By: Ted Dabrowski and John Klingner
Yes, it’s true. Teachers in Chicago don’t get Social Security. They don’t pay into the fund and they don’t get the benefits. Illinois politicians opted out of Social Security for teachers decades ago in favor of government-run pension plans.
But what the CTU won’t tell you is that the average retired Chicago teacher gets far more in annual benefits than the average Chicago private sector worker gets under Social Security.
This fact is being ignored as the union strikes for more compensation and thousands more in staffing. Both demands will drive up the district’s pension shortfall – the primary reason CPS is already rated five notches into junk and on a path toward insolvency.
Today’s average CPS retiree gets nearly $56,000 in pension benefits annually. That’s 3.25 times more than the average Social Security benefit in Illinois, which was just $17,200 in 2018.
The average CPS pension is also far more than the $29,665 the U.S. Census reported as the average retirement income in Chicago in 2017.
That’s not surprising given the average American in their 60’s has a retirement account balance of just $172,000, according to a study by Transamerica Center for Retirement Studies.
And just looking at average CPS pensions is misleading. A more true measure of just how valuable teacher benefits are is to look at retirees who had a full career at CPS. Those who retired in the last three years get pensions of nearly $72,000 annually.
That’s also far more than the $25,900 maximum Social Security benefit a private sector retiree gets if she retires at age 62.
The benefits for CPS pensioners don’t end there.
Teachers also get cost-of-living adjustments (COLAs) that compound automatically at 3 percent each year. Social Security benefits, on the other hand, only grow based on inflation, which has averaged just 1.55 percent a year over the past decade (2008-2018).
For the average retired teacher, that means her pension of nearly $56,000 will double to more than $113,000 after 24 years in retirement.
Mayor Lori Lightfoot has already asked Gov. J.B. Pritzker for a state bailout of the city’s nearly-bankrupt pension funds. Now, just a few months later, she’s making the city’s problem bigger by giving away what she has termed the “most lucrative package in [CTU] history.” Average teacher salary increases of 24 percent and hundreds more in staffing will only drive up CPS’ pension debts, which Moody’s calculates at $25 billion.
Both sides of the negotiating table can continue to ignore pensions, but bigger salaries, more staffing and the compounded colas will ensure the pension bubble will get bigger.
It’s only a matter of time until it pops.
Read more about the teacher’s strike and Chicago’s financial crisis:
- People of every age and income group are fleeing Illinois
- Lightfoot’s budget won’t stop Chicago’s downward spiral
- Chicago’s Pitch For New Bond Refinancing Is Mighty Fishy
- Chicago teachers strike: Why is no one talking about pensions?
- Here is the list of benefits Mayor Lightfoot is offering to the teachers’ union and why it’s terrible for Chicagoans
- Why Chicago’s Lightfoot should push for a pension amendment, not tax hikes