A HISTORY

LESSON
CHICAGO’S EDUCATORS
Illinois law specifies that funding for Chicago Teachers’ pensions shall be a combination of employer contributions, state
appropriations, employee contributions, and earnings on investments (40 ILCS 5/17-127). A funding crisis at the Chicago
Public Schools in the mid-1990s fundamentally changed the structure of pension funding. CPS administrators in need of
operating revenue introduced legislation allowing the school district to use money
earmarked for pensions (the tax levy) for operating costs.
As a component of the agreement to allow CPS to use the tax levy for operating costs, the State agreed to formalize a
long-standing practice of making an annual contribution to CTPF: “The General Assembly finds that for many years the
State has contributed to the Fund an annual amount that is between 20% and 30% of the amount of the annual State
contribution to the Article 16 retirement system (TRS), and the General Assembly declares that it is its goal and intention
to continue this level of contribution to the Fund in the future.” (40 ILCS 5/17-127).
The State of Illinois did not appropriate funds consistent with its goal and intent. Instead, between 1995 and 2016, State
funding for CTPF dropped to less than 1% of the funding provided to downstate/suburban teacher pensions. During this
same period, the Fund lost an additional $3.2 billion in revenue from its employer, which used pension funding
“holidays” to help stabilize its own budget. These full or partial “holidays” from 1996 through 2005 and 2011 to 2013
deprived the Fund of revenue from investment returns. Lacking stable sources of revenue, the Fund liquidated assets and
relied on investment earnings to pay pension obligations.
Decades of concern from CTPF members and a funded ratio dipping below 50% demonstrated the critical need for change.
Improvements began when legislation signed in 2016 (Public Act 99-521) reestablished the CTPF tax levy. The levy, initially
capped at 0.383% of Chicago’s property value, sent revenue directly to the Fund. Collected for the first time in Fiscal Year
2017, the levy generated approximately $250 million toward CPS’s $733 million contribution for Fiscal Year 2017.
Additional legislation signed on August 31, 2017, (Public Act 100-465) reformed the Illinois education funding formula,
established the State’s obligation to fund the normal cost of Chicago’s teacher pensions, and provided funding to offset
the cost of retiree health insurance. The legislation increased the ceiling for the tax levy to 0.567%.

Pensions provide secure and stable retirements for teachers, administrators,
and public school personnel, and provide an economic engine for the City
of Chicago and State of Illinois. Legislation passed during the past two years
corrects long-standing funding shortfalls. Going forward, CTPF will have a
solid path of diverse, stable, and equitable funding, ensuring that Chicago’s
educators can retire with dignity and security.

203 North LaSalle Street, Suite 2600, • Chicago, Illinois 60601-1231
312.641.4464 • 312.641.7185 fax • www.ctpf.org

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 PENSION FUNDING

19962005

Pension “holiday” takes $2 billion in funds earmarked for pensions and redirects them to the
Chicago Public Schools (CPS) operating budget. CPS promises to resume payment to the Chicago
Teachers’ Pension Fund (CTPF) when the funded ratio falls below 90%. The State of Illinois agrees
to contribute 20-30% of the contribution made to downstate/suburban teachers pensions (TRS).

2006

CTPF’s funded ratio falls, and CPS begins making payments to the pension fund for the first time
in a decade.

2010

P.A. 96-889 gives $1.2 billion in pension “relief” to CPS and extends the pension funding
schedule by 14 years to 2059.

20112013

CPS makes required payments to CTPF at the reduced amount (about $200 million per year
instead of the necessary $600 million).

2012

CTPF funded ratio drops to 53.9%. CTPF liquidates $60-80 million each month to fund pension
payments.

2013

Facing a 2014 payment of more than $600 million, CPS requests additional “relief” with SB 1920
House Amendment #2. The measure was defeated.

2014

CPS makes a $601 million pension payment to CTPF.

2015

CPS makes a $634 million payment for 2015, and requests a payment deferral for 2016 and 2017.
Discussions end without an agreement.

2016

CPS makes a $676 million payment on June 30, 2016. P.A. 99-521 is adopted by the Illinois
legislature, reestablishing a pension tax levy at a capped rate of 0.383%. The State of Illinois
contribution to CTPF drops to $12.1 million. TRS receives $3.7 billion.

2017

P.A. 99-0521 becomes effective June 1, 2017. CPS makes direct payments totaling $483 million
towards a total payment of $733 million for the 2017 fiscal year and the tax levy provides
$250 million in July and August 2017.
P.A. 100-0465 is enacted August 31, 2017. The law reformed the Illinois education funding
formula, established the State’s obligation to fund the normal cost of Chicago’s teacher pensions,
and provided funding to offset the cost of retiree health insurance. The legislation also raises the
tax levy ceiling to 0.567%.

 CTPF

FUNDING HISTORY
Public Act 100-0465 increases the tax levy to 0.567%. Requires the State of Illinois to pay
the normal cost portion of the CPS’ required contribution and $65 million for
retiree health insurance costs beginning Fiscal Year 2018.

Percent

BOE resumes payments to CTPF
Funding shortfalls begin to take toll

100

99.7 99.9

100

100.8

In 2016 Illinois legislators pass
Public Act 99-0521 reestablishing
the pension tax levy. This is the
first time since 1995 that CTPF has
a guaranteed revenue source.

99.9
96.7

96.3
92.0

BOE requests & receives
additional $1.2 billion in
pension payment “relief”
over 3 years

85.8

80
80

80.9

83.5
79.0 78.0

80.1 79.4
73.3

66.9

60
60

59.7

CPS collects $2B in pension tax revenue;
contributes $0 to CTPF.

53.9
49.5

40

51.5 51.8 52.4

50.1

GA installs “safety net” to protect Fund.
State of Illinois states its “goal and intention” to
contribute 20% to 30% of TRS contribution.
Law also requires CPS to resume contributions
when funding falls below 90%.
State funding fails to materialize.

40

20
20

0
0

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

Prior to 1995 CTPF was funded through City of Chicago tax levy.
1995 legislation redirected tax levy to CPS operating budget.

2008

2009

2010

2011

2012

2013

203 North LaSalle Street, Suite 2600
Chicago, Illinois 60601-1231
www.ctpf.org
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2014

2015

2016

2017

Chicago Teachers’ Pension Fund