Saturday, October 18, 2014

Andrew Broy: Just Say NO (to any study questioning Charter School Claims)

Andrew Broy
Andrew Broy:  Just Say NO (to any study questioning Charter School claims)

Andrew Broy is the head of the Illinois Network of Charter Schools. 

Broy, who runs an “education blog” on the electronic Huffington Post, was ecstatic with the election of Rahm Emanuel as Mayor of Chicago, and he quickly offered suggestions to the new Mayor for selections of a fresh educational leader in the city, one tailored to work with Sec. of Education Duncan’s Race to the Top ( ).

Together, Broy and Emanuel have worked well past the current caps on charter schools in the city using a variety of loopholes in the law.  In fact, the number of new charter openings in Chicago is staggering – only eclipsed by the number of public school closings. 

Problem for Broy: A recent research study by the University of Minnesota finding Charter Schools really don’t perform any better than public schools – in fact, worse – and it is one with which Broy has, understandably, taken serious umbrage.

Mayor Rahm Emanuel has been rather silent on this recent and latest research, but in the past the Mayor has used a different tactic than Broy.  Rahm doesn’t say “no”; he uses a more political and evasive response:  That’s old research” or “we should be measuring all schools’ performance, not just one kind.” 

Broy prefers to attack directly the researchers' methodology or the study’s validity.

"…that's old research…"
The Chicago Tribune?  Well, they admit siding with the Mayor and Broy whenever possible, although even the Editorial Board finds itself wondering on occasion where Broy is coming from.  Example?

Broy, who likes to offer his own research whenever possible, defended at one point the efficacy of Charter Schools by pointing to the numbers of students seeking entrance into Chicago’s charter institutions.  Kind of like an “If you build it and someone wants to come “ argument.  For Broy, interest is tantamount to successful education.  In an opinion piece by the Chicago Tribune entitled “The Thirst for Charter Schools,” the Dold-led Board states, “It’s no secret that this page strongly supports charter schools…Charter schools attract excellent young teachers and offer them wide latitude to reach students…” (

(Never mind that average salaries of charter schoolteachers are nearly 30% lower than national averages for teachers/grade level…or that wide latitude may mean not necessarily having qualifications in a specific subject area. )

But in April of 2013, even the Tribune questioned the number of students seeking admission into Chicago Charter Schools at 19,000.  Broy, who often cites that and other generous numbers, ignores studied reports that these numbers “significantly overstate demand because it counts applications, not students."  In other words, if a student applies to four or more different charter schools, each of these requests is counted as a student waiting for one school.  While that may seem statistically invalid as representing the whole number of all students seeking admission, Broy “stands by his calculation(s). “We feel the 19,000 number is strongly supported and is likely a conservative estimate.”  The higher the inflated number, the increased proof we educate better? 

Broy adamantly accepts his own research standpoints, but he balks at the investigation provided in this recent study by the University of Minnesota – and many other foundations/universities indicating that charter schools do not perform in any measurable way that outshines the public school system.  And this recent study, specific to Chicago and a single year of careful correlation/control of like students and like programs demonstrates charter schools perform more poorly than their public counterparts.

Yet, the study entitled “Charter Schools in Chicago: No Model for Education Reform,”  is careful in its exegesis to include past studies (with which Broy took exception) on charter school performance to better validity and reliability of study.  Looking back at earlier studies by Rand Corporation, CREDO of Stanford University [two separate researches] and a local Medill study, the University of Minnesota calculated a research model designed to find a more consistent and reliable manner in which to match control groups in both charters and public schools.

“What the analysis described here can do is update the comparisons to the most recent year available (2012-13) and provide comparisons that include all students and all charter schools in the Chicago public school system.  The completeness of the data set also allows comparison of how other parts of the traditional system – selective or gifted student schools and magnets – compare to traditional and charter schools.  Finally, the available data makes it possible to look at a range of achievement measures, including standardized pass rates, student growth rates, and college entrance (ACT) scores” (  ). 

