Pension Pickup Explained

"Pension Pickup" Explained.

The Illinois Policy Institute is angry once again with what their editorialist Diana Sroka Rickert considers another unnecessary handout to Chicago teachers:  the Pension Pickup. 

In her December Tribune editorial last week, Rickert urged Chicago’s besieged Mayor Emanuel and CPS CEO Forrest Claypool to end the current practice of providing pension pickups for the Chicago Teachers Union. 

“While (they) have busied themselves asking state taxpayers to send hundreds of millions of dollars Chicago’s way, they’re unwilling to use the $174 million that’s already available for them to use for teacher’s pensions.”

But they’re not the peculaters.  The real culprit?  Read on, please.

“Chicago teachers are supposed to pay 9 percent of their salaries toward their own retirement savings.  But instead, teachers pay just 2 percent; the rest of the “teachers’ contribution” is picked up by taxpayers, thanks to a clause negotiated into their contract6s in the early 1980s.”

As a retired educator from a suburban district I suppose I could feel a little miffed with having paid 9.4% of my salary each paycheck, instead of 9% like those in the CTU.  Adding to that, if CTU paid only 2% of the 9%; well, why didn’t I get such a deal?

And that’s exactly what Rickert and the IPI want all of us to do.  Let’s not think it out or look into it.  Let’s just be blind angry. 

The “deal” that Chicago teachers got in the early 1980s was actually a mandated law by the General Assembly in 1983.  And this statute (40  ILCS 5/17-130.1) provided the opportunity for retirement contributions to be considered part of the negotiating process in salary and benefit settlements during collective bargaining.  In fact, all districts in Illinois got the same deal.

“An Employer or the Board may make these contributions on behalf of its employees by a reduction in the cash salary of the employee or by an offset against a future salary increase or by a combination of a reduction in salary and offset against a future salary increase.” 

Teacher’s Union:  We’d like to ask for a 2% increase in our wage benefits across the board this next contract.

Board of Education:  We’d like to find a way to do that.  How about a ½% increase across the board, and we’ll pick up 1.5% of your contribution costs per person?

If` you’re still not sure how this works, it means that my union never debated with the Board over my 9.4% payment.  But just down the highway at another district near the airport, they did and paid only 4% of their 9.4% requirement. 

What Rickert is not telling us – and I believe on purpose – is that the statute in 1983 was not a prosperous honeyfuzzle by the unions.  The statute was a smartly designed legal mandate for flexibility for negotiators on both sides, one that might have prevented strikes.  Think of it as an offer to use pension contributions as one part of a package of benefits for working in a specific district – and in Chicago.

And if you were lucky enough to get “such a deal,” you were still on the hook for the required taxes and costs so associated.  The amount negotiated could never “exceed the employee contribution required by Section 17-130 for all employees…”  Likewise, such contributions by a Board or Employer were also to be treated “as employer contributions in determining tax treatment under the United States Internal Revenue Code.“

Now that I know a bit more, maybe the grass wasn’t so much greener over by the airport.  Or even for teachers in the city of Chicago. 

And Union leader Karen Lewis?  She knows that regardless of a Supreme Court unanimous decision acknowledging the thievery of the state and the city, they’ll still keep coming.  She knows that Claypool and Emanuel want to take the pickup away, even after it has been an integral part of contract negotiations for over 30 years.

She knows, like Rickert doesn’t want us all to know, that that 7% in contribution pickup has been traded over the three decades for give-ups in salary, benefits, and working conditions. 

And this is why the Chicago Teachers Union is taking a vote this week on whether they will strike. 

They know the Mayor, Claypool, the IPI, and they understand what a pension pickup is.

Now you do too.