Pensions

The FY2027 budget includes $1,014.5 million for the Chicago Teachers’ Pension Fund (CTPF). With strong investment returns thanks to a favorable market, this amount is $42.1 million less than what CTPF forecasted last year for FY2027’s projected contribution, and $12.1 million less than the FY2026 statutory contribution amount.

The structural changes enacted in FY2017 and FY2018 that altered the funding mechanisms supporting the CTPF provided several key measures to ensure long-term pension health. In FY2017, the Illinois General Assembly granted CPS the ability to implement a property tax levy dedicated to funding the CTPF at a tax rate of 0.383 percent of the Equalized Assessed Value (EAV) of Chicago properties. That rate was then raised in FY2018 to a maximum rate of 0.567 percent. Additionally, in FY2018, the State made a commitment to pay the employer’s normal cost for pension obligations, which is the amount of future pension benefits that CTPF-eligible employees will accrue over a given fiscal year. In FY2027, this normal cost comes out to 36.3 percent of the total employer contribution amount. Despite these improvements, CPS still bears legacy costs that have—aside from FY2023 and FY2027—required the use of operating revenue to cover the difference between the levy’s revenue and CPS’ statutory pension payment. Nonetheless, CPS continues to make all statutory contributions to the CTPF in accordance with the pension ramp, which has the mandate that CTPF be 90 percent funded by FY2059.

These costs are a burden unique to CPS. CPS remains the only school district in the State with its own teachers’ pension system separate from the statewide Teachers’ Retirement System (TRS). Full-time salaried CPS teachers and other licensed teaching staff are part of the CTPF, which, until FY2018, has been funded almost entirely by Chicago taxpayers with little support from the State. Under this arrangement, Chicago taxpayers have faced the unique burden of having to support both the CTPF and the TRS. Like all other working Illinoisans, portions of their income, corporate, and sales taxes paid to the State go toward funding TRS costs, but Chicagoans bear the additional burden of supporting most of the CTPF costs through property taxes and other local revenue streams.

With a strong investment market in FY2022 and increased pension levy revenues, CPS did not need to spend any of its operating revenue on CTPF contributions for FY2023—the first time in the last twenty years where CTPF was wholly funded by dedicated state and local revenue sources. In FY2024, and to a lesser degree in FY2025, CPS had to once again divert operational revenue to help cover its statutory contribution. The amount of operating funded contributions for FY2026 is anticipated to be significantly less than the $61.3 million budgeted amount, and may reach close to zero, but will not be fully reconciled until the property tax cycle is complete. However, thanks to a growing property tax base and continued investment performance, the dedicated pension levy for FY2027 will be able to cover the entirety of the District’s CTPF pension payment. Whereas the operating revenue diversion exceeded $140 million in FY2024, FY2027 will see no operating revenue diversion. Diversions in out-years will be dependent on both projected levy revenue as well as changes to the statutory contribution amounts based on investment returns.

Per the CTPF’s 2025 actuarial report, the total statutory, or required, employer contribution to the CTPF for FY2027 will be $1,014.5 million. Of that number, the State will pay $368.0 million, which is comprised of the projected normal cost of $351.1 million and $16.9 million to offset the benefit increases enacted under Public Act 90-0582 (this is set at 0.544 percent of the CTPF’s total payroll pursuant to Public Act 90-0655). This total of $368.0 million also includes $65 million in the form of a health insurance subsidy for retirees.

CPS’ required contributions for FY2027 amount to $646.5 million. The pension property tax levy is projected to raise the same amount in FY2027 - $646.5 million. While the operating revenue diversion was $102.9 million in FY2025 and budgeted at $61.3 million in FY2026 (with the potential of being reduced to zero), no operating revenue is projected to be needed to cover the District’s pension obligation for FY2027. Much of this decrease stems from increases in the pension levy revenue year-over-year paired with reduced required contributions due to strong investment markets and a higher than expected market return in recent years.

A Strong Market Boosts Funded Ratios for the CTPF

The funded ratio of the CTPF based on the actuarial value of assets (AVA) decreased slightly to 47.9 percent as of June 30, 2025, down from 48.1 percent on June 30, 2024. This actuarial value is determined by a four-year smoothing method that helps account for unexpected gains or losses and provides better baselines for long-term fiscal planning. Therefore, it is more stable year-to-year than the market value of assets (MVA) detailed below.

The decrease in the actuarial funded ratio stems from a lower-than-expected actuarial value return. The FY2025 actuarial value return was just 4.8 percent, below the assumption of 6.5 percent and the lowest actuarial value return since FY2012. When using the MVA to assess, which examines the unadjusted returns within a fiscal year, we see that the funded ratio rose from 47.5 percent as of June 30, 2024, to 50.2 percent as of June 30, 2025. The return on market value of assets was approximately 11.25 percent for FY2025, the strongest since FY2021. For context, the ten-year average for market value investment return is 7.3 percent, while the ten-year average for the actuarial value investment return is 7.2 percent.

The unfunded actuarial accrued liability (UAAL) for CTPF grew by $237 million to $14.17 billion. The UAAL is calculated by taking the total accumulated cost of pension benefits and subtracting the value of the total assets in the plan’s possession.

