Sneak Attack From City Hall

The Emanuel budget proposed yesterday includes a surprise call for CPS to give the city back pension money the city has been paying for certain CPS employees: "Chicago taxpayers would no longer subsidize pensions for non-teaching employees of the Chicago Public Schools, under a surprise plan tied to Mayor Rahm Emanuel’s 2012 budget." ( City wants CPS to pay for pensions for its non-teaching employees Sun Times).  On the same day, CPS announced it would issue $400M in bonds: "Chicago Public Schools officials today announced $400 million in bonds will be sold for ongoing construction, renovation and maintenance projects." (CPS issues $400 million in bonds Tribune)

More on budgets and pensions:

Emanuel Budget Cuts Deep, But Some Sacred Cows Untouched CNC: Under Emanuel’s proposal, the corporate fund that covers day-to-day spending on government operations would shrink by 5.4 percent next year, to about $3.1 billion.

Illinois taxpayers kick in $400 million for teachers’ pensions Statehouse News:  The report added that 139 school districts paid a portion of teachers’ contributions to TRS for the 2009-2010 school year. Teachers in the remaining 312 school districts contributed to TRS directly from their paychecks.

 

 

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  • Is there any way to find out how many public schools that have been recently renovated at tax payer expense are now being turned into charter schools? An acquaintance told me yesterday that her school was renovated extensively this summer and faculty was informed that it would become a charter school next year.

  • In reply to FrontRow:

    You can FOIA (Freedom of Information Act) that question from CPS I guess. Ask our Union officers how to go about doing it and how to request the information. Let us know how this goes.

  • In reply to FrontRow:

    Elementary schools have a limit of 350 students. The recent controversy is because the 2006 state test results for Chicago Schools did not show the expected rise in test scores that everyone hoped to see.

  • Fran Spielman in her Sun Times report (10/12/11) makes it sound like it was a great mystery that the City of Chicago was picking up the employer pension costs for CPS employees paying into the Municipal Employees' Annuity and Benefit Fund of Chicago (MEABF). Ms. Spielman quotes the Mayor saying: "We pay the pensions for CPS employees who are non-teachers. Nobody can explain why. ... So, I said, ‘It’s not the whole thing, but in the first year, you’re gonna give back at least half of it." A little research would explain why.

    MEABF was created in 1921 by an act of the Illinois General Assembly (chapter 40, Act 5, article 8 of the Illinois Compiled Statutes) to provide disability and retirement benefits to qualified employees of the City of Chicago and the Chicago Board of Education. The Act states: "Any person who becomes an employee of the Board of Education on the day before the effective date and who on June 30, 1923, was a contributor to any municipal pension fund in operation in the city on that date under the Public School Employees' Pension Act of 1903. Any such employee shall be considered a municipal employee during the entire time he has been in the service of the employer."

    The Act also states: "Any person who becomes an employee of the Board of Education for the first time on or after the effective date, and who was a contributor on June 30, 1923, to any municipal pension fund then in operation in the city under the Public School Employees' Pension Act of 1903. Any such employee shall be considered a municipal employee during the entire time he has been in the service of the Board of Education."

    These CPS municipal employees are those employees not cover by the pension plan for certified employees. The City of Chicago is required by state statues to contribute the amount necessary beyond employee contributions to finance the requirements of MEABF. The City of Chicago has been underfunding MEABF since 2002 according to the audited 2010 report for MEABF. Mayor Emanuel did not suddenly discover the city was paying for CPS civil service workers' pensions, it was well know and has been going on since possibly 1923.

    The Civic Federation is the organization that created the city's current plan relating to MEABF. In its review of the CPS FY12 budget the Federation states:

    "The Civic Federation recommends that Chicago Public Schools begin paying for its share of the Municipal Fund employer contribution. This will shift a cost of at least $75 million to CPS. The Illinois General Assembly should grant CPS the authority to levy an additional property tax for this purpose. This alignment of employer contributions and pension funds in which employees participate is important for both transparency and accountability. It allows taxpayers to see where their tax dollars are going and it gives CPS a greater stake in the health and management of the Municipal Fund."

    Yes, that is $75 million big ones being transferred off the City's books and on to CPS books. The CPS Board of course has law on its side and could oppose this move, but it will not because the Board members will be ordered not to since they are Mayoral appointees. It is also very possible the Illinois General Assembly will not grant CPS the authority to levy an additional property tax for covering this $75 million a year, since the city would not want a $75 million a year reduction in its tax levy. We should also recall the City has already gotten CPS to eat over $40 million in police costs that had under the Daley administration been picked up by the city. It appears Mayoral control over CPS has its contradictions.

    Rod Estvan

  • The end game
    The new bill to place ownership of our pension funds in the hands of
    The mayor is not only an insult to every present board member it is a
    very bad idea. If this bill passes along with SB512, the pension reform
    Bill the results will be catastrophic for a couple of reasons.
    If both pass it will cause one of the largest transfers of wealth
    In American History that will affect new, old and retired teachers.

    The corner stone of SB512 is the elimination of the defined benefit.
    It offers only three options beginning in 2012.old teachers can keep what they earnedtill then and pay merciless deductions estimated as high as 60% of salary.
    Plans two and three allow members to direct individual accounts into
    Investment vehicles approved by a new state board. It will take five years
    To become vested .If you resign after that you get your money and what the boardcontributes plus interest. If you resign before five years this happens:

    If a participant who is not vested in employer contributions terminates employment, the participant shall be entitled to a benefit based solely on the account values attributable to the 11employee's contributions and any investment return on those contributions, and the employer contributions and any investment return on those contributions shall be forfeited. Any employer contributions that are forfeited shall be held in escrow by the company investing those contributions and shall be used as directed by the System for future allocations of employer contributions.

