Chicago Asks Teacher Pension Fund for $500 Million Loan to Stave Off Further Classroom Cuts, Layoffs

On Tuesday, Chicago Public Schools (CPS) made a $634 million pension payment to the city’s teacher pension fund.

The payment was made on time, but resulted in budget cuts for the cash-strapped school system.

Now, Chicago is asking the teachers’ pension fund for a $500 million loan to prevent further classroom cuts and layoffs.

From the Chicago Sun-Times:

Mayor Rahm Emanuel’s administration is asking the pension fund for a five-month, $500 million loan.

At a pension fund meeting Wednesday, Chicago’s newly appointed Chief Financial Officer, Carole Brown, said she’s well aware it’s a “big ask,” particularly after the history of pension holidays and partial payments that created the $9.5 billion pension crisis at the Chicago Public Schools.

But Brown said the loan is needed to avoid even more devastating classroom cuts. The loan would be made in fiscal year 2016, when CPS would shift from a lump-sum pension payment to monthly payments. When the loan is repaid in fiscal year 2017, the Chicago Teachers Pension Fund would get the money back — with interest.

“We’re not asking you to forgo. All we’re asking is some cash-flow relief so that we can have time . . . to work with you to go down to Springfield to get a long-term solution to both the education funding issue and the teacher pension funding issue so we don’t have to come back to you,” Brown said.

The trustees’ reaction, from the Sun-Times:

Although pension fund trustees expressed their “general overall support,” it wasn’t without a heavy degree of hand-wringing.

One trustee questioned the idea of “hoping Springfield can come through for us” in the toxic atmosphere of a state budget stalemate between Democratic legislative leaders and Republican Gov. Bruce Rauner over Rauner’s demand for pro-business, anti-union reforms.

Another trustee warned that the teachers pension fund is “not a bank” and even if it were, “You’re [going to] a bank that, in the past, you haven’t been making your payments to for your mortgage to ask for a loan. I don’t think that would pass any underwriter’s approval.”

A third trustee recalled that the teachers pension fund was asked for a one-year pension holiday in 2010. It ended up being a three-year holiday at cost of $1.2 billion, the trustee noted, adding, “Will we ever recover from that? No.“

Chicago Teachers Pension Fund executive director Charles Burbridge says he is considering the proposal.

Photo by bitsorf via Flickr CC License