The study, using comprehensive data for years 2012-2013, shows that, after controlling for the mix of students and challenges faced by individual schools, Chicago’s charter schools actually underperform their traditional counterparts in MOST measureable ways.   

Most administrators might offer, “Well, you caught us on a bad year?”  But Broy boldly assaults the validity of the study altogether, declaring a single year not indicative of what charters have done and do for students.  On the other hand, beyond the litany of other studies indicating questionable results by Charters, the conclusions are pretty damning.  In the U of M report for that single year: “Reading and math pass rates, reading and math growth rates, and graduation rates are lower in charters, all else equal, than in traditional neighborhood schools.  This is true despite the fact that, because students self-select into the charter system, student performance should exceed what one sees in traditional schools, even if charters do better at teaching their students.

And, recall, Broy’s particular style of research theorizes that self-selection (times how many applications?) is revealing of a better education.  That’s simple.

Read the full report for an illuminating look at how Charters in Chicago increase expulsions, deepen racial segregation, ignore record keeping, avoid reporting on school report cards, and present students often with under-prepared or unlicensed would-be educators. 

Tuesday, October 14, 2014

Ms. Karen Lewis: Get Strong; Be Well. Her Speech of May 5, 2014.

Ms. Karen Lewis: Be Strong, Get Well.

“Broken dreams,” my Dad used to remind me are the “been’ brothers of our existence.  “Could ‘a been, Should ‘a been, and Would ‘a been.” 

Looking back at the magnificent address Ms. Karen Lewis provided the City Club of Chicago in the spring of this year, there is no doubt.  

Could have been. Should have been. Would have been.

Reading her speech reveals her adamant refusal to be blinded by injustice and political chicanery, her promise to the parents and children of the public school system in our city, and the great depth of her commitment to all the people of Chicago.  If you have never read the speech, now is the time to do so and send good thoughts to her. 



