The Chicago Pension Scandal: $100,000+ Teacher Pensions Costing Taxpayers $1 Billion

Tyler Durden's picture

As we've known for quite some time now, Illinois is completely insolvent, and in large part due to enormous pension liabilities which as of December were underfunded to the tune of $111 billion. Not only is the state insolvent, its millionaires can't get out fast enough to avoid the massive tax hikes that will be coming in what is sure to be a failed effort to plug budget holes, as well as the soaring criminality in cities such as Chicago which recently just passed the historic milestone of 1,000 gunshot victims in the fastest time in decades.

Citing unfunded pension plans, Moody's downgraded Illinois to Baa1, and gave it a negative outlook back in October. The issue with the pension funds (aside for the massive shortfall in funding) is that per the Illinois Supreme Court, benefits cannot be altered. In a ruling last year, the state's Supreme Court overturned a 2013 law that tried to ease the burden of what was then a $105 billion funding gap.

"Crisis is not an excuse to abandon the rule of law. It is a summons to defend it." the supreme court said in its ruling.

In other words, regardless of the fact that the pension funds are insolvent, the state cannot cut benefits to any of its participants. This is in stark contrast to the multi employer private pension funds, which as we pointed out, are able to cut benefits in order to keep the funds solvent.

At this point, it's clear that without the ability to cut pension benefits, most plans will end up insolvent, at which point nobody will be receiving benefits. Until that point comes, however, there are a few who are living quite well off of the system.

As Forbes' Adam Andrzejewski reports, there are currently 7,499 teacher retirees that earn at least six figure pensions, and he estimates that in just six years, the number will be three times what it is today because, as we noted previously, the Illinois Supreme Court recently confirmed that pension benefits are constitutionally guaranteed and "the public employee gravy train is running faster than ever."

Now, there would be nothing wrong with these retirees collecting the "annuity" benefits after paying to the retirement plan for years as most other honest, hard-working employee do. There is just one problem: this was a human system, and like every human system (especially in Illinois) it was impeccably gamed from the beginning. Especially when Chicago is involved as it is here.

Take the example of two union lobbyists who substitute taught for one-day in the public schools and then started collecting over $1 million of lifetime public ‘teacher’ pension payout – despite a state law expressly designed to stop them.

And now take all the other 7,499 educators. The retirees in question paid so little into their own retirement (breaking even on their cost basis within the first 20 months of retirement) that taxpayers now face a $900 million bill just to keep the pension payments flowing!

Not unexpectedly, a well known culprit behind this systemic abuse emerges: the city of Chicago. As the following map showing where the 7,499 six-figure educator pensions located, most of the ‘heat’ is in the six-county area around Chicago.

 The shifting of responsibility for funding retirement from the individual to the taxpayer at these levels is completely unsustainable.  

This week, our organization at OpenTheBooks.com debuted our interactive info mapping platform giving context to the 7,499 retired Illinois educators who pulled-down a pension of $100,000 or more. These retirees cost Illinois taxpayers $900 million (2015). Individually, these pension millionaires contributed so little to the system that they ‘broke-even’ on their ‘cost-basis’ within the first 20-months of retirement.

It takes the equivalent of all income taxes paid by 330,177 individual Illinois taxpayers to fund the nearly $1 billion for the 7,499 ‘highly compensated’ six-figure retirees. By any estimation, this is unsustainable. Illinois only has 6.2 million people with jobs.

 

The article goes on to point out that by 2017, Illinois tax payers will be on the hook for more than 10,000 educator pensions that pay more than $100,000 a year, and by 2022 that number rises to over 20,000 people pulling in six figures after retirement. Readers can probably calculate on their own the nominal dollar taxpayer support that will be needed then.

Adam also draws attention to another critical issue further burying taxpayers, which is double-dipping.

[M]any administrators taking six-figure pensions really aren’t even ‘retired.’ Twenty-one highly compensated school administrators are now members of the municipal system, not the teacher’s system. It’s double-dipping: receiving a ‘teacher’ retirement pension, while also rehired by a school under the ‘municipal’ plan.

This form of doubling-dipping is not prohibited under Illinois law. It should be. For example, Mohsin Dada made $503,200 by double dipping the Teacher’s Retirement System (TRS) and the Illinois Municipal system (IMRF). Dada’s teacher pension is $254,700 and his current salary from North Shore School District 112 is $248,510 – up from $202,903 just three years ago (2012).

