The Chicago Teachers Union is rolling out a plan they say will help solve the teachers pension crisis. CTU leaders say their proposals would raise much-needed money for the cash-strapped retirement fund that covers the city’s educators. The fund is just under 50 percent funded.
Speaking to WBEZ Thursday, CTU head Karen Lewis said cutting benefits for retired schoolteachers is “unconscionable,” and that cannot be the answer to pension woes. Instead, she said, the union is suggesting ways to raise more revenue. A Chicago Public Schools spokesman called those ideas “not a responsible solution.”
CTU wants the city and state to adopt three proposals that it says could bring in billions of dollars that could be devoted toward retirement accounts:
- A so-called “LaSalle Street Tax” would impose new taxes on financial transactions at the CME Group and the Chicago Board Options Exchange. The Chicago Teachers Union wants a dollar tax on the trading of agriculture futures and two dollars on other derivatives. In addition to raising money, CTU Vice President Jesse Sharkey said the tax could help curb high-frequency trading, which has come under fire lately. “Derivative trading is a problem at its current level,” Sharkey said. “These are trades that don’t produce value. These are not long-term investments of the kind your grandmother might have in her stock portfolio.” Sharkey estimates the new tax could bring in $10-$12 billion a year.
- A commuter tax on those who work in Chicago but live outside the city. Sharkey suggested the tax could be administered through the payrolls of companies in Chicago with employees who live outside the city. Sharkey said an alternative way to implement the tax would be as a regional income tax surcharge affecting cities surrounding Chicago. He said the cash generated from this plan could be shared between Chicago and the communities affected. Sharkey did not have an estimate for how much money this tax could generate.
- A delay on the expiration of some tax increment financing (TIF) districts. TIF districts are special zones of the city that divert tax money into economic development projects. Critics, including those in the Chicago Teachers Union, have ridiculed the mayor’s use of TIF districts, saying they amount to personal slush funds. “You could take a lot of bad debt off the books by making a bond that would put the school system in better shape financially by using TIF money that would actually help serve the intended purposes of the taxation authority the schools have,” Sharkey said. The teachers union estimates more than a billion dollars in bonds could be generated from this idea
The Chicago Teachers Union said Chicago should inject $5 billion into the pension fund immediately by floating municipal or pension obligation bonds. The new “LaSalle Street” tax, commuter tax, and TIF revenues would then go to pay off those bonds. The refinancing scheme would save $3 billion by 2059, said a consultant for the union. Sharkey says the money from the TIF districts could be used to pay off bonds, which would be used to pay down the Chicago Teachers Pension Fund’s $9 billion in unfunded liabilities.The union also opposed any more property tax increases to help fund the Chicago Teachers Pension Fund.
Last year, Illinois lawmakers approved legislation that would cut teacher pension benefits as a way to help reduce the state’s $100 billion pension obligation. The legislation is the subject of a lawsuit filed by unions representing state workers.
Now, lawmakers have turned their attention toward Chicago city workers. Last month, they passed a bill changing the pension benefits of city municipal and laborers. That legislation still needs the approval of Illinois Gov. Pat Quinn, who hasn’t said whether he’ll sign the bill or not.
Lewis said she’d oppose a similar pension plan that would affect teachers, if one were to be proposed.
“If we’re talking about benefit changes without some sort of revenue, then we are just basically cutting our own throats and we will not do that at this moment,” Lewis said.
Gov. Quinn’s hesitance to sign the legislation affecting the retirements of city laborers and municipal workers comes in part from Mayor Rahm Emanuel, who has said he’d pay for those pension bills by increasing property taxes in the city.
Lewis made a point to say the teachers pension fund’s financial problems stem from the Chicago Board of Education’s refusal to put money into the system for years, not from exorbitant benefits for teachers. She said she’s not convinced raising retirement ages, increasing employee contributions to the retirement fund or reducing cost of living adjustments would fix the hole in the pension fund.
“We are concerned that they’re not done,” Lewis said. “If we continue to give, give, give and make huge concessions, when does it all end? Til when we have no pensions?”
Meantime, a Chicago Public Schools spokesman dismissed the union’s proposals.
“We’re glad that CTU is putting forth ideas on how to solve our pension crisis, but borrowing $5 billion and raising taxes by a record amount to prop up the pension fund is not a responsible solution,” said CPS spokesman Joel Hood. “Any conversation about pension reform must start with legislative action in Springfield, moving toward reforms similar to those which now apply to 80 percent of teachers in Illinois.”
WBEZ’s Linda Lutton and Alex Keefe contributed to this story.
Tony Arnold covers Illinois politics for WBEZ. Follow him @tonyjarnold.
Linda Lutton covers education for WBEZ. Follow her @wbezeducation.
Alex Keefe covers politics for WBEZ. Follow him @akeefe.