Monday, May 5, 2014
"On behalf of the members and staff of the Chicago Teachers Union, I want to thank you for inviting me to the City Club again. I am always honored and pleased to stand before you. 
One of my fondest memories of growing up in Chicago was when I was about seven years and my father would take me out on Saturdays for a ride around the city in his old Plymouth. I smiled as Lake Michigan whizzed by my window and I thought its waters flowed from the most striking ocean in the world. I marveled at the skyscrapers and imagined them as the real monsters of the midway; ones that came alive at night to play football in the middle of Soldier’s Field.
I remember one time, however, as we were blazing down 63rd Street with the EL screeching on the tracks overhead, when my father became distracted for just a second and nearly hit a panhandler standing too far in the street.  My father, ever the teacher, grumbled something under his breath about people needing to keep their focus—though I don’t think he was judging the man at all. He then he went on to talk about what it meant to be “in poverty” versus what it meant to be “poor.” I’m not sure what it was about that man or that incident, but it seemed to me that my father was talking more to himself than me—or maybe he was just thinking aloud. But, I can still remember what he said to me:
“Never lose your focus Karen; there’s a reason your eyes are in the front of your head,” my father said. “Poverty is an economic condition—something created by social and political systems--but being poor is a psychological condition, and it’s created by hopelessness and despair. You can have all the money in the world and be a poor and sorry soul. You can have very little and be rich in character, rich in spirit. Never let them break you down,” he said, not saying to whom he was referring. “Education is the answer, you hear me Karen? You get an education, you maintain your dignity and then you fight like hell to never let anyone take it from you. You get an education and you’ll never let anyone take from you what’s rightfully yours, you hear me?  Someone wants to put you in poverty; you better fight like hell, ‘lest you find yourself lost, broken, and poor. You be smart. You keep your focus.” 
Later that night, after dinner and my mother tucked me into bed with promises of sweet dreams (unlike my father who had scared me to death); I thought the things my father said on the way home. I think I vowed right then, that night that I would let anyone send me into poverty. That if someone wanted to take something from me or do something to me that I did not ask for that I stand up for myself, that I would fight like hell—just like my father said.
I am reminded of this story because this is where I find myself right now: focused and fighting like hell for the 30,000 educators who elected, Jesse, Michael, Kristine and me to our office. Our members don’t want to wind up in poverty because somebody who just rode into town wants to take away their livelihoods. Its as if the 1 percent isn’t satisfied with having most of it. It seems they want it all.
And, they justify their behavior by determining among themselves “who is worthy” and who isn’t. They do stuff like determine which children receive another brand new, unsolicited, selective enrollment high school in their neighborhood and which children have 49 schools in their communities wiped off the face of the map. They develop social identifiers to determine who amongst us are “strivers” and who amongst us are in the 25 percent who will “never amount to anything, or be anything” and therefore aren’t worthy of investment. They question your values without ever coming truthful about their own.
These influencers manage by chaos and carnage. These are among the city’s fathers who are calling for our pensions and the destruction of our unions.  Instead of engaging in a public good and being real heroes, by dramatically funding neighborhood schools, helping to ease student debt, and ensuring teachers and other public employees have the resources they need to give our young people a 21st Century, world-class education, our leaders see opportunity in crisis and so they manufacture a great deal of them.
Isn’t that what we hear whenever our elected officials want to reduce, cut or diminish something—it’s a crisis! This is their go-to management tool. CPS said it had a billion dollar deficit. With a billion dollar deficit the Board somehow found a way to authorize 13 new charter operations; to fund three new turnarounds with costs that could trend in upwards of $21 million; to spend $10 million for new furniture; to announce new air conditioning for every school; to unveil surprise plans for a $60 million Barak Obama High School on the North Side in honor of a South Side trailblazer; and the list goes on and on and on. But, CPS and the mayor forgot to tell people that their billion-dollar deficit included the $681 million pension payment that was slated for 2014. And they forgot to mention their surplus. (This year the payment is about $685 million.)
But then again, the Board and City Hall forget to tell us a lot of things—like how charter schools fair no better than neighborhood schools. In many cases they fair worse. How these operations are in Springfield using taxpayer money and private donations to fight legislation that would hold them accountable and put them under the complete authority of the same Board of Education as the rest of us. How is it in 2014, that we still have a major school district in this country with separate and unequal policies?  