It gets wose: the public pension largess is not only for government educators, but also private education associations and union bosses. For example, Reginald Weaver was President of the National Education Association (NEA) in Washington, D.C. – the de facto national teacher’s union. Weaver’s Illinois teacher’s pension is now $22,759 per month, or $273,108 annually.

And lest we forget about the fact that outside of the tens of thousands of retirees who are making six figures, there are another 100,000 pensions for rank and file teachers who make less than that. Include these members, and an estimated $1 out of every $3 collected by the Illinois income tax now goes toward retirement annuities. That's the equivalent of all income taxes paid by 2 million Illinois taxpayers every year.

The systemic abuse of the system goes to the very core: locally, school districts are spiking salaries – granting raises near the end of a career to raise guaranteed pensions – which drives costs even higher. The fraud appears to be focused on the city of Chicago. Some examples:

  • Northern Illinois school districts are driving the majority of $100,000 pensions. In fact, 6,706 pensions for over $800 million in annual payouts were conferred by districts in the Chicago metropolitan suburban area. Only 793 six-figure pensions totaling $95 million in annual payouts were conferred by school districts in the rest of the state. Yet, income-taxpayers across the whole state guarantee the retirement annuities for everyone.
  • The Top 100 All-Time pensions: #1 $302,991 (Lawrence Wyllie at Lincoln-Way CHSD) to #100 $200,812  (Michael Radakovic at Aurora East USD 131). Read the Top 500 All-Time IL teacher pension list.
  • The Top 5 school districts conferring six-figure pensions are Palatine TWP HSD 211, Palatine (449); Township HSD 214, Arlington Heights (419); Consolidated HSD 230, Orland Park (196); Northfield TWP HSD 225, Glenview (188); Maine TWP HSD 207, Park Ridge (180).

Given what we know about the situation, there is no path forward that will save these pension funds from going insolvent. This brings us to an interesting twist... Under Illinois state law, the pension system is required to reach 90% funding by 2045. We're curious if by that point, the state supreme court will view crisis as being a valid excuse to "abandon the rule of law."

For those who are curious about more details, the following interactive map courtesy of OpenTheBooks.com lays out all the 7,499 "retired" Illionois reveals all those who hope to abuse the system until the very last drop. Click on the map for the interactive version.

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38BWD22's picture

 

 

The voters of Chicago & Cook County got who they wanted and elected.

Congratulations.

silverer's picture

Agreed. Now, TAX THE SHIT OUT OF THEM!

Government needs you to pay taxes's picture

After draining their host, the Dims scurry off to the next place they wish to 'save', leaving the niggers and the rest of the slow, old, and weak to suffer as a result of their decades-in-the-making debacle.

LowerSlowerDelaware_LSD's picture
LowerSlowerDelaware_LSD (not verified) Government needs you to pay taxes Apr 24, 2016 2:14 PM

End all government unions.  Allow the free market to compete for teachers, secretaries, and all other gubmint jobs.  Private school teachers make around 1/3 that of gubmint "school" (indoctrination center) teachers.

Now being a teacher in the Dear Leader Obama "organized" Chicago...  I wouldn't do it for double that.  Too many entitled ape-like thugs who are happy to pop a cap in yo ass jus fo being whitey.  Cuz Obama saz you deserb it.

NoPension's picture

Is it too late to get in on this?

Just axin'.

MagicHandPuppet's picture

"Whitey will pay!" /sarc

I for one will applaud as this corrupt cleptocracy crumbles.

JLee2027's picture

Not only are the pensions absurd, the courts are absurd for thinking they can stop ecomonic reality. The courts, obviously, need to be severly stipped of power in the next version of the US Constitution. They are the weakest link of the system, and the most corrupt.

John Kich's picture

This is Donald Trump's most shocking statement yet,

However the mainstream media isn't saying a word about it!

