The Fiscal Crisis

***Guest Column***

If you’ve read my column or watched the news over the course of the past several months, you know that Illinois is in dire financial straits. There are too many contributing factors to count, but I try to tackle them one at a time. Last week I made brief reference to one such area that I hope to shed more light on this week. I welcome your comments and feedback, and if you would like any source or reference material, please do not hesitate to contact my office.

There is little doubt that Illinois is heading towards a fiscal cliff. When you couple unsustainable state spending with an unstable tax base, the results are never good. On top of these mounting issues, we have even more bad news: Chicago is fiscally insolvent. Why does this matter to us in Northwest Illinois? Well, if the stopgap budget is any indication, our tax dollars will be paying for a municipality’s empty promises. No, state tax dollars will not be going to bail out Freeport or Rockford, they are going to Chicago.

Chicago’s fiscal standing is on even shakier ground than that of the State. This year, Chicago’s budget deficit is $137.6 million. That number is actually a huge improvement on the billion dollar deficits that the city ran from 2010-2013. But the bad news is that this number doesn’t account for Chicago’s pension obligations. This is where the state is expected to step in.

The least solvent of Chicago’s pension funds by far is the Chicago Teachers’ Pension Fund (CTPF). I don’t fault teachers for wanting to make a good wage – we all want a good paying job. But at a certain point there has to be an understanding that there just isn’t enough money.

The Chicago Teachers Union (CTU) has fought for higher pay and better pensions for decades. Again, I fully support teachers being paid a fair wage, but the following numbers are truly astounding.

State law mandates that teachers pay 9.4% of their yearly salaries into their retirement fund. In Chicago, teachers pay only 2%, and the school district supposedly covers the other 7.4%.

Chicago Public Schools average a salary of just over $78,000 a year, and after that 2% pay in, the average teacher receives a taxable income of around $76,440. The problem is that by the teachers only paying in 2%, and CPS is walking away from its obligation to cover the other 7.4%, a fiscal cavern that makes the Grand Canyon pale in comparison has emerged with only empty promises filling the gap.

Chicago Public Schools’ complete mismanagement has serious consequences for those of us who live west of I-294, because in the end we will be left picking up the tab. When the time comes, and the time is coming soon, the State will again be asked to bail out the City of Chicago. If and when this happens, it will add billions to our state’s already growing deficit. Chicago’s problems are our problems.

In 2014, the average retiring pensioner received $68,196 a year. This pension is exempt from state income taxes. So CPS teachers can work for thirty years, contribute little to their own retirement fund, and receive a good retirement. Just imagine if you are a husband and wife who are both retired teachers and earn $68,196 a year twice over.

Right about now most of you are re-thinking your career paths, especially those of you who are teachers in the area that actually contribute a sizeable portion to your own retirements. But if I were a retired CPS teacher, I would be concerned about the solvency of my pension fund. No matter which way you look at it, this is a raw deal for the State of Illinois. So what is the CTU doing to remedy the situation? Nothing. In fact, they are accelerating towards the fiscal cliff. This year, CPS teachers will strike for more concessions. As one observer put it, “I can’t believe some of these people teach my kid math.”

But I would be remiss to lay all the blame on the teachers union. The reality is that the city of Chicago and CPS have been complicit as well.

Beth Purvis, the state’s Secretary of Education says this: “The stunning fact is that while the state provided major assistance to CPS, Chicago shirked its own duty to pay its pensions. From 1995 to 2015, the state sent CPS payments totaling approximately $1.1 billion for pension contributions. During that same time frame, CPS skipped pension payments for 10 straight years and received General Assembly approval for three additional years of contribution reductions.”

The Secretary goes on to say, “Given these conditions, it is no surprise that CPS leader Forrest Claypool is now asking for a financial bailout for the irresponsible behavior of his predecessors, but let's not be confused. This additional allocation for CPS is not to restore equity — it's to make up for years of financial mismanagement.”

Teachers want to make a good wage; I respect that. But what I can’t abide by is Chicago using the rest of Illinois to pay for it. Next year, the State will pick up a minimum of $215 million dollars of CPS pension costs. Mark my words: that is only the first drop in the bucket.

Successful businessman Anthony Hitt sums up my thoughts exactly when he said, “Keep every promise you make, and only make promises you can keep.” The private sector is expected to follow through on their promises, and so should the government. At this moment, our State government – and the City of Chicago – needs to focus on not making promises we can’t keep.

As always, you can reach me or Sally at 815/232-0774 or e-mail us at repstewart@gmail.com. You can also visit my website at www.repbrianstewart.com or on Facebook.