The time is coming where charters cannot dodge accountability; and when their educational employees will have to unionize in order to secure their benefits and protect the integrity of their classrooms. And, CTU will be right here, red shirts in hand, waiting for them when they do.
This city does not have a pension crisis. It has a leadership crisis--although, CNN’s mockumentary called Chicagoland would have the world believe this is a town with one heroic school principal; and,  where one lone ranger named Rahm, and his trusty side-kick McCarthy, run around solving everybody’s problems by executing “tough choices” with cool one-liners and good lighting.  CNN wants us to believe this is a magical land on some utopian island where race, class, history, democracy, and context, does not matter to the people who call this place home and the mayor’s only valid opposition  is a nine-year-old boy on the South Side. 
Chicago is a city of diverse neighborhoods with rich histories and unique subcultures. What you saw were stereotypes and social and political challenges out of context. It wasn’t just the African Americans on that CNN nonsense that were stereotyped, so what’s Chicago’s middle class. The blacks only issue is youth violence and internally directed despair and the white folk in this town only care about their season tickets and parking meters. As you were watching did you hear the dog whistle go off?
I’m reading a book by Ian Haney Lopez called “Dog Whistle Politics: How coded racial appeals have reinvented racism and wrecked the middle class.” I know some of you cringe when I bring up race, but I’m not going to stop talking about it until it is no longer relevant. Dog Whistle.
We don’t need Hollywood producers to carve out a fictitious narrative about our city while touting the benefits of a colonial mentality to make this work exciting. Do we? They say there’s a million stories in the naked city, well let’s talk about the tale of broken promises. 
Promises were made to the public employees of this city and those promises have been broken.  
And, when we ask, why are you trying to cheat us to us? Instead of answers we get faulty logic and false choices. “Drastic pension cuts or no pensions at all.” “More funding for the classroom or pension benefits for failing teachers.” “Fully funded pensions or a 150 percent increase in property taxes?” False choices.  The wrong questions. What we should be asking is why does a law like 4.5 exist on the books that makes it difficult for Chicago parents and educators to negotiate over class sizes? Why is Chicago the only school district without a representative elected school board? Why are public services and public sector employees under this constant attack by our leaders?
It’s about the money. Its so folks like Ken Griffin and Bruce Rauner, who make more per second and per minute than many workers in Illinois earn per hour, can constantly meddle in education policy while they continue to not pay their fair share. It’s so someone like billionaire John Arnold, who ran Enron into the ground and stole the pensions of thousands of workers in one of the largest pension heists in this nation’s history can inflict the same kind of damage upon Chicago. These are the same folk who are rabid about teacher accountability.
Look, if all of these hedge fund managers and venture capitalists were really concerned about “shared sacrifices,” they’d create some jobs and institute a living wage for Illinois families instead of destroying our city like a swarm of Gucci-winged locusts. Why can’t they pay their fair share?
We don’t have a pension crisis.  We have a pension shortfall and a crisis in leadership. We have someone on the fifth floor who lacks the political will to do what is just, what is honorable, what is legal.  We have someone who governs via “press release” and controlled PR campaigns. We have elected officials in Springfield who seek to punish people who did everything right, who did nothing wrong, by paying into their retirement system. We have a governor who is caught between a rock and a hard place; but even if that is so, he must have the moral courage to do what is right and equitable for working families in Illinois.
Instead of citing this shortfall as reason to end expensive tax cuts and subsidies, CPS, the mayor and other lawmakers are citing it as a reason to slash retiree benefits.
CPS proposed major cuts to retirees’ pensions during the Spring 2013 legislative session. CTU opposed any cuts to retirees, not just the incredibly draconian cuts Mayor Emanuel supports. These proposed cuts mainly affect retirees through suppression of cost-of-living adjustments. Under the CPS proposal, COLAs would be limited to 3% simple interest on the first $25,000 in retirement income, up to a maximum annual increase of $750. Over time a retiree would lose thousands of dollars in pension benefits.
Our officials and their allies want the public to believe that public sector workers are greedy and undeserving of the defined benefit.  Unlike most workers, teachers do not receive social security. We are not eligible for free Medicare Part A—our premiums average $451 per month—and that doesn’t include doctor’s fees and prescription medicine. We’re talking $41,584 a year for a teacher who is fully vested after 28 years of service, and much less for paraprofessionals.
