Schools Say They Can’t Absorb Pension Costs

Illinois Senate President John Cullerton

 

Even though one-third of Illinois’ schools have been placed on financial watch lists by the state Board of Education, leading Democrats are moving closer toward a plan that would shift teacher retirement costs from the state to schools.

 

The new plan–which gained ground after House Speaker Mike Madigan mentioned it last month during a speech at Elmhurst Colllege–would force school districts and the state’s public universities to pay for part of the costs of their retiring teachers going forward. Previously discussion about the state’s pension troubles had focused primarily on the prospect of reducing benefits for future retirees. 

 

Illinois Senate President John Cullerton, who has been floating the idea with newspaper editorial boards, said the plan would allow individual school districts and state colleges to make choices about how to address the pension problem. Some districts and universities would absorb the cost. Others might be forced to take a tougher stance with teacher unions during contract talks and negotiate pensions as part of overall salaries and benefits, Cullerton said. 

 

“What we’ve suggested is for local school districts to have a little skin in the game when they hire teachers and administrators and set their salaries,” Cullerton said. “They should be required to set aside money into the pension system for their future retirees.”

 

But the plan is running into resistance from groups including the Illinois Association of School Boards, which said Tuesday it would force local districts across the state to make an additional $800 million in contributions toward teacher pensions–likely leading to cuts in education spending, hikes in property taxes, or some of both. Districts already are too strapped to simply absorb the cost of pensions, according to Ben Schwarm, the association’s executive director.

 

“On the heels of an income tax increase last year and taxpayers looking at the fact that the state still has a huge budget deficit, and then they’re looking at a cut to education or a property tax increase, a lot of taxpayers are going to look at it and think it’s not the best idea,” Schwarm said. “I think legislators see that, too.”

The Illinois State Board of Education put 94 school districts on two of its financial watch lists last year with another 203 flagged as potentially worrisome. 

 

But the state’s top Democrats have signaled their support for the new pension funding plan in recent weeks as they discuss overall pension reform. State leaders are getting more serious about solutions as they head into an election year facing more than $8 billion in unpaid state bills and more than $80 billion in unfunded pension liabilities. Talks on Senate Bill 512—legislation that would have reduced pension costs by requiring current workers to pay more into the system or accept a lower benefit—stalled last fall. 

 

Currently, Chicago Public Schools is the only district that pays its share toward teacher pensions without state help. All other suburban and downstate districts rely on state funding and contributions from teachers themselves to fund teacher pensions. 

 

And state funding has dwindled. For more than two decades, the state failed to pay its full share into the pension systems. This created an imbalance that now imperils the long-term survival of Illinois’ five pension systems, which serve the state’s teachers, university workers, state employees, judges and General Assembly retirees. 

 

Cullerton said the state wouldn’t pull out completely from paying into teacher pensions. But help from the districts would ease the state’s budget crunch and, potentially, free up more money for schools, he said. 

 

Poorer school districts already receive more money from the state than wealthier districts through general state aid, a sliding-scale formula that directs more resources to low-income areas. But even those schools would not be immune, Cullerton said. 

 

“When you negotiate a teacher salary, whether you’re in Harvey or Winnetka, you should always have the responsibility, as we do in Chicago, to put aside some money for the future pension costs of that teacher,” Cullerton said.