Whose Fault is the CPS Budget Crisis?

Last week, Chicago Public Schools chief executive Ron Huberman announced that the school district, the nation's third-largest, wants to slightly increase property taxes to help cover a rising budget deficit for fiscal year 2010. But the real pain, as Huberman hastened to add, will come in 2011, when the red ink may reach $1 billion due to exploding pension costs.

It should be clear by now why Mayor Daley chose a highly-regarded budget whiz with no education experience to succeed U.S. Secretary of Education Arne Duncan. Huberman, with the help of the General Assembly, came to CPS straight from saving the Chicago Transit Authority from financial ruin. Chief among his accomplishments at the CTA was renegotiating employee pension benefits to bring them in line with the CTA's long-term budget.

Huberman and Daley have already begun to test the waters on renegotiating teacher pensions. The response from the Chicago Teachers Union has been predictably apoplectic. Both Daley and the union have tried to shift some blame to the state. And taxpayers, who feel like they already taking it on the chin, are understandably fed up with both the union and politicians at all levels.

Like a lot of issues in Chicago, though, nearly everyone shares the blame for creating this mess. Below, I've highlighted some facts that demonstrate how a dysfunctional administrative and political culture -- in CPS and the union, in Chicago and Springfield -- has brought us to where we are.

1.) The Chicago Public Schools underfunded pensions for a decade, from 1995 to 2005. One of the biggest reasons the teachers pension fund is so weak is that CPS underfunded it for 10 years. Are teachers wrong to ask why they should pay for the fact that the district's problem is one of its own making? The CTU certainly has its answer: "We're not the federal government, and we're not going to provide a bailout to CPS," said CTU spokeswoman Rose Genova.

2.) Part of the reason for the pension under-funding was that CPS increased teacher salaries without increasing classroom time. For years, CPS has bought labor peace by increasing salaries at a fast clip without asking for longer hours. In fact, CPS has one of the shortest school days and school years of any big city, meaning that teachers do quite well if an hourly wage is computed. According to Crain's Greg Hinz, the current pension plan lets teachers retire at age 55 (with a minimum of 34 years on the job) with 75 percent of average pay of the highest four of the previous 10 years. Benefits rise at 2.2 percent per year. The average pension today is $42,000 on a salary of $57,000.

3.) CPS teachers have no Social Security benefits, and so slashing their pension benefits or switching to a defined-contribution system is borderline cruel. Critics of the union argue that the private sector has all but abandoned traditional defined-benefit pensions. As an employee of a charter school, I receive a 503b (the non-profit equivalent of a 401k), not a pension. But I, like all private employees, will (in theory) also have Social Security as a guaranteed source of income. Since CPS teachers, like many Illinois governmental employees, do not pay Social Security taxes, they don't receive these guaranteed benefits.

4.) Chicago residents are being double taxed. As if Chicagoans weren't sick of paying for enough things that actually benefit the entire region (*cough* Olympics *cough*), Mayor Daley makes the valid point that the Illinois pension system is extraordinarily unfair to Chicago taxpayers. The state covers the pensions of all the teachers in Illinois who are outside of Chicago, while CPS must cover the pensions of its own employees. Given that Chicago taxpayers contribute tax dollars to the state like everyone else, the system double-taxes Chicagoans. And I'll leave aside that this is triple punishment for that subset of Chicago taxpayers known as Chicago teachers, who all must live within the city limits due to the CPS residency requirement.

5.) TIFs are diverting tons of money. Mayor Daley's beloved Tax-Increment Financing districts siphoned off over $275 million from the CPS last year. Granted, some TIF uses are legitimate, but even if we assume that just 15 percent is wasteful (a number that Ben Joravsky -- and many others -- would call laughably low), canceling these TIFs would provide more money for CPS than Huberman's newly-announced property tax hike.

What does this all mean? Well, mostly that no one has seriously sat down and thought of wholesale reform to the way CPS pays for its obligations -- and that those who have likely found it impossible to cut through the warring interests and design a system that makes sense.

The best solution, I think, is the one espoused by my good friend, the crusading labor lawyer Tom Geoghegan. As Tom argues, what we really need in the United States is a guaranteed public pension through the Social Security system:

Compared to other developed countries, the United States is very miserly in what it spends on Social Security. Our rivals typically provide 60 percent or more of working income as part of the public pension while we pay under 40 percent. Far from "controlling the costs" of Social Security we should be increasing the pay out by lifting the payroll tax and moving to progressive income taxation. [W]orkers should contribute more for a meaningful retirement now that the private pension system has virtually collapsed.

