HEADLINES : Illinois
Chicago Teacher Strike Highlights Importance of Public Pension Reform
WASHINGTON - Today, in response to the Chicago Teachers Union's decision to walk out on contract negotiations with the city, the Council for Citizens Against Government Waste (CCAGW) took the opportunity to highlight the need to reform public employee pension plans, which are among the principal drivers of state and local budget deficits across the United States. The Chicago Teachers Union, whose members average an annual salary of $76,000, rejected a 16 percent raise over four years. They had initially asked for 30 percent over two years.
The financial outlook for Chicago Public Schools (CPS), like that of the city of Chicago and the state of Illinois, is grim. CPS is facing a budget deficit of between $600 and $700 million in fiscal year (FY) 2013, while Chicago grapples with a budget shortfall of at least $369 million and Illinois faces a $43.8 billion deficit, the worst of any state. CPS's bond rating has been downgraded this year by Standard & Poor's and Moody's, and Fitch changed its outlook from "stable" to "negative" in August. The agencies cited concerns about CPS's looming $338 million pension payment in 2014.
Illinois public-sector pension programs are the most underfunded systems in America. While the crux of the negotiations between the city and the union is wages, CPS's budget deficit is being driven in large part by an underfunded pension system. Proven funding for Chicago teachers' pension plans amounts to just 31 percent of its future obligations, and the Illinois Teachers' Retirement System has assets to cover a mere 18.8 percent of its liabilities.