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Chicago Crowd-Out: How Rising Pension Costs Harm Current Teachers—and Students

issue brief

Chicago Crowd-Out: How Rising Pension Costs Harm Current Teachers—and Students

May 25, 2016
Public SectorPension Reform
Urban PolicyEducation

Executive Summary

Since the 2008 financial crisis, U.S. state and local governments have faced significant fiscal challenges, and a few jurisdictions—Detroit, most notably—have filed for bankruptcy. The worsening financial crisis of the Chicago Public Schools (whose budget, as well as its taxing authority, is separate from that of the city) poses a threat to the welfare of 26,261 current teachers and 396,683 students.

Key Findings

  • Rising retirement costs have contributed significantly to the CPS’s budget woes: since 2001, the CPS’s actual pension contribution—for benefits that its teachers, retired or still working, have already earned—has grown more than sevenfold, while the CPS’s revenue has grown by only about 11 percent.
  • The growth of pension debt-service payments leaves fewer resources to pay for today’s teachers and students: the CPS has enacted wide-ranging budgetary cuts, from textbooks to coaching stipends, and average salaries for teachers have also stagnated.
  • The Illinois Supreme Court’s ban on benefit adjustments for current workers and retirees has severely narrowed the CPS’s options for resolving its financial crisis: absent substantial reforms to CPS pensions, the burden of correcting the CPS’s fiscal mismanagement will fall mostly on Chicago’s teachers—and students—in the form of pay cuts, layoffs, furloughs, and other reductions to educational services.

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