June 4th, 2018
Belleville News Democrat | Who should pay for teacher pensions?
Jim Tobin, President of Taxpayers United for America, is quoted in the following article by the Belleville News Democrat.
SPRINGFIELD — State legislators from the metro-east say they’re open to the idea of shifting some of the state’s costs for teacher pensions to local school districts, but they aren’t fully embracing the idea just yet.
Local school leaders are bracing themselves. They say it could be a huge expense coming at a time when their budgets are already hurting.
“It would be devastating,” said Granite City School District 9 Superintendent Harry Briggs.
If the cost is dumped into local school districts’ laps, some of the school leaders hope it will be a phased-in cost, giving them time to deal with the new burden.
Gov. Pat Quinn, House Speaker Michael Madigan and Senate President John Cullerton have each talked about the possibility of shifting all or some of the teacher pension obligation to school districts.
The move could save up to $1.3 billion a year for the state, which is struggling to pay its bills. School districts, though, would have to cut programs, increase property taxes or do both in order cover the cost.
Briggs said his district already had its state aid cut by $1 million this year, and the district lost $400,000 in state payments for transportation.
“Through no fault of our own, we’re having a revenue problem, and we’ve done everything possible to reduce expenditures and to do our due diligence. But it’s a very difficult environment,” he said.
Briggs said he has not yet calculated the potential cost to his district, “but I’m sure it would be a tremendous liability, because I have over 400 teachers. I would suspect that it’s a very large number.”
The five pension systems for state employees are underpaid by about $83 billion, in part because of the state skipping payments into the systems. The state will put about $4 billion into the systems this year to cover current obligations and to cut into the unfunded liability. Quinn’s proposal is to shift to local school districts and colleges all or part of the roughly $1.3 billion contribution to the teacher retirement system.
Proponents of the idea says school districts need to have “some skin in the game.” They say school districts have been giving pension-sweetening deals to educators at the end of their careers. Those deals cost the school districts little, but can result in big, life-time payouts from the pension system.
That’s a legitimate issue that needs to be addressed, said Senate Majority Leader James Clayborne, a Belleville Democrat.
“For a long time, the school districts haven’t had, really, any accountability regarding raises and increases, with how those impact the state’s budget as a whole,” Clayborne said.
But he stopped short of saying he supports shifting costs to school districts.
“I’m in favor of sitting down and discussing it, if there’s ways that we can resolve it without severely hurting the school districts,” Clayborne said. “It should be discussed and it should be put on the table.”
Rep. Paul Evans, R-O’Fallon, said the argument that school districts need to have a stake in the pensions costs has validity. “If it doesn’t cost you anything, you’re not concerned about the price,” he said.
But Evans said he’s concerned that if the state cut its share of the costs, the state wouldn’t give taxpayers some corresponding relief from state taxes. So, in effect, residents would just be hit with a bigger property tax bill.
Some school leaders think Quinn and state legislators are just trying to push the dirty job of raising taxes onto local school boards. In the eyes of voters and taxpayers, the school boards would be the bad guys.
Belleville School District 118 Superintendent Matt Klosterman said a number of proposals have been discussed, each with different funding formulas, so he doesn’t have a cost estimate yet for his district. But any shift will be expensive for local schools, he said, and likely will require a tax increase.
“Are we real excited about that? No,” Klosterman said. “The state, over a period of time, has made some choices where they haven’t kept up with their responsibility for the (pension fund) contributions, and now we’re in a position where it’s a significant problem, and they want to put it back to us.”
He added: “It’s real easy for them in Springfield to say, ‘Well, we’ll give you the ability to levy a tax.’ Well, that tax isn’t coming out of Springfield, it would hit the residents that live within our school district.”
School districts for years have offered incentives or bonuses to teachers in the final years of their careers. Some examples from recent teacher contracts:
* In Belleville District 118, a teacher who agrees to retire receives a $15,000 incentive, spread across the final four years of employment.
* At Triad, a teacher receives a $9,000 bonus over the final four years of employment.
* At O’Fallon Township High School District 203, a teacher receives a 5.6 percent raise in each of the final four years of employment.
Klosterman said a teacher’s retirement allows the district to save money by hiring someone at the lower end of the pay scale. He said one advantage of the incentive plan is that it helps with planning, because districts are given notice when a teacher is about to retire.
“We’re not necessarily incentivizing them to retire earlier than the system allows for them to do,” he said. “The system is, 35 years (of service) or age 60. So we’re not incentivizing them to leave before they have the 35 years or they’re 60 years old.”
Briggs, the Granite City superintendent, said the end-of-career bonuses are not significant pension boosters, because the pension system has been changed so that the maximum salary increase that can be counted toward a pension is 6 percent.
“There’s no golden parachute any longer,” Briggs said. “If you’re talking about increasing someone’s pension by 20 percent or more, those days are gone. We’re protected by law. I think it’s a debate to deflect what the real issue is, and that’s the unfunded liability that the state has created.”
Can it pass?
Passage of politically charged legislation will be difficult, especially in a year when every legislator is up for re-election. Legislators from Chicago, though, would likely find it easier to support the plan. Chicago schools have their own pension system, under which the city provides the employers’ contribution to the pension system.
Rep. Scott Penny, D-Fairmont City, said: “The state has been paying, for downstate areas, a significant portion of the teachers’ retirement system. Contrary to what everyone thinks, the money was not going to Chicago and getting spent there. Downstate Illinois was getting a significant portion of the teachers’ pensions paid by the state — including the taxpayers of Chicago.”
Penny, a former Collinsville school board member, said the proposal would be “a dramatic change, and it’s going to impact local school districts.” He added, “it’s a complete realignment of the concepts of how the system’s funded, so I’m waiting to see what the proposals are going to be.”
Other local legislators also are taking a wait-and-see stance.
Rep. Jerry Costello II, D-Smithton, said: “It’s rhetoric right now. This stuff changes on a daily basis. I think right now, it’s a litmus test to see how people feel about it.
“Something has to be done, because it’s unsustainable. Everybody involved has to sit down at the table.”
Rep. Eddie Lee Jackson, D-East St. Louis, who is a former educator and serves on the House’s Elementary and Secondary Education Appropriations Committee, said he wants more information on the effect to local schools before he decides on whether to support the idea.
As for whether it makes sense for school districts to have a greater stake in actions that determine teacher pensions, Jackson said: “I’m not disagreeing with that, but I want to look at the effects of it before I say ‘yes’ or ‘no’ to the possibility of that occurring. That directly affects the pension plan of the state when those salaries are increased.”
Jim Tobin, president of Taxpayers United of America, opposes the idea, which he said will result in “huge property tax increases” but no corresponding decrease in state income taxes. He said a better idea would be to have teachers pay more toward their pensions, and an even better idea would be to end the pensions.
“Just like us in the private sector, they could have Social Security and 401(k)s,” Tobin said. “That, of course, in the long run would end the unfunded liabilities.”
A phased-in shift?
Clayborne said the possibility of phasing-in the cost shift is something that’s being discussed. That would make the proposal slightly more palatable to school leaders.
Collinsville Superintendent Robert Green said he didn’t see any way around making local districts pick up at least part of the tab. “But if they expect us to pay 100 percent, that’s going to be very painful,” he said.
Green said one idea floating around Springfield was to create a separate local tax levy for pensions. “That’s putting something else on the backs of local taxpayers,” he said. “This is not the time to do that.”