It should be noted that under Mayor Emanuel it doesn’t look like many of us will make it to 28 years. Is that the scheme—fire us before we become fully vested? Nearly 3,000 educators have lost of their teaching positions under his reign alone, many of whom are African American, female and over the age of 50.
Let’s face the facts. No retired school clerk is getting rich off of $26,000 a year. No one is living high on the hog. We don’t have nine homes to choose from like Bruce Rauner with his $18 watch.
This is about nearly 30,000 school employees who are being asked to agree to do more with less. This is about my 85-year-old mother whose only income is her pension. I don’t want her choosing between her prescriptions and whether or not she’ll by food.  This is about Carrene Beverly Bass, a dedicated teacher, who will be laid off this year because her school, Dvorak, was recently turned over to AUSL.  She’s too young to retire, and if she can’t find a new teaching position, what happens then? You want her lose her job, take a cut to her retirement security and then turn around and pay more in property taxes? Does that make sense to anyone besides the mayor?
And they act as if our pensions are crippling the system: Less than 15 percent of private sector employees in the U.S. now have defined benefit pension programs, down from nearly 40 percent in 1979. However, cash-value plans (401ks) have grown, from 16 percent to over 42 percent.  The CTU is not interested in casino-style capitalism where the very people who trashed our economy in 2005 are now entrusted with our lives. We do not want to move into a 401k-styled plan. This would prove to be a disastrous, and the Board would still have to make its outstanding contribution as guaranteed by law.
Illinois taxpayers have benefited from the diversion of billions of dollars of pension money to cover other public expenditures for 17 years. Chicago taxpayers contribute about 18 percent of the State’s tax revenues, but the Chicago Teachers Pension Fund (CTPF) receives only a tiny portion of the State’s funding for teacher pensions.
It is CTU’s position that new taxes dedicated to reimbursing the CTPF would not be contributions to a so-called broken system.  We believe if the rich would just pay their share we could actually fix the pension system injured by the diversion of retirement money used to bailout politicians for their poor fiscal planning through the years.  We believe new taxes should be directed toward those sectors of the economy that are most robust and provide the strongest growth opportunities.
We have to get more creative about revenue generation. How they make this overdue payment is not our responsibility.  Yet, we want to show the Board, our parents and this city that we are always willing to work with them and find equitable solutions.
We’ve been very vocal about wanting CPS to renegotiate bad loans with banks and calling for TIF reform. We should delay the expiration of the TIFS and use a small section of that revenue it would create to produce a series of bonds. We support what Cook County Clerk David Orr said recently on the subject: “Chicago homeowners are being asked to pay more for pensions without receiving any additional services while corporations and private interests in TIF districts continue to reap their reward.” Orr said he “believe there is a way to restructure TIF funds to ease the pension burden at no additional cost to taxpayers.” We should go back and look at his recommendations.
We believe there should be a commuter tax on individuals who live outside of the City but work here and rely on city services. This is something we know the mayor supports and this is also an opportunity for us to work together on something. This proposal is a flat 1 percent tax on incomes of those who live outside Chicago but work in the city. Suburban residents benefit from the urban core’s global influence, as well as the income opportunities provided by employers based in the city. The City valued this tax at $300 million based on the 620,000 non-residents who work in Chicago and earn an estimated $30 billion in income.[i]
We’ve been saying all along, the rich must pay their fair share. We support a fair and progressive income tax. As our researcher Sarah Hainds points out: “Having everyone in Illinois pay 5 percent in income tax is absurd.  The estimated median family income by census tract in Chicago range from $5,016 on the Near West Side to $280,388 on the Near North Side, with a city average of $48,000. Illinois could haul in $57 million just from a minor increase in the income tax of six people who are among the most influential in maintaining the status quo in education funding and policy: Bruce Rauner, Penny Pritzker, Ken Griffin, Andrew Broy, David Vitale and Barbara Byrd-Bennett.” Illinois has lost an estimated $2.5 billion in tax revenue due to the abuse of tax havens.
We want corporate loopholes closed: According to Pew Center, public pensions face a 30-year shortfall of $1.38 trillion, or $46 billion on an annual basis. This is dwarfed by the $80 billion a year states and cities spend on corporate subsidies also known as welfare.
