The Chicago Teachers' Pension Fund (CTPF) paid out $1.5 billion last fiscal year, mostly on benefits to retirees.
But it only earned $7.8 million on its investments, according to a filing it made with the Illinois Department of Insurance.
In addition, it cost CTPF $35.8 million in investment expenses to earn that $7.8 million, according to the filing, meaning it actually lost $28 million between July 1, 2015 and June 30, 2016.
The Chicago Teachers' Pension fund operates like a Ponzi Scheme, but it is allowed to do so because the fund is taxpayer-backed. Bernie Madoff's private Ponzi scheme cost investors $18 billion; he received 150 years in prison.
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Years like 2016 elucidate how the fund, which is supposed to pay for the current retirements of some 28,000 former CPS teachers and administrators as well as provide future benefits to another 29,000 active ones, is running out of money, and time.
At $10.1 billion, CTPF is less than half the size actuaries say it needs to be to earn enough investment returns to pay its obligations.
Because it isn't, Chicago taxpayers and current CPS employees have been propping up the fund. Their annual contributions aren't invested but, rather, used to pay expenses and current beneficiaries.
This fact isn't expressly admitted by CTPF. But so long as the fund remains undercapitalized, it remains a fundamental reality.
Such a scheme would be illegal in the private sector. But among public employee pensions, especially in Chicago, its commonplace and tolerated. For now.
$16 billion short
A Local Government Information Services (LGIS) analysis of CTPF's investment performance and spending found that over the past decade, it paid out $7 billion more than its investments earned.
Between 2007 and 2016, the fund earned $5.1 billion while it spent $12.1 billion.
The fund's official asset base decreased by only $1 billion-- from $11.1 billion to $10.1 billion-- thanks to contributions by active CPS employees and Chicago property taxpayers on the CPS employees' behalf.
They ponied up another $5.55 billion, money CPS employees were led to believe was being invested for their own retirements. In truth, its being used to pay benefits for teachers who retired 10 or 20 years ago.
Left to exist on its own investment returns, like a private fund would, the Chicago Teachers' Pension Fund would be less than half the size it claims to be today-- just $4.1 billion-- LGIS found. That's short $16 billion, compared with the state's actuarial analysis.
Three more years like 2016, and CTPF at its true size would be more than just insolvent. It would be completely out of cash.
Property taxes: the trump card
City of Chicago property taxpayers have proved CTPF's reliable backstop, paying $3.7 billion toward Chicago teacher pensions since 2007, or an average of $310 annually per Chicago household.
That number is trending upward, and quickly.
The last three years, CTPF has received nearly double-- $587 annually per Chicago household, just for teacher pensions. To be sure, over the past three years, taxpayers have made record contributions-- between $600 and $700 million per year.
But it hasn't made a dent.
CTPF's overall liability grew 38 percent from 2007 to 2016, as higher paid teachers retired and active ones earned higher and higher salaries. The fund owed $14.7 billion in 2007; it owes $20.3 billion today.
Annual payouts to beneficiaries have risen 61 percent since 2007, from $906 million to $1.46 billion. The average CPS teacher salary has risen, too, by 58 percent, from $59,458 to $94,064.
At today's rate of beneficiary growth, the CTPF stands to shell out $8.6 billion to retirees over the next five years, or 85 percent of its current asset base.
Investment returns won't be close to enough to pay the bill.
The past five years, CTPF has earned $3.2 billion. The five years before that, it earned $1.9 billion.
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Chicago Teachers Pension Fund liabilities are rising
Teacher compensation and retiree benefits are growing, as the number of active CPS teachers falls and the number of CPS retirees rises.
| # Teachers | Avg. CPS Teacher Comp* | # Retirees | Avg. Retiree Benefit | |
| 2016 | 29,243 | $94,064 | 28,398 | $51,546 |
| 2015 | 29,706 | $96,420 | 28,114 | $50,601 |
| 2014 | 30,654 | $91,351 | 27,722 | $50,130 |
| 2013 | 30,969 | $76,026 | 27,440 | $48,848 |
| 2012 | 30,366 | $76,466 | 25,926 | $47,544 |
| 2011 | 30,133 | $76,286 | 25,199 | $46,288 |
| 2010 | 33,983 | $72,498 | 24,601 | $44,766 |
| 2009 | 31,455 | $71,825 | 24,218 | $43,280 |
| 2008 | 32,089 | $66,809 | 23,920 | $41,838 |
| 2007 | 32,968 | $61,634 | 23,623 | $38,372 |
Source: Illinois Department of Insurance
*Teacher Comp includes taxpayer-funded pension contribution but not health care benefits. Numbers are not indexed for inflation.
Property taxpayers and teachers prop up the Chicago Teachers' Pension Fund.
The fund cannot pay for teacher retirements on its investment returns alone. So it funds them with property taxes and contributions from CPS teachers. How much have they contributed to the fund over the past decade?
| Property taxpayers | CPS Teachers | Total | |
| 2016 | $700,700,000 | $191,882,430 | $892,582,430 |
| 2015 | $708,667,000 | $191,233,298 | $899,900,298 |
| 2014 | $650,416,141 | $187,846,065 | $838,262,206 |
| 2013 | $207,654,000 | $188,356,294 | $396,010,294 |
| 2012 | $203,729,011 | $187,141,384 | $390,870,395 |
| 2011 | $208,589,994 | $185,882,636 | $394,472,630 |
| 2010 | $355,759,950 | $194,621,551 | $550,381,501 |
| 2009 | $263,069,327 | $176,176,975 | $439,246,302 |
| 2008 | $229,270,412 | $172,504,804 | $401,775,216 |
| 2007 | $168,761,750 | $179,017,663 | $347,779,413 |
| TOTALS | $3,696,617,585 | $1,854,663,100 | $5,551,280,685 |
Source: Illinois Department of Insurance
How much would the Chicago Teachers' Pension Fund have left if operated as an actual pension fund?
Since 2007, Chicago's Teacher's Pension Fund has earned $5.1 billion over the past ten years, while paying out $12.1 billion. How much would the fund have left if it weren't subsidized by active CPS employees and property taxpayers?
| Beginning Assets | Investment Return | Expenses | Ending Assets | |
| 2007 | $11,090,370,261 | $1,909,439,876 | $906,472,176 | $12,093,337,961 |
| 2008 | $12,093,337,961 | -$737,538,769 | $1,000,770,310 | $10,355,028,882 |
| 2009 | $10,355,028,882 | -$2,463,906,744 | $1,048,155,262 | $6,842,966,876 |
| 2010 | $6,842,966,876 | $1,107,573,754 | $1,101,288,633 | $6,849,251,997 |
| 2011 | $6,849,251,997 | $2,123,292,641 | $1,166,400,567 | $7,806,144,071 |
| 2012 | $7,806,144,071 | -$38,083,067 | $1,232,635,521 | $6,535,425,483 |
| 2013 | $6,535,425,483 | $1,174,582,824 | $1,340,401,283 | $6,369,607,024 |
| 2014 | $6,369,607,024 | $1,685,134,974 | $1,389,710,588 | $6,665,031,410 |
| 2015 | $6,665,031,410 | $381,740,298 | $1,422,589,121 | $5,624,182,587 |
| 2016 | $5,624,182,587 | -$27,987,163 | $1,463,798,486 | $4,132,396,938 |
| TOTALS | $5,114,248,624 | $12,072,221,947 |
Source: Illinois Department of Insurance
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