Pension deal could impact Chicago teachers

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Chicago teachers weren’t included in the state’s new pension reform bill, but there is still a chance state legislators will impose similar benefits cuts on them in the coming weeks or months, says Chicago Teachers Pension Fund executive director Kevin Huber.

That’s because historically, the law governing the state Teachers Retirement System and the law governing the Chicago Teachers Pension Fund have been very similar. For example, a 2010 pension overhaul affected both pension systems in the same way.

However, such changes would require lawmakers to tackle the pension crisis anew right after a difficult and controversial vote, which public employee unions fought tooth and nail.

“The mayor is looking at keeping some kind of equitable relationship between the benefits for the teachers in the suburbs and the benefits for the teachers in the city,” Huber says. “If he has his choice, we would have been included in the bill.”

For now, the changes slated to affect teachers outside Chicago include:

* Cost-of-living adjustments would be based on a portion of teachers’ pensions equal to $1,000 per year of service, rather than the whole pension. For example, a currently retired teacher who worked for 28 years and is earning a $43,000 pension would see the annual cost of living adjustment reduced to 3 percent of $28,000, rather than 3 percent of $43,000.

* For teachers who have not yet retired, the retirement age would go up and between one and five cost-of-living adjustments would go away. Teachers who are under age 43 will see the greatest cuts to their adjustments, and those under age 46 would see their retirement age increase between four months and five years.

* The salary used to calculate pensions would be capped at $110,000, which would primarily affect principals, assistant principals, and teachers with advanced degrees.

* New hires would not be able to count vacation pay or sick pay toward their pension.

In exchange for the benefits cuts, lawmakers plan to reduce employees’ required contributions from 9 percent to 8 percent of their income, and strengthen requirements for future funding so that pensions don’t run out of money again.

Laurence Msall, president of the Civic Federation, says the pension deal “takes an important step in the right direction to begin stabilizing the state’s pension crisis” but is “only one step in a 30-year journey the state has to take.”

Msall points out that the law is expected to face a court challenge, and will have to be found constitutional in order to take effect. Also, the state faces billions of dollars in unpaid bills, as well as the coming expiration of an income tax increase.

Without either more revenue or a separate bill to tackle Chicago pensions, Chicago Public Schools will face a billion-dollar deficit next year. However, it’s not clear how much money a Chicago pension reform bill similar to what the state passed today would save the district.

“Chicago Public Schools are in severe financial condition. They have been downgraded and continue to be downgraded by the ratings agencies because they have no comprehensive plan for dealing with their pension problem,” Msall says.

He says the Civic Federation has called on CPS to create a plan for stabilizing the district’s finances.

Mayor Rahm Emanuel’s press office did not respond to an inquiry about his lobbying efforts related to the pension bill.