What are they really trying to cover up?!...

http://tinyurl.com/final-bubble-trump16

Stuck on Zero's picture

If those retirees are smart they'll leave the state to live in a state with lower taxes.

cheka's picture

the lib states are truly special

most states' teachers retirement are a fraction of that

in tx, teachers contribute 7% of their check, state matches with 5%...and they get the princely sum of $2300/month

also have to buy their own health care

this is more typical than the healdine grabbing lib crap

JoeSoMD's picture

The pensions are absurb - no doubt about it.  The issue is that the state constitution guarantees these benefits in that the level of benefits cannot be changed for a retiree.  So the justices did follow the constitution I think.  They will run out of money some day.  What happens then I don't know.  Massive layoffs?   Probably a Puerto Rico like situation.  The Feds will ultimately bail them out.  Your and my federal tax dollars will be thrown down the drain.  Quite sad.  Peace brother.

squid's picture

"Not only are the pensions absurd, the courts are absurd for thinking they can stop ecomonic reality. "

 

Is it not the court's function to interprit the law as written?

If the people of Illinois are so Fxxking stupid as put an absolute in the constitution about state pensions, then what's to discuss? Amend the constitution.

 

It is not any court's job to protect us form ourselves.

 

Squid


MayIMommaDogFace2theBananaPatch's picture

 

 

ELWOOD: It's 106 miles to Chicago, we've got a full tank, half pack of cigarettes, it's dark out, and we're wearing sunglasses.

 

JAKE: Hit it.
JamesNorman's picture

It Always Comes Down To The Vote, Lets not Mess Up The Presidental Race, Support A Canidate Ready To Fight And Support This Cause  http://goo.gl/oN60mw

 

 

YOUR VOTE COUNTS AMERICA !!!

junction's picture

Next, check out the Chicago police retirees, many of whom retire on 75% tax free disabilty pensions.

Bay Area Guy's picture

The tax free disability pensions are really prevalent in every large city and they are not just the cops.  In San Francisco, the Fire Department is notorious at this.  They cover for each other quite well too.  They work 24 hour shifts and many of these "heros" have second jobs where, if they are injured (or even if they are injured playing pick-up basketball), they're told to crawl into the station where the station commander will certify that they slipped on an oil leak in the stationhouse, then, bang, they're off on tax-free 100% workers' comp or if they are supposedly completely disabled, they get tax free disability pensions.

Of course, they're all still out there working their second jobs, even though they are "disabled".

HamFistedIdiot's picture

I get all this hating on the criminal plebes. But please remember that 90% of the corruption/satanism originates with fractional reserve fiat banksters, Rothschilds, Soros, the private shareholders of the federal reserve, the guardians of the deep state, such as Goldman Sachs and Lockheed Martin, the vaccine pushers, the militaries around the world spraying 20 million tons of free form aluminum nanoparticulate matter on us via "geoengineering", and their ilk. Still, if it weren't for the criminal "order followers" and cowards that make up the bulk of the population, this fraud and omnicide wouldn't be tolerated.

Jackagain's picture

Should be called Crook County....

PeaceLover's picture

I doubt it..
I mean look how many people get caught up watching and voting in a election.
Until all ALL ALL money is out of goverment we are screwed.
kind of on track 200yr and broken.

If you think a election in usa does anything but a game to see who get's to spend the money.
I truth there maybe a few that don't get it and are looking to change

WillyGroper's picture

aside from the obvious, what does hitlery & john wayne gacy have in common?

born in the same hospital 1942-1947. 

hospital looted, abandoned, homeless medcaid fraud for baseless amputation, committed by a card carrying member,...to make way for luxury condos.

Like i replied to buzzsaw, we're being assraped on every level.

now where have we seen this bank & this prosecutor before?

 

dizzyfingers's picture

Get out while you can!!!

Philo Beddoe's picture

I left about the same year Oprah arrived.  Miss the Cubs and good hot dogs. Other than that...meh. 

D Nyle's picture

Left in 89, 11 dollars in tolls to leave the state, best money I ever spent!

JoeSoMD's picture

It does not matter too much whether you get out or not.  The state will go bankrupt and the Feds will bail them out.  We will all pay for this through our federal taxes.  Quite sad.  We cannot escape this.  The FSA is too powerful.

silverer's picture

Chicago should raise taxes to whatever level it takes. If it requires confiscation of assets: cars, personal property, real-estate, it should be proceeded to immediately. Any bank accounts held by taxpayers, private funds, retirement funds, etc.. should be seized immediately. That's how it will work, because the court said so. I'm just curious why the city politicians are waiting so long to implement it.

lincolnsteffens's picture

@ Silverer "I'm just curious why the city politicians are waiting so long to implement it."

