Fiscal experts are warning that Chicago Public Schools (CPS) will be back for more once the revenue raised from yet another increase in property taxes disappears into the fiscal black hole that is the Chicago Teachers Pension Fund (CTPF).
“They will have to come back for more over and over and over again,” Ted Dabrowksi, vice president of policy for the Illinois Policy Institute and author of numerous position papers on the economic woes of the city and state, told Chicago City Wire.
The 8.3 percent increase in property taxes announced by CPS will cost the owner of a $250,000 home $177 more annually in taxes, more than half of which will go to the ever-higher contributions CPS must make to the busted pension fund.
Illinois Gov. Bruce Rauner
The increase, with no City Council approval needed, comes courtesy of a provision in the school funding plan, signed by Gov. Bruce Rauner in late August, that already included a generous bailout for the Chicago schools, Dabrowski said. The plan provided $150 million more for CPS than an earlier plan Rauner vetoed. A good portion of that funding will likewise go to cover pension costs.
Overall, CPS received an additional $450 million over last year, $221 million of which will go toward employee pensions.
The property tax increase is on top of a record-high $543 million in property tax increases still being phased in to cover police and firefighter pensions.
A May 2017 analysis by Chicago City Wire shows that throwing more money at the CTPF is about as sound as investing in a Ponzi scheme. The CTPF paid out $1.5 billion last fiscal year, mostly in benefits to retirees, but it earned just $7.8 million on its investments, records with the Illinois Department of Insurance show. It cost CTPF $35.8 million in investment expenses to earn that $7.8 million, meaning it actually lost $28 million between July 1, 2015, and June 30, 2016.
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 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.