    That is pretty slick the company gets to hold the money in escrow for future allocations.
    So anything the board invested for you becomes a piggy bank for the company. But it gets better, this paragraph will be the kiss of death:

    The participant shall not be deemed a fiduciary by reason of providing investment direction. A person who is a fiduciary, including the plan sponsor, shall not be liable for any loss resulting from the investment direction of the employee and shall not be deemed to have breached any fiduciary duty by acting in accordance with that direction. The retirement system, the Illinois State Board of Investment, and the employer do not guarantee any of the investments in the employee's account balances.

    This little provision removes any responsibility
    the employer and state had to safeguard these funds including
    decisions made by the states new investment board.

    Finally all the money in every Chicago pension fund will
    Be invested by new boards beholding to the mayor. These people
    Will get their hands on Billions of dollars of old money and
    millions of new dollars to play with. A huge transfer of wealth
    without any risk to the politicians.

  • In reply to rbusch:

    Dear rbusch, good information, thanks!

  • Well, Herman Cain's 999 is starting to look pretty good. First my 4% raise goes and now my pension. I am already buying all of my own instructional supplies. All that is left will be 9% percent for federal taxes. Please don't bother to tell me that Republicans don't favor teachers, never do the democrats.

  • I almost forgot, how many months before Bill Daley can become the next mayor of Chicago? I never thought that I would miss Richard Daley so much. You never miss your water until the well runs dry or some fool digs up darn thing. Does anyone know why there is such a negative bash the hell out of Daley crusade going on?

  • In reply to teach4chicago:

    Golly, I don't know, maybe its because he drove the city's finances off a cliff and into financial ruin. Worried about your pension? Thank your pal Richie.

  • So, what happens to my pension if I resign after this year? I have been with CPS for 8 years but I am beginning to think this is not a district (or city or state) worth staying in. Every day there is something new and depressing...

  • In reply to scooby:

    Dear scooby, please contact the CTPF and they will tell you.

  • Another F Word

    This word is critical in understanding what is could happen to your pension if Both SB 512 and HB 3827 pass .Our word is:

    Fiduciary
    Black's Law Dictionary describes a fiduciary relationship as "one founded on trust or confidence reposed by one person in the integrity and fidelity of another." A fiduciary has a duty to act primarily for the client's benefit in matters connected with the undertaking and not for the fiduciary's own personal interest. Scrupulous good faith and candor are always required. Fiduciaries must always act in complete fairness and may not ever exert any influence or pressure, take selfish advantage, or deal with the client in such a way that it benefits themselves or prejudices the client. Business shrewdness, hard bargaining, and taking advantage of the forgetfulness or negligence of the client are totally prohibited by a fiduciary.
    As fiduciaries, financial planners must make fair and complete disclosure of all material facts and must employ reasonable care to avoid misleading their clients. The utmost good faith is required in all their dealings. Simply put, fiduciaries must exhibit the highest form of trust, fidelity and confidence, and are expected to act in the best interest of their clients at all times.
    The distinction between a financial planner with a fiduciary interest and a salesperson is crucial. A financial planner, under common law and by some statutes, is a fiduciary. A financial planner must always provide services and advice in the best interests of the client. Whereas salespeople may have their own motives and interests at heart and offer goods and services for a price, a fiduciary must serve the client, if necessary at the cost of the fiduciary's own interests.
    It is generally believed that fiduciaries perform their trades for reasons other than money and feel a sense of responsibility that goes beyond simply making a living. To paraphrase Supreme Court Justice Brandeis: "It is an occupation which is pursued largely for others and not merely for oneself. It is an occupation in which the amount of financial return is not the accepted measure of success."

    This is why we elect Pension Trustees as our fiduciaries .A new bill

    introduced On October 5, 2011 will in effect eliminate this trust between
    teachers, and all other Chicago employees, by creating new boards. This little paragraph buried in the pension bill SB512 has the potential to wipe out all our pension assets:

    "The participant shall not be deemed a fiduciary by reason of providing investment direction. A person who is a fiduciary, including the plan sponsor, shall not be liable for any loss resulting from the investment direction of the employee and shall not be deemed to have breached any fiduciary duty by acting in accordance with that direction. The retirement system, the Illinois State Board of Investment, and the employer do not guarantee any of the investments in the employee's account balances."
    If my command of English is correct this will alter the fiduciary our pension trustees, four will be appointed by the mayor three elected by us. It will in effect remove the responsibilities and absolve them from any liability in case their actions cause our pension fund to disintegrate.
    Taken in total the passage of these bills will allow the mayor to transfer
    ten billion dollars of current assists in The Teachers Pension fund into new investments. A staggering transfer of wealth.

  • @seth lavin says that we should be paying more attention the part of the budget where the mayor gives CPS some $30M in surplus TIF money back, as reported in CNC http://bit.ly/o6SAyX

  • In reply to Alexander Russo:

    Okay, the Mayor "gives" CPS $30M in TIF money--a one-time deal.

    And then he requires CPS to pay back half of the $32-1/2M the city spent fr school-based Municipal Pension fund workers.

    And in all subsequent years to pay the full amount of those pension funds, which will be far more than $30M.

    Frankly, CPS cannot afford for the Mayor's generosity.

    --Danny

  • In reply to Danaidh:

    Totally correct Danny.

    Rod Estvan

  • also -- former TFA chicago head john white now in charge of NOLA schools profiled in the WSJ http://on.wsj.com/pFtZDk

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