If the federal government provided a higher Social Security payout (i.e., a public pension) funded by higher payroll taxes, entities from the Chicago Public Schools to the old General Motors could actually devote their attention to their work rather than worrying about how to pay for their retirees' pensions.

Comments

[K Kasper]

Wow, what a suprise -- a charter school teacher saying teachers need more classroom time instead of increased pay. Are you getting a little tired of being asked to work without pay. That's what happens when you're not in a union. That's what happens when you don't understand that by becomming part of a charter school that does not have union representation you HELP the city do all of the 5 things you listed above.

Plus -- get your facts straight, the last contract did indeed increase classroom time. Union teachers are NOT opposed to increased classroom time. What they are oppossed to is increased classroom time without compensation. Something charter school teachers have no ability to fight.

[norsider]

Mr. Bayani does make some valid points regarding TIF's, the disparity between the statewide teachers retirement and CPS teachers retirement.

What he does NOT prove is a valid reason why CPS teachers should bow down before Huberman to give up $$$ to atone for the sins, whether of omission or commission of Da Mare and Springfield.

[norsider]

IDS is a reprehensible corporate giveaway to Kaplan, et al, for all of the reasons you list above. (And yes my students and I have suffered through it.) Save $32 million right there by dumping it AND hold off on buying another canned curriculum. In fact why not demand that downtown STOP BUYING USELESS programs and instead pump those funds directly into the schools so that the principals & LSC's can make their own informed decisions about how best to serve the students THEY teach in each particular community. Isn't that a huge part of the decision matrix the National Boards expects of superior teachers?

[norsider]

Rock on Rodentface!

As the CPS old-timers, who weren't afraid to strike for their rights used call out, "Chop the top." How many hacks are there at 125 S. Clark whose day-to-day contributions would not be missed? How much can be saved there?

A pension is a promise, a contractual obligation, and it is a legitimate part of the compensation package for teachers. It never ceases to amaze me that people think nothing of asking teachers to make do with less over and over again in a manner that they would never even consider asking of other professions. Not only are we required to live in the city limits, which is not cheap, but we should just drop our rights to plan for our own futures, maybe pay off a mortgage by the time we retire and go about our lives in a dignified manner.

[rodentface]

Besides general mismanagement by the Board and Mayor, here are two more major causes of the deficit:

6.) Illinois ranks 49th, functionally dead last, in its support for education. (Nevada is 50th but uses gobs of casino money to pay for education, thus alleviating the state's contributions.)

7.) Lack of educator involvement in budgeting. The current CPS budget deficit is approximately $60 million. How many teachers or in-school employees (not downtown bureaucrats) took part in crafting the CPS budget? Zero. While $60 million may sound like a lot of dough, I guarantee that money could easily be saved by implementing solutions from a teacher panel. I'm a teacher - where would I start? Instructional Delivery Systems (IDS) costs CPS $32 million this coming year. IDS mandates curricula in over 40 high schools, eliminates professional autonomy entirely, discards lessons relevant to students' lives created by those who know the students best - teachers, spends large sums on books that are never even used, and shows zero evidence of a positive impact on student learning. Simply return to high school teachers their freedom as professionals and CPS will alleviate one half of its current deficit. It would not be difficult for a panel of teachers to save another $32 million negatively impacting students or classrooms.

Thanks to you and the Huffington Post for your article. It is clear to Chicago education professionals that the Chicago Way in education, which Secretary Duncan is proposing to replicate, is a massive fraud.

[rodentface]

Mr. Bhayani,

Each of your 5 points deals with mismanagement on the part of CPS, the city, or the state - not teachers.

1) CPS underfunded pensions. CPS asked and state legislators allowed it.
2) Your basic premise here is in error. The CPS/CTU Agreement from 2004-2007 did increase instructional time by 15 minutes for every day of the school year. And teachers would be happy to teach longer but not for free. I volunteer enough of my time as it is, thank you very much. Oh, during the 5 year stretch from 2004 to 2009 teacher salary costs for CPS have risen only 10%. Hardly extravagant.
3) CPS employees do not receive social security. Yep. An issue for state legislators.
4) Chicagoans are double taxed. True enough. It's an issue for the mayor and city council.
5) TIFs. Again, you're dead on, but it's an issue for the mayor and the city council.