* From a a CTPF communique to its members…
This morning the Chicago Teachers’ Pension Fund (CTPF) Board of Trustees met in a special meeting where representatives of the Chicago Public Schools (CPS) presented a proposal to create a short-term employer payment plan. At the meeting, CPS Interim Chief Executive Officer Jesse Ruiz, Chief Administrative Officer Tim Cawley, and the City of Chicago’s Chief Financial Officer Carole Brown outlined a proposal which would not reduce pension funding, but would help CPS close a $500 million budget gap for 2016.
Under the terms of the proposal, CPS would discontinue its practice of making a single annual pension payment on the last business day of the year and would instead make monthly payments to CTPF, beginning in January 2016 and continuing for the next 10 years.
This new funding schedule would defer approximately $500 million of the FY 2016 payment into the FY 2017 fiscal year. The proposal requires CPS to pay interest at 7.75% on the deferred amount and requires $750 million in collateral to secure the agreement.
Following a period of discussion and debate, the board voted to communicate its general support for the proposal, and authorized a subcommittee of the Board of Trustees to continue negotiations and discussions with CPS. The subcommittee is expected to meet in July and will make a recommendation to the full board later this month.
“We were encouraged to see representatives of CPS at our meeting this morning and appreciate the opportunity to openly discuss payment security for the Fund,” said CTPF Board of Trustees President Jay C. Rehak. “While we still have concerns about this proposal, we look forward to working through these issues so that our members’ interests are protected and our Fund receives all the revenue necessary to meet the pension commitments made by CPS.”
“Under the current statute, CTPF receives revenue once a year, on the last business day,” said CTPF Executive Director Charles A. Burbridge. “This proposal revises the payment schedule, but ensures that we have a monthly revenue stream and provides security and interest on a deferred amount, which is reassuring for our members.”
The subcommittee is expected to make a recommendation in advance of the full board meeting on July 16, 2015.
- 47th Ward - Wednesday, Jul 1, 15 @ 5:31 pm:
This sure feels a lot like trying to get a cheeseburger today but not paying for it until next Tuesday.
It does buy some time though, and if this is accurate, it looks like a fair deal for the pension fund.
- Umm like - Wednesday, Jul 1, 15 @ 5:43 pm:
I will gladly pay you Tuesday for 3 hamburgers today. That kinda does sound whimpy
- Fiscal Cliff Huxtable - Wednesday, Jul 1, 15 @ 5:50 pm:
$750 million in collateral = Entire CPS real estate portfolio
- Confused - Wednesday, Jul 1, 15 @ 6:13 pm:
Several clicks on the ratchet.
- Formerly Known As... - Wednesday, Jul 1, 15 @ 6:22 pm:
CPS is paying 6% on the $ they borrowed to pay the CTPF pension, and 7.75% to borrow that $ back from the CTPF pension?
Chicago-style accounting.
- Mason born - Wednesday, Jul 1, 15 @ 7:06 pm:
Two things stand out. One didn’t rahm say they wouldn’t pay ‘15 bills with ‘16 funds when Rauner offered to accelerate grant funds. Which being grant funds wouldn’t cost 6% any reason he couldn’t have made his reborrow off that. Now he is pushing ‘16 costs into ‘17 but that’s a lot different than ‘16 funds into ‘15.
2. What happens if ctpf were to ever take the collateral? Is cps really going to lease their own buildings back from ctpf? If your not willing to take possession of the collateral it isn’t collateral it’s window dressing.
- Last Bull Moose - Wednesday, Jul 1, 15 @ 7:16 pm:
Does not sound like an arms length transaction.
The great risk to the CTPF is that the City of Chicago cannot make its payments. Increasing the amount due from the City is not prudent.
Unless you own the company, don’t put your career and your savings in the same company. This is not a good risk for the teachers.
- Soccertease - Wednesday, Jul 1, 15 @ 7:26 pm:
Defer=kick the can down the road.
- Gooner - Wednesday, Jul 1, 15 @ 7:30 pm:
So CPS cannot make the year’s payment, but they expect to make the year’s payment plus 7.5%, if only they can divide it up into 12 monthly bills?
Apparently CPS did not involve their math teachers in this analysis.
- Original Rambler - Wednesday, Jul 1, 15 @ 7:34 pm:
I’d love for a reporter to track down RMD and get his thoughts on the current CPS pension crisis.
- Carhartt Representative - Thursday, Jul 2, 15 @ 8:12 am:
=CPS is paying 6% on the $ they borrowed to pay the CTPF pension, and 7.75% to borrow that $ back from the CTPF pension?
Chicago-style accounting.=
Of course, interest paid to a wall Street Bank is going to be different than interest paid to the fund that you’re supposed to be funding. It seems like the interest the city would pay, would actually just save them from bigger payments down the road.