By: Ted Dabrowski and John Klingner
Teacher pensions have not been a point of discussion during the recent Chicago Teachers Union strike, though they should be. After all, it’s pensions that are primarily threatening the solvency of both the City of Chicago and Chicago Public Schools.
Pensions and other benefits make up 25 percent of CPS’ budget and a large part of teachers’ overall compensation. Mayor Lightfoot has already made a firm proposal to raise the average teacher’s salary by 24 percent and those raises will translate into bigger debts for the district.
The average retired CPS teacher already receives a pension of nearly $55,000 a year, according to a 2019 FOIA request to the Chicago Teachers’ Pension Fund.
However, looking at the pension of an average teacher far understates the true size of CPS pensions. The “average” benefit includes teachers who only worked a few years for CPS, which brings down the average.
To get a more accurate picture of what pensions are really worth, look at career teachers. Over half of all currently retired CPS teachers worked 30 years or more. On average, they receive a $72,000 annual pension and began drawing benefits at age 61.
In comparison, the average annual Social Security payment in Chicago is just $16,000 and the maximum benefit for someone retiring at age 62 is $26,500.
The U.S. Census Bureau also reports that the average retirement income in Chicago totaled $30,000 in 2017.
Even more, the average career CPS pension will grow by 3 percent, compounded annually, due to the COLA benefits teachers get. That will double a teacher’s annual benefit to over $140,000 in 25 years.
In all, a career CPS teacher can expect to collect, on average, over $2.2 million in retirement benefits.
That total benefit is all the more lucrative considering how little Chicago teachers contribute to their own pensions.
A CPS teacher is supposed to pay 9 percent of her salary to the Chicago Teachers Pension Fund every year. However, since 1981, CPS has paid for, or “picked up,” 7 of that 9 percent as an additional perk for teachers.
That means a recently retired career CPS teacher only contributed, on average, 2 percent of her yearly salaries toward her pension. That was just $35,500 in lifetime contributions in exchange for $2.2 million in benefits over her retirement.
Those pension benefits will rise due to the salary increases Lightfoot has already offered the CTU. Salaries and benefits for CPS workers make up two-thirds of the district’s budget and raising them will be a prime reason for any new tax hike levied on Chicagoans.
Currently at $54,000, the CPS offer would push the salaries of today’s 2nd-year teachers to $73,000 in just five years – a 35 percent increase.
Today’s average school nurse will do even better. She’ll see a 48 percent jump in her salary to just under $73,000.
And today’s average teacher, making nearly $79,000, will earn nearly $98,000 in 2024. That’s a 24 percent increase.
Those raises are all a function of Lightfoot’s proposed 5-year labor contract that provides guaranteed raises and cost-of-living adjustments.
The true burden
Pension debts will also go up as CPS adds additional staffing. Lightfoot has made verbal commitments to increase just nurse and social worker staffing over the next five years by 450 people alone. The CTU is demanding far more than that. They want the guaranteed hiring of thousands more support staff.
All that will increase pressure on Chicago households that are already on the hook for more than $150 billion in combined state and local retirement debts, according to numbers based on Moody’s calculations. Divvy up that shortfall over Chicagoans with the means to pay – those with incomes over $75,000 – and the result is an impossible, future tax burden of nearly $400,000 per household.
Nobody is on the side of ordinary Chicagoans when it comes to the teachers strike. No matter who “wins,” ordinary Chicagoans are going to lose big.
In a burdensome city like Chicago, that’s a big deal. Another unaffordable contract that costs hundreds of millions, if not billions, more will only exacerbate Chicagoans’ pain and drive more of them out of the city. That will leave a larger bill for those who remain, creating a perpetual spiral of higher taxes and more out-migration.
The reality is nothing will change until politicians like Lightfoot demand the two reforms that will do the most to save the city: a roll-back in the state’s collective bargaining laws and a constitutional amendment for pensions.