it funds them with property taxes and contributions from CPS teachers. How much have they contributed to the fund over the past decade?

Property taxpayers CPS Teachers Total 2016 $700,700,000 $191,882,430 $892,582,430

2015 $708,667,000 $191,233,298 $899,900,298

2014 $650,416,141 $187,846,065 $838,262,206

2013 $207,654,000 $188,356,294 $396,010,294

2012 $203,729,011 $187,141,384 $390,870,395

2011 $208,589,994 $185,882,636 $394,472,630

2010 $355,759,950 $194,621,551 $550,381,501

2009 $263,069,327 $176,176,975 $439,246,302

2008 $229,270,412 $172,504,804 $401,775,216

2007 $168,761,750 $179,017,663 $347,779,413

TOTALS $3,696,617,585 $1,854,663,100 $5,551,280,685

Source: Illinois Department of Insurance

How much would the Chicago Teachers' Pension Fund have left if operated as an actual pension fund?

Since 2007, Chicago's Teacher's Pension Fund has earned $5.1 billion over the past ten years, while paying out $12.1 billion. How much would the fund have left if it weren't subsidized by active CPS employees and property taxpayers?

Begin Assets Invest Return Expenses Ending Assets

2007 $11,090,370,261 $1,909,439,876 $906,472,176 $12,093,337,961

2008 $12,093,337,961 -$737,538,769 $1,000,770,310 $10,355,028,882

2009 $10,355,028,882 -$2,463,906,744 $1,048,155,262 $6,842,966,876

2010 $6,842,966,876 $1,107,573,754 $1,101,288,633 $6,849,251,997

2011 $6,849,251,997 $2,123,292,641 $1,166,400,567 $7,806,144,071

2012 $7,806,144,071 -$38,083,067 $1,232,635,521 $6,535,425,483

2013 $6,535,425,483 $1,174,582,824 $1,340,401,283 $6,369,607,024

2014 $6,369,607,024 $1,685,134,974 $1,389,710,588 $6,665,031,410

2015 $6,665,031,410 $381,740,298 $1,422,589,121 $5,624,182,587

2016 $5,624,182,587 -$27,987,163 $1,463,798,486 $4,132,396,938

TOTALS $5,114,248,624 $12,072,221,947

Source: Illinois Department of Insurance


TOPICS: Business/Economy; Miscellaneous; Society
KEYWORDS: chicago; pensions
tables will probably not come out right
1 posted on 05/22/2017 8:40:22 PM PDT by Attention Surplus Disorder
[ Post Reply | Private Reply | View Replies]

To: Attention Surplus Disorder

Paid out $1.5 billion? I don’t buy it.


2 posted on 05/22/2017 8:41:59 PM PDT by SSS Two
[ Post Reply | Private Reply | To 1 | View Replies]

To: SSS Two

It sounded high to me as well, I am just copying & pasting the article as found. Nevertheless, 50,000 retired teachers @ $30K a year is $1.5 billion.


3 posted on 05/22/2017 8:47:28 PM PDT by Attention Surplus Disorder (Apoplectic is where we want them!)
[ Post Reply | Private Reply | To 2 | View Replies]

To: Attention Surplus Disorder

Funny how the government can change the “rules” on private investment into 401k plans.

Defund these ponzi pension funds that promise 90% of annual income for life.


4 posted on 05/22/2017 8:49:58 PM PDT by a fool in paradise (patriots win, Communists and Socialist Just-Us Warriors lose)
[ Post Reply | Private Reply | To 1 | View Replies]

To: Attention Surplus Disorder

Abolish public schools and this will be solved; no more property tax, no more property confiscation by the state. You get what you pay for—except from the state.


5 posted on 05/22/2017 8:54:17 PM PDT by Fungi (No tagline. Suggestions invited.)
[ Post Reply | Private Reply | To 1 | View Replies]

To: Attention Surplus Disorder

Bankruptcy!

Its good - and its necessary. Pray it comes soon.


6 posted on 05/22/2017 8:55:13 PM PDT by PGR88
[ Post Reply | Private Reply | To 1 | View Replies]

To: Attention Surplus Disorder

I wonder how many high schoolers actually graduated?


7 posted on 05/22/2017 8:55:50 PM PDT by Slyfox (Where's Reagan when we need him? Look in the mirror - the spirit of The Gipper lives within you.)
[ Post Reply | Private Reply | To 1 | View Replies]

To: Attention Surplus Disorder
its all for the children....

my solution to pensions in this country....

stop offering defined pensions immediately...for all...military included...

offer 401's and then ONLY pay out what govt contributed when the recipient reaches age 60

if someone wants to retire on what they saved in their 401 k, let them..when they're 59 and 1/2 like everybody else.....

offering defined pensions was a mistake from the start...like Medicare and SS, nobody things about the long term consequences of such grandiose ideas....

the younger people are always the ones to suffer...

8 posted on 05/22/2017 8:56:26 PM PDT by cherry
[ Post Reply | Private Reply | To 1 | View Replies]

To: Attention Surplus Disorder

$1.5B divided by 28,000 is about $53,500 per retiree.


