CNBC's Santelli calls CPS pension problem a 'Ponzi scheme'
The Chicago Public School system's (CPS) pension fund is "essentially a Ponzi scheme,” according to CNBC on-air editor Rick Santelli, who called into “Chicago’s Morning Answer” radio show recently.
Co-host Dan Proft is a principal of Local Government Information Services, which owns this publication.
The notion that the pension fund takes in millions more dollars than it pays out caught Santelli's interest.
"Not only can you not make that math work, you can take it as an incubator of bad math," Santelli said. "You follow many similar programs further up the food chain to federal programs such as Social Security, Medicare and Medicaid because they all suffer from the same issues."
Santelli, who lives in Wheaton and has reported on financial topics for nearly 20 years, said he feels sorry for the teachers who pay into into the pension plan, acting in good faith and expecting a return. They probably joined CPS based on their expected pay, benefits and pension, he said.
"But the sad part is the Ponzi scheme aspects are very accurate," he added.
According to Santelli, if a pension fund is paying out more than it is is bringing in, there are several possible solutions: renegotiate benefits, break the original contract, get more contributions, increase taxes being paid into the fund, find someone else to manage the fund, or raise the age of pension benefit qualifications.
"There is no silver bullet here," Santelli said. "And what's worst is that having no good answers is the only time the city, state or the country move on any negative issues."
Santelli endorsed raising the age limit to qualify for the pension.
"Extending it a few years really goes a long way," he said.
Santelli argued that the burden of the pension fund deficit must be placed on either local property owners or the teachers.
"It is people who are teaching right now who should be the maddest because all of the money that they think they are contributing to help grow a retirement fund and expect to be there when they need it and it isn't," he said.
Santelli blamed the problem on ongoing political conflicts.
"In the end, somebody needs to be willing to work together, and somebody needs to cave here," he said.