The State Continues to Fund CTPF at a Lower Rate than the TRS

The passage of state education funding reform in 2017 began to address a pension system that unfairly penalized Chicagoans. Even though both the CTPF and TRS are governed by state statute, there has been a vast difference in the source of funding for both pension systems. The State is projected to pay $368.0 million in FY2027 for CTPF teacher pension costs, which represents 36.3 percent of the total employer contribution. In FY2026, the State contributed $6.50 billion towards the mandatory employer cost for the TRS. In FY2027, the TRS will receive $6.59 billion from the State, which comprises 98.2 percent of non-member contributions. Accounting for an additional $27.8 million in contributions from federal funds, school districts across the State are only required to contribute 1.4 percent of the annual required contribution amounts. When compared to CPS’ requirement to contribute 63.7 percent of total employer cost, the discrepancy becomes stark.

Another way to think about this difference is to examine the average contribution from the State to the two retirement funds on a per pupil basis. In FY2027, the State’s estimated contribution to TRS amounts to a pension contribution for downstate and suburban school districts of $4,405.95 per student, while CPS will only receive $1,143.30 per student.

CPS’ Employer Contribution Requirements: Diverting Operating Funds to Bridge the Gap

In FY2027, CPS is projected to contribute $646.5 million for Chicago teachers’ pensions sourced entirely from the dedicated pension levy. The State will pick up the other $368 million, of which $351.1 million is for normal CTPF costs, and $16.9 million is for “additional” state contributions. These “additional” state contributions are statutorily required to offset the portion of the cost of benefit increases enacted under Public Act 90-0582 and are calculated as 0.544 percent of CTPF’s total teacher payroll.

Chicago property values have increased steadily in recent years and are expected to continue to grow. This growth creates additional revenue for the District which, in return, decreases the amount of funding diverted from the operating budget to close the gap in employer contributions. In FY2027, the entire $646.5 million that CPS must contribute is anticipated to come from the pension levy revenue and there will be no operating revenue diversions.

In the majority of fiscal years since its inception in FY2017, CPS has needed to divert operating revenue to help complete the statutory contributions, although at gradually lesser amounts. Based on estimations of pension levy growth due to an increased EAV in FY2025 and additional growth projected in FY2026, CPS will not need to rely on operating revenue to bridge the gap of statutory contributions for FY2027. Last year the District anticipated needing to divert operating funds to cover this obligation until FY2034, while in this fiscal year the District projects that the dedicated levy will be able to cover all required employer pension contributions. In future years, the trend of less reliance on operating revenue to supplement the payment is expected to continue and certain years of no operating revenue contributions are likely. The exact amount of operating revenue needed to supplement the pension levy in out years will be dependent on a variety of factors including the investment returns of the pension fund.

Pension Contributions by the State and Individual Employees

As the total employer contribution costs continue to increase in accordance with the actuarially required amount in order to reach a 90 percent funded ratio of CTPF by 2059, State contributions will shrink as a total share of the overall revenues used to cover this cost, if limited to just the normal cost and the “additional” 0.544 percent of payroll pursuant to Public Act 90-0655 to cover increased cost of benefit increases enacted under Public Act 90-0582.

In FY2027, the State’s contribution is projected to make up 36.3 percent of the total employer contribution; however, this is scheduled to decline to 17 percent by 2059 if there is no further expansion of the CTPF’s employer cost assumed by the State. The normal cost borne by the State will gradually decline as a greater share of the workforce becomes “Tier II” teachers who are entitled to a less generous level of benefits than “Tier I” employees.

CPS is reliant on the State continuing to add funding to the Evidence-Based Funding (EBF) model so that future pension costs do not prohibit us from investing in students and schools. If funding strategies are not changed at the State level, CPS expects its contribution to CTPF to double between FY2027 and FY2051—increasing from $628.5 million to $1,316 million. By FY2059, CPS will need to contribute $1,660 million annually to the CTPF to cover pension payments. More discussion on the State’s EBF formula can be found in the Revenue chapter of the Budget Book.

At the individual level, employees covered by CTPF are required by statute to contribute 9 percent of their salary to pensions. However, from 1981 through 2017, CPS paid the first 7 percent on the employee’s behalf, in addition to its own employer contribution. Under the 2019–24 Collective Bargaining Agreement with the Chicago Teachers Union, CPS no longer paid the initial 7 percent for “Tier II” employees hired on or after January 1, 2017, leaving them to contribute the entirety of that 9 percent. This will continue under the 2024–28 Collective Bargaining Agreement with the Chicago Teachers Union.

Decline in Funded Ratio Led to Increased CPS Contributions

Until June 30, 2001, CTPF had a funded ratio of 100 percent, and according to State law, CPS did not have to make an employer contribution. By June 30, 2004, the funded ratio dropped to 86 percent, below the 90 percent threshold, and therefore CPS was statutorily required to begin making employer contributions. State funds would not begin to ramp up in earnest, however, until the passing of Public Act 99-521, which took effect in 2017. As seen in the graph below, the District is on course to meet the FY2059 deadline of being 90 percent funded. A full explanation of the designated baseline ramp can be found in the  FY2025 actuarial report.

MEABF Contributions

Employees of CPS who do not participate in the CTPF participate in the Municipal Employees’ Annuity and Benefit Fund (MEABF). The MEABF is a City of Chicago pension annuity fund established to fund retirement for most civil service employees of the City of Chicago. Non-teacher employees of CPS are also allowed to be part of the fund.

The employer's proportionate share of collective pension expense is recognized as on-behalf payment as both revenue and expenditure in CPS' budget.