A shortchanging of pension contributions to the Chicago Public School Teachers’ Pension & Retirement Fund by the city school system and state since 1995 created a debt that will eventually cost taxpayers an additional $12 billion in interest alone over the next 50 years, according to Kevin B. Huber, executive director of the $10.4 billion fund.
In an open letter dated Wednesday on the fund’s website, www.ctpf.org, Mr. Huber said the school system and the state have in total shortchanged the fund a combined $5.2 billion.
Defending the fund against accusations of overly generous public pension benefits, Mr. Huber wrote, “If revenue was collected when it was due instead of being deferred to future taxpayers, we would not have a problem. Had CTPF received the $3.2 billion redirected to CPS and $2 billion from the state, we would be 100% funded.”
The Chicago Public Schools system redirected $3.2 billion in Chicago teacher pension fund tax revenue to finance the cash-strapped school system’s budget starting in 1995, when CTPF was nearly 100% funded, through 2005. During that period, the school system received all and the pension fund received nothing in the CTPF tax revenue, a transfer approved by the state legislature, Mr. Huber wrote.
The CTPF “became a victim of its own success,” he wrote.
The CTPF’s funding level now is expected to fall below 60%, Mr. Huber said in an e-mail.
At the same time the Legislature allowed the transfer, it agreed to allocate to the CTPF 20% to 30% of the annual contributions allocated to the statewide teachers’ pension system, but that allotment has steadily declined since 1995, shortchanging the CTPF by a total of $2 billion, Mr. Huber wrote in the letter. In fact, the CTPF will receive no state funding for 2011. For the current fiscal year, the Legislature agreed to contribute $2.4 billion to the $37.1 billion Illinois Teachers’ Retirement System, Springfield.
Teachers in the meantime “never missed a payment to their pensions,” now contributing 9% of their salary, Mr. Huber wrote.
In terms of investments on its assets, the CTPF reported an 8.42% annual rate of return since the beginning of 1991 through June 30 of this year, Mr. Huber noted.
The fund’s assumed actuarial rate of return is 8%.
“Solid investment returns are critical to the success of any pension fund, but without adequate employer contributions, a pension fund simply cannot survive,” Mr. Huber wrote in the letter.
The fund is seeking additional funding from the school system and state, Mr. Huber said in the e-mail.