9 posted on 05/22/2017 8:58:57 PM PDT by Starboard
[ Post Reply | Private Reply | To 3 | View Replies]

To: Attention Surplus Disorder

Not, as the libs like to say, sustainable.


10 posted on 05/22/2017 9:02:13 PM PDT by JennysCool
[ Post Reply | Private Reply | To 1 | View Replies]

To: cherry

military included...

####

That is fine as long as you outlaw any future military drafts and allow people to quit the military at anytime for any reason when something better cones along - like a company with a better 401k plan.

It ain’t a job like a toll taker or teacher.


11 posted on 05/22/2017 9:05:39 PM PDT by 2banana (My common ground with terrorists - they want to die for islam and we want to kill them)
[ Post Reply | Private Reply | To 8 | View Replies]

To: Attention Surplus Disorder

How can any organization legitimately expend $35.8 million in “investment expenses” to make only $7.8 million on its money? Sounds to me like some investment companies have gotten into some real sweetheart deals with the fund’s managers.


12 posted on 05/22/2017 9:11:10 PM PDT by Bob (Damn, the democrats haven't been this upset since Republicans freed their slaves.)
[ Post Reply | Private Reply | To 1 | View Replies]

To: Bob

A better, though less valuable question might be, how much do they pay the accounting guy/gal to check those investment results?

Sweetheart deals? Chicago? Surely you jest!


13 posted on 05/22/2017 9:13:55 PM PDT by Attention Surplus Disorder (Apoplectic is where we want them!)
[ Post Reply | Private Reply | To 12 | View Replies]

To: Attention Surplus Disorder

This is fraud. The teachers don’t put in much to their retirement. And the calculations for their benefit expand their benefit far above what they should get under a normal pension. The avg. benefit is $50,000. But that includes teachers who only worked 7 years. The avg. pension for those who retire with a full pension is well above $100,000. And it grows every year. They get a 3% raise every year of retirement. These greedy bastards will take down the state and the city as well as the schools. All three have the same issue, ridiculously over generous pension plans that pay out far more than the government employee actually made while they were working.

Just wait a few years. There is nothing to be done in Illinois. Math will collapse the state in a few years. It won’t matter what they try to do. Its like a fly stuck in a spider web. Any sign of struggle just makes it worse.


14 posted on 05/22/2017 9:23:04 PM PDT by poinq
[ Post Reply | Private Reply | To 1 | View Replies]

To: 2banana
Military - It ain’t a job like a toll taker or teacher

Exactly.

You would almost certainly have to resort to a draft if pensions were changed. I'm one of those who made that choice; I'm a Reserve "Lifer." Call me a mercenary, but I went active for Desert Storm without a complaint. One of the things I was tasked to do was go to the Navy sites where we sent Naval Air Reservists. Without exception, and at all levels (enlisted and officer & I've been both) they were judged as "outstanding." I was so proud of them.

Part of the recruiting effort for both active and reserve was the retirement benefits. Change that, and you may wind up with a draft; and I don't think the nation wants to go there!

15 posted on 05/22/2017 9:49:12 PM PDT by Ace's Dad (BTW, "Ace" is now Captain Ace. But only when I'm bragging about my son!)
[ Post Reply | Private Reply | To 11 | View Replies]

To: Attention Surplus Disorder

So only 7.8 million with 10 billion capital! That is only ~0.078% yield - almost nothing so even the money they have is badly managed. For comparison the Dow Jones Industrial Average adjusted for dividend reinvestment returned 16.47% in 2016.


16 posted on 05/22/2017 11:22:20 PM PDT by Krosan
[ Post Reply | Private Reply | To 1 | View Replies]

To: Krosan
badly managed

Welcome to Illinois.

Investment funds are not "badly managed" there.

The funds are stolen and the politicians get a kickback on the action.
17 posted on 05/23/2017 2:23:59 AM PDT by cgbg (Hidden behind the social justice warrior mask is corruption and sexual deviance.)
[ Post Reply | Private Reply | To 16 | View Replies]

To: cherry

stop offering defined pensions immediately

You are speaking of Defined benefit vs defined contribution. There is a huge difference between the two. One is sustainable the other is, in continual good times, also potentially sustainable depending on the size of the benefit offered. I would say one answer would be no defined benefit plans ever for public service employees. That would be government workers. Military excluded. Private companies can offer the plans that work for them but pitting the taxpayers against their own government employees is guaranteed to cause problems as we saw in Wisconsin a few years back.


18 posted on 05/23/2017 7:23:09 AM PDT by wita (Always and forever, under oath in defense of Life, Liberty and the pursuit of Happiness.)
[ Post Reply | Private Reply | To 8 | View Replies]

To: PGR88

Pray it comes soon.


Nothing changes till the money runs out. Looks to be about 5 years?


19 posted on 05/23/2017 7:29:06 AM PDT by PeterPrinciple (Thinking Caps are no longer being issued but there must be a warehouse full of them somewhere.)
[ Post Reply | Private Reply | To 6 | View Replies]

Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.

Free Republic
Browse · Search
General/Chat
Topics · Post Article

FreeRepublic, LLC, PO BOX 9771, FRESNO, CA 93794
FreeRepublic.com is powered by software copyright 2000-2008 John Robinson