The politicians are waiting until their assets are moved from Illinois to an off shore trust before confiscating everything in sight. Once their homes are sold and assets sent to their new trusts they will confiscate everything that is left.

jerry_theking_lawler's picture

When dealing with 'government'...remember, what the Nazis did was all legal too.

Jethro's picture

As long as the pension recipients are forced to stay in the locale where they earned the pension. Let them reap the wind.

skinwalker's picture

I grew up in New York state, which spends a fortune on education, both in relative and absolute terms, has an incredibly strong teachers union, and pays teachers a great salary plus benefits and pension. For 12 years i suffered through the public school system, where no expense was spared to make sure the teachers lived well. Students be damned. 

 

I could have gotten a better education in Somalia. I imagine Illinois is even worse. 

Philo Beddoe's picture

The public system education is notch top in Illinois. Example me.  I can write the name of all 36 states in crayon, sucka. 

Never One Roach's picture

Last time I was in the Windy City I saw so many purple Escalades and yellow silk-blend suits driving them.

 

It's quite a colorful place. I guess that's something.

pudge94's picture

Obama says there are 57.  You're 21 short.

Philo Beddoe's picture

I hereby promise all Ill pensioners free dinosaur rides in 20 years.  

DontGive's picture

Who do I have to blow to get in on this 'free dinosaur ride' racket?

Jackagain's picture

Who needs Al Capone when you have the Chicago Dem. Machine teachers unions? Is it any wonder this craphole is where Obama came from? 

Time to flush that toilet....

 

Snípéir_Ag_Obair's picture

"The Illinois Supreme Court recently confirmed that pension benefits are constitutionally guaranteed" Maybe. Maybe not. But there comes a time when the executive, the legislature, the citizens, or some combination thereof should properly ignore what a fucking court says.

Why?

Because the citizenry, practically speaking the legislature, has every bit as much right to determine the 'constitutionality' of something as a majority of unelected judges.

NoPension's picture

I wonder what a Supreme Court Justice's pension looks like?

JLee2027's picture

Exactly. Their own pensions were at risk. Can't have that.

Joe Camel's picture

The pension benefits may be constitutionally guaranteed, but the revenues needed to fund the benefits are not as no one is forced to live or transact business within the state of Illinois. Refer to Detroit to see what happens when everyone starts to leave.

JoeSoMD's picture

Correct.  Detroit has cut all other services to continue to pay their pension obligations.  They have abandoned entire square blocks of the city, telling the few remaining residents that they will no longer provide police, fire, or bus service.  They are encouraging people to move to more central neighborhoods.  Fat chance.  The outliers are where they are becaue they cannot afford to move.  They are the working poor that need city bus services.  When state-wide services are pared waaaay back there will be political will to change the constitution.  When soccer moms in the burbs see there lilly-white schools turning to crap they will insist on change.  Remember, getting out is not an option for many people.  You are stuck were your job is.  Only the young, entry level employee has any chance of mobility.  Any mid-level or senior employee is stuck, stuck, stuck.  Peace brother.

ClydeCrashcup's picture

Not to challenge anything you said there, Joe Camel, but bringing up the subject of the city of Detroit, NOBODY who has not been there, or lived there or near there for an extended period, can possibly conceive of just how gutted and apocalyptic that hellhole of a city truly is.  It is 20 years since I last spent much time there, and I still feel a profound sense of depression and hopelessness every time I think about Detroit.  To say that it is a rotten, decaying husk of what it once was is to be profusely overgenerous.

RichardParker's picture

Pension benefits are constitutionally guaranteed...

The Constitution is a living breathing document that is not the law of the land nor are elites are required to follow it.  Every good liberal knows these things.  Anybody who questions this is a racist or a terrorist, or both.

 

Eat your heat out MDB!

 

bpj's picture

They can tax the pensions, start with a third.

Excursionist's picture

Timely article.. was just talking about this topic with my wife yesterday evening.  She taught in NYC's and LA's public school systems, and my comment about educators' and administrators' all-in comp being too high didn't resonate with her.

I mentioned the Cadillac plan health benefits she received when teaching... I mentioned the ridiculous pension benefits she accrued...  Nothing.  Ultimately the conversation devolved into "What is 'market' for a public school teacher?"

I don't know where the bright line for 'market' resides, but like pornography, I know out-of-market when I see it.