Tiwanda Parker, a college and career coach at Marshall High School, wonders how she could make a convincing argument for students to apply for jobs at Chicago Public Schools without a more stable pension picture.
“We have to make sure that we believe in this profession,” she said. “And a part of believing in this profession is … making sure that those basic benefits are in place.”
Who picks up the bill for the disputed $175 million pension payment for nonteaching CPS staff has been a looming question mark for the district in recent weeks and months. It is part of what led to the resignation of the previous school board and the subsequent firing of schools’ chief Pedro Martinez. It’s also part of what led to last week’s delay of a budget amendment to balance the city’s books by the end of March.
The city has already made the payment but is awaiting reimbursement from CPS. Mayor Brandon Johnson and predecessor Lori Lightfoot have argued CPS should be responsible, while Martinez repeatedly has said the payment is the city’s legal obligation. The district said in a statement to the Tribune it doesn’t have the funding to cover the pension payment on top of the costs of a new teachers contract.
“Chicago Public Schools (CPS) officials have been clear for more than a year that CPS, like many districts, is facing a challenging fiscal situation without federal COVID-19 relief funds and without state education dollars that meet the state’s own definition of full funding,” a CPS spokesperson said in the statement.
Johnson’s team had been warning of a looming March 30 deadline to log the reimbursement in its books for 2024. Without it, the mayor’s team had suggested it might have to draw from its reserves to reconcile the difference. The final shortfall, Johnson deputies said in a Tuesday briefing, would not be known until later this spring, but an accounting fix could be done without Council sign-off.
“Again, it’s too early to tell, but ultimately, any of this kind of reconciliation does not require a council vote, OK?” a senior administration official said.
What about the beneficiaries?
Conversations about the Municipal Employees’ Annuity and Benefit Fund by city officials in recent weeks don’t often address the people behind the pension that is being treated like a political football.
“This is our pension, we’ve done the work and it should be paid,” said Lashawn Wallace, who was a paraprofessional with CPS for 32 years and is now on leave from the district to work as an organizer for the Chicago Teachers Union.
Regardless of who picks it up, the pension contribution tab for the MEABF will continue to rise as it digs out of near-insolvency. The MEABF only had about 24% of the funds it needed to cover future payments at the end of 2023, according to the fund’s most recent actuarial report. Pension contributions, by law, must rise to reach a 90% funded level by 2058.
Former Mayor Rahm Emanuel got creative with how to meet the city’s obligation to MEABF workers, including imposing water-sewer tax increases, but Johnson settled his budget last year by a razor-thin margin and has not floated similar options to cover the gap.
More than half of the fund’s beneficiaries are current or former CPS employees, according to city officials — a number that is growing. The fund also covers some employees from the city and the Chicago Housing Authority.
There were over 36,900 active members of the MEABF, per data as of December 31, 2023, the most recent figures provided by city employees. That doesn’t count over 24,400 inactive members and 26,000 retirees and beneficiaries.
During the Tuesday briefing with the mayor’s office, Johnson officials said they won’t know how large the gap from the MEABF will end up being until a “book reconciliation” between March 30 and June 30 that accounts for final revenues and expenses from 2024. The city can only log revenues for the last fiscal year until the end of this month.
The mayor’s team also could not say whether other revenues would overperform enough, or whether expenses would drop enough to cover the $175 million difference. They also demurred on whether the city should cut back on other revenues it doles out to CPS — like grants, capital projects, or tax-increment financing surplus — to make up for the shortfall. Drawing down from the city’s reserves may earn the ire of ratings agencies, but is still on the table, mayor’s office officials said.
Regardless, “we have sufficient liquidity to meet our obligations,” a Johnson administration official said. “We can’t predict how the rating agencies will react to either the news cycle or the material impact. So we will do our work, and they will do theirs, and both of those things will be public.”
Ald. Scott Waguespack, a frequent mayoral critic, warned that any action cutting out City Council will make Johnson’s already-fraught aldermanic relationships “much worse” after a grueling 2025 budget cycle. He and 14 other aldermen issued a letter on Tuesday demanding council approval for any movement of city funds to cover the 2024 budget gap, as well as quarterly reporting on the Finance and Budget committees on cash-flow management.
“The problem I have with a couple of my colleagues who are with them on this and just saying, ‘Hey, we’re just going to move the money around,’ it’s other people’s money,” Waguespack, the former chairman of the Finance Committee, said. “It’s taxpayers’ money, and they can’t treat taxpayers like it’s an open cash register.”
‘Highly unusual situation’ and ‘highly unusual history’
At a recent school board meeting to discuss financial options to cover the pension payment in mid-March, Jill Jaworski, the city’s chief financial officer, said in a presentation that she herself is a member of the MEABF.
She recommended the school board approve a borrowing proposal to address the budget gap partly caused by the $175 million pension payment asked for by the city.
Jaworski said the pension conflict is a “highly unusual situation” based on a “highly unusual history.” In all other school districts in Illinois, Jaworksi said, teacher retirement contributions are paid for by the state.
By law, the city is responsible for making MEABF payments. That only changed in 2020, when Lightfoot, in an effort to detangle district finances from the city as it transitioned to an elected board, forged an agreement that would shift some costs onto CPS. The district made its first payment to the fund in 2021, and future payments were supposed to gradually rise to more than $250 million.
“As CPS moves to be a completely independent school board, there is a need for CPS to become financially independent,” Jaworski said, suggesting the state should help pick up some costs, as it does with other school districts in Illinois.
But CPS is different from other districts because of its status as a large, urban district. It also has millions of dollars of debt in capital project expenses for its old buildings.
An increasing payment
Because of those rising obligations to the MEABF, the city’s ask of CPS could grow to $315 million by 2027, according to projections in a 2022 district analysis, further stressing an already structurally imbalanced budget.
Tom Sgouros, a research associate in data science at Brown University, said it is possible to run a pension system at low levels of funding under the right demographic conditions indefinitely — assuming there’s no large population bump or other unexpected changes.
“That’s because whoever’s in the Chicago system that is going to be owed a pension liability to them, the last dollar of that liability isn’t going to be paid out until they die,” Sgouros said.
In a recent interview with the Tribune, Joe Ferguson, president of the watchdog group the Civic Federation, said: “There is no professionally advanced and vetted pathway for the school board to take on the MEABF reimbursement, which it has no legal obligation to take on in the first instance.”
Non-teacher CPS employees told the Tribune they don’t care how the pension payment is paid, so long as they still have stability and aren’t shortchanged in their retirement benefits.
Chicago Teachers Union President Stacy Davis Gates reiterated that sentiment at a rally with firefighters and teachers union members Monday morning, where members of both unions urged the swift settlement of their respective contracts.
“Let me say this. I don’t care who pays it. The city can pay it. The school district can pay it. They can figure out how to honor the workers in this city,” Davis Gates said when asked about the pension payment. “It only is a problem of hot potato when it comes to the workers of this city.”
“Protect those who protect you,” read one of the signs that bobbed in the sea of CTU red ski hats and jackets.