But chief among our proposals is our call for a LaSalle Street Tax also known as a financial transaction tax or FTT. This would generate between $10 billion to $12 billion annually for Illinois with about $2 billion going to the city of Chicago. This very small tax seeks $1 on both the buyer and on the seller of futures contracts and a $2 tax on derivatives contracts that are executed through the facilities of the Chicago Mercantile Exchange (CME) and the Chicago Board Options Exchange (CBOE), two of the largest financial markets in the world.
Each year the value of products traded on these two exchanges totals well over $900 trillion, according to FTT expert William Barclay, board member of the Chicago Political Economy Group.  The average contract size is more than $225,000. So under our proposal the tax amount is less than 2/1000s of percent of the contract’s value. You and I pay more taxes on our take our orders at McDonald’s than buyers and sellers would pay in this proposal.
It should be further noted, the payment of the LaSalle Street Tax does not fall on the trading venue but rather on the entities, institutional and individuals who trade. The products under this tax are not traded on any other exchanges. Some of them (products) such as the S&P 500 index futures and options are exclusively licensed to these two exchanges. Therefore, there would be no incentive for the exchanges to pick up and move, as some have suggested. Although the exchanges do not pay the LaSalle Street Tax, they do provide a low cost and technically simple means to collect the tax.
Who pays? Most derivative trading is done by large institutions and individuals such as investment banks, day traders, hedge funds and brokers, as well as, accounts held by high net worth individuals. The bulk of the revenue would come from the top 1 percent and the institutions that handle their money.
Can this work? Yes it can. There are similar taxes in the UK, Switzerland, Hong Kong, France and other countries. These are all large markets and the tax has been in place for several years or even decades. The markets in these countries have not been hurt and the exchanges have not moved away.
In administering the LaSalle Street Tax, the clearing houses already serve as collection agencies for transaction fees and they could easily collect a financial transaction tax at low cost.
I know a financial transaction tax isn’t popular with our Board president and the mayor—both of whom have direct ties to the MERC.  I know they are very concerned about their super wealthy friends and colleagues having to pay a whopping 0.01 percent on the underlying notional value of their trades. I get it. The wealthy do not want to pay their fair share. I get it—instead of the uber rich giving up a single dollar on a quarter of a million dollars, their defenders would have our senior citizens lose thousands of dollars in benefit cuts.
But, I believe Illinois could use $10 billion to $12 billion annually. Imagine the possibilities of having this new pool of revenue. Imagine the impact on the lives of people in our state who are dependent on social services, mental health, job training, education, affordable housing and retirement security.
Currently, there are two FTT proposals that have been submitted to the Illinois legislature: HB 1554 calling for the $1 and $2 taxes, respectively, and a revised HB5929 that would instead impose a much lower financial transaction tax (say .50 or .75 cents) that would also raise significant amounts of money from high volume trading.
The LaSalle Street tax is good tax policy for Illinois. The rate is very low compared to the value of the contract; the tax would fall primarily on high income individuals and wealthy institutions; it would discourage useless short-term trading; and it taxes the sector that caused the financial crisis that led to the Great Recession in the first place.
We stand in solidarity with our brothers and sisters in We Are One Illinois and the We Are One Chicago in fighting this broad daylight pension heist.
The Chicago Teachers Union is proud to work with AFSCME, SEIU Healthcare, and the fire, nurse and police unions. In total, we represent the real backbone of Chicago. We are the first responders; the people who take care of the sick, the impoverished, the illiterate; the people who keep this city functioning. Our internal challenge is to maintain our focus, to support one another and resist the urge to appeal to narrowed interests.
Our elected lawmakers must have the political will to generate revenue that isn’t derived from cutting, reducing, and punishing those who have already paid their fair share.
If the mayor can honor a contract for parking meters he can also honor the constitutional provision of retirement security. And, if he cannot, then maybe its time we send him into an early retirement.
Chicago Teachers Union will continue to expose the predatory corporate and political interests that eschew an elected, representative school board because the handpicked school board of the mayor refuses to honor the wishes of parents that want smaller class sizes, wrap around services, libraries, art, music, physical education, appropriately staffing levels, an end of high-stakes testing and a stable education workforce—the schools our children deserve.
Thank you."

Monday, October 6, 2014

Minimizing Risks in Defined Pensions - Theirs, That Is...

Pension Vocabulary: Minimizing Risks in Defined Pensions – Theirs, That Is…

My parents used to love watching Hitchcock films.  As soon as the movie began, they’d try to be the first to spot Alfred embedded in his film, and then they’d put all of us in the same kind of plot situation and discuss how we’d react as a family.  Thank goodness I was too old to watch Psycho with them, but I clearly remember Lifeboat; John Hodiak trying to decide whom to shed and whom to keep.  Being chubby, I remember offering my reason to stay on board our imaginary family raft in tossing seas.  “I won’t have to eat much for a long time, “ I offered.  Stern Captain Dad and First Mate just stared and smiled…

It’s much that way in the private world of pensions nowadays, only the situation is hardly imaginary.  In fact, castaway pension plans are readily around in all areas: public pensions, private pensions and even the work of pension investment firms.  In the world of business, anyone in a pension is someone who “eats too much” or certainly diverts necessary funds that would be better appreciated as profits.

And, when private world collides with public worker pensions, what begins as confusing can become quite disastrous…for retirees.

One means of removing the “extra baggage” of an obligation like a pension for retired workers nowadays has become a strategy called “de-risking.”  Some companies, especially larger ones like huge telecommunications giant Verizon, is to move all pension obligations to an annuity through an insurance company.  This is a win-win for the company because the insurance company purchases the entire pension obligations at a price determined by the actuarially determined likelihoods.  In other words, National Insurance assumes your $100 million pension obligation for $80 million, because they anticipate having to pay out only $68 million after running the numbers on your retirees.  The insurance company stands to win $12 million in the transaction.  Your company is able to unload nearly $80 million in obligations and add that windfall to the income line of the ledger, making the stockholders adore your business acumen.  In short, one company receives a way out of promised obligations; the other bets on the odds of people dying before collecting. 

Of course, those retirees uncomfortable with the idea are problematic, so these same companies provide a lump sum payout for the fiscally squeamish.  According to a recent article in AARP Magazine, this two-pronged strategy is in vogue in the private world, where “58% of companies offered lump sums to former employees or a plan to do so.”  Another “38% expect to transfer pension obligations to an outside agency within the next five years”  (
And the companies have reasons beyond the profit margin: since the Great Recession, mandatory payments to the Pension Benefit Guaranty Corporation (to provide pension payments in case of company default) have escalated – with more companies defaulting – and returns on money invested for pensions have lessened. 
This transfer began in earnest in 2012 when changes to pension law fully kicked in, making it more attractive for employers to offer lump sums… A rash of companies made cash offers that year, including Ford Motor Co., J.C. Penney, Lockheed Martin Corp. and Archer-Daniels-Midland Corp.
“Retiree advocates are concerned. Traditional pensions have been disappearing for years in the private sector, where only 16 percent of workers were covered last year, down from 35 percent in the early 1990s, according to the Bureau of Labor Statistics. This latest trend, though, leaves retirees without valuable federal protections and increases their chance of outliving their money, particularly if they take a lump sum and don't invest wisely.” (
But even if private business retirees were to take the leftovers of PBGC, the amounts of the annual benefit is capped when the employer goes bankrupt.  The maximum annual benefit is just over $59,000, BUT no other benefits are provided – not health or cost of living. 
Things in the private world are harsh, but as retirees in a public service sector position, we need not worry about the PBGC coming to our rescue, in case Illinois’ Protection Pension Clause is ignored or over-ruled by the Illinois Supreme Court: They won’t. 
Because the municipals and the states did not need pay into the pension insurance program for those of us in the public sector (just as they did not need pay into social security), we cannot claim a loss to the PBGC if we were to lose our pensions.  The state’s having waived sovereign immunity when it comes to obligations and promises, one might ask what would cause such a bleak scenario.  On the other hand, the recent pronouncement of would-be governor Rauner that he would immediately move current pubic employees to a 401K program (and thereby stop further funding of pensions) certainly raises that scenario for union leaders and business people alike. 
Sadly, it takes only a quick north to see how such a catastrophe might play out on at least the municipal level.  According to an enlightening article in the Detroit Free Press entitled “Pension Safety Net Will Not Help City of Detroit Retirees,” journalist Susan Tompor warns that the city already inured to the many failed manufacturing businesses and the intervention of the PBGC to assist as best it can; the same is out of the question for teachers, firemen, and police. 
As we hear more about the prospect of a Chapter 9 bankruptcy filing for the city of Detroit, it is key to understand that the PBGC will not be a safety net for those retirees. It’s just not in the PBGC’s wheelhouse.
“The PBGC also insures 915 ongoing pension plans sponsored by Michigan companies, covering more than 1.5 million people. But again, not municipal workers.
The PBGC was created by the Employee Retirement Income Security Act of 1974. It does not receive money from taxpayers. Instead, it collects insurance premiums from employers that sponsor insured pension plans, earns money from investments and receives funds from pension plans that it takes over.
“For a state or municipal pension, the taxpayer is typically the backstop. Yet Detroit’s finances are in such a hot mess that raising taxes or finding another revenue source to fund pension promises is highly unlikely. Dramatic changes regarding pensions and retiree health care seem inevitable, even with any possible brutal legal battles ahead” (

In addition, closer scrutiny of Rauner’s plan to switch to a defined contribution plan bears more thorns than fiscal fruit according to the Director of the Illinois Retirment Security Initiative, Ms. Bukola Bella. 

Some state legislators want to change Illinois’ current defined benefit system to a defined contribution system that will cost more to implement and produce lower benefits. Estimates of that change alone will cost taxpayers $275-$610 million per year (in administrative costs) if all current participants in the five Illinois state pension systems are covered by this change.”  And while Ms. Bella argues accurately that 401K;’s are simply supplemental savings instruments, not retirement plans, her seminal dispute is revealed in the additional costs of such a shift and persistent expenditures.
“In fact, both Nebraska and West Virginia experimented with shifting from a defined benefit system to a defined contribution system and shifted back. The reason – simple. The investment management fees, record-keeping fees, educational programs and other administrative line items associated with a defined contribution system were substantially greater than the cost under the old defined benefit system. The failed defined contribution system didn’t provide enough income to live on and both Nebraska and West Virginia experienced former state employees having to go on welfare.
"It's true..I'll drive 'em nuts.."
“The National Institute for Retirement Security reviewed this issue and made a very clear finding, “for any given level of benefit, a defined benefit plan will cost less than a defined contribution plan. This makes defined benefit plans, in the language of economists, more efficient since they stretch taxpayer, employer and employee dollars further in achieving any given level of retirement income.” Switching to a defined contribution plan from a defined benefit plan will not solve Illinois’ public employee pension crisis or eliminate the $54.4 billion current unfunded liability. It will, however, cost taxpayers more money and result in public employees having less to live on” (

 Finally, if and when (Gov.) Rauner’s promised 30-man group of the best and brightest minds of Chicago businesses were to  meet and determine that 401K’s were the direction best taken in “pension reform,” who would benefit most?  Likely good friends like hedge-fund manager Ken Griffin, at least according to a recent expose by David Sirota regarding the movement of investment strategies of public pension funds to Wall Street friends of politicians like New Jersey’s Governor Chris Christie.   And he is just one of many states to do so…New Jersey, Rhode Island, Maryland, North Carolina, Kentucky, etc. 
Those investments are managed by private financial firms, which charge special fees that pension systems do not pay when they invest in stock index funds and bonds. The idea is that paying those fees — which can cost hundreds of millions of dollars a year — will be worth it, because the alternative investments will supposedly deliver higher returns than low-fee stock index funds like the S&P 500.
Unfortunately, while these alternative investments have delivered a fee jackpot to Wall Street firms, they have often delivered poor returns, meaning the public is paying a premium for a subpar product.
In New Jersey, for example, the state’s alternative investment portfolio has trailed the stock market in seven out of the last eight years, while costing taxpayers almost $400 million a year in fees. Had the state followed the advice of investors like Warren Buffett and instead invested its alternative portfolio in a low-fee S&P 500 index fund, New Jersey would have had more than $5 billion more in its pension fund. In all, as New Jersey plowed more pension money into alternatives, its pension returns have routinely trailed median returns for all public pension systems” (
Sirota’s final warning highlights the most dangerous rippling effect of the current trend to extract the money of public workers:
That spotlights a pernicious dynamic that may be at work: The more public money that goes into alternative investments, the more fees alternative investment firms generate, the more campaign contributions are made by those firms, and thus the more money politicians devote to alternative investments, even as those investments deliver poor results for pensioners. It is a vicious cycle whereby the financial industry wins and taxpayers, once again, lose.”