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SPRINGFIELD  —  Illinois’ latest plan to shed its worst-in-the-nation pension ranking would get “the state out of the pension business” by shifting future costs for public school teachers and university employees on to local taxpayers

By Benjamin Yount

SPRINGFIELD  —  Illinois’ latest plan to shed its worst-in-the-nation pension ranking would get “the state out of the pension business” by shifting future costs for public school teachers and university employees on to local taxpayers.

A group of Republicans and Democrats from both the Illinois House and Senate today unveiled a plan they say could save Illinois $2 billion this spring.

“The total savings, between now and 2045, would be almost $160 billion, the decrease in the unfunded liability would be $28 billion immediately,” said state Sen. Dan Biss, D-Evanston, who added the next payment for all five of Illinois’ pension plans would drop by $2 billion this spring.

Illinois is set to pay nearly $8 billion for pensions in the next budget. The total unfunded liability is nearly $130 billion, according to some estimates.

The newest proposal is a tweak of a number of old pension reforms, again focusing on cost-of-living adjustments and a cap on pension income, while requiring public employees to pay more for their own retirement.

But the biggest savings to Illinois would come from having local schools and the state’s public universities pick-up the entire cost for their new workers’ pensions. Illinois would continue to pay the bulk of the multi-billion tab for teachers and university workers currently on the job.

“If you are a new employee … you would contribute 4 percent of your salary toward a (defined benefit) plan,” said House Republican Leader Tom Cross. “And at the same time you would accumulate a (defined contribution) plan. You would put in 5 percent, and your employer could put anywhere from 3 to 10 percent. That would be negotiated by the school district or the university”

New employees, according to the pla,n would be anyone hired after Jan. 1, 2014.

By shifting the cost from the state to local schools and universities, Illinois would get out from under the expected future costs of paying for defined-benefit retirement plans for thousands of future teachers and university employees.

Republicans like Cross and Rep. Darlene Senger, from the affluent suburb of Naperville, have opposed a cost shift in the past. But Senger said this plan protects teachers who are now in the classroom.

“Not everybody is going to be happy. Almost everybody will have some piece of this that they don’t like,” Senger said. “But we will guarantee that you will have a pension in 30 years, and we will be out of this problem once and for all.”.

The cost shift may produce the biggest savings, but it is not the biggest legal hurdle for pension reform.

The new proposal would raise the retirement age to 67 and apply a cost-of-living adjustment only to the first $25,000 of a public workers’ pension.

That is sure to trigger a court fight over Illinois’ constitutional guarantee that pension benefits cannot be diminished.

Within hours of the new proposal being made public, the We Are One Illinois coalition, a group of the state’s largest public employee unions included the American Federation of State, County and Municipal Employees, the Illinois Education Association, the Illinois Federation of Teachers and the state’s AFL-CIO chapter was dismissing the legislation.

“Like the previous approach, HB 3411 continues to focus on unfair, unconstitutional benefit cuts that erode the value of retirees’ pensions,” the coalition said in a news release.

The unions have made no secret that they want lawmakers to raise taxes to pay for the pension system.

State Rep. Elaine Nekritz, D-Northbrook, however, is not worried about having to argue for the reforms.

Nekritz is quick to say the new pension plan would guarantee payments, adding that the pension systems could sue the General Assembly if lawmakers fail to make payments to the pension system, as they have in the past.

The pension plan from Cross, Nekrtiz and Biss comes one day before the Illinois House is scheduled to vote on a number of pension reform proposals.

The action Thursday is expected to test various pension plans, but is not expected to produce a final piece of legislation.

Contact Benjamin Yount at Ben@IllinoisWatchdog.org

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14 Comments

  1. The rich versus the poor, again.

    A few years ago, Reverend James Meeks had a wonderful proposal to equalize school spending.

    Does the State of Illinois accept the mandate to place all school districts on the same, level playing field?

    Does the State of Illinois accept the concept that all children have the same access to a quality education?

     Will the State of Illinois (that's all of us!) provide the funds to properly educate all of our children? 

    If local school districts are to fund pensions then the gap between the 'rich' school districts and the  'poor' school districts will only grow bigger.  Have any of our elected law-makers voiced any concern on this (unintended) fallout?

  2. Vouchers the answer, Democrats the problem

    The answer is school vouchers, something The Rev. Meeks supports.

    School vouchers would give parents, especially poor parents, a choice to send their kids to private schools. In that system, schools would compete for students and we all know competition brings out the best in us.

    But the powerful Teacher's Union and their Democratic cronies every time kill any legislative effort for school vouchers. Each generation our public schools get more expensive but provide less quality.

    Voters are to blame.

     

  3. Level Funding—all aspects ?

    Will Springfield go the whole way and require all schools to operate on the same dollars per student ?

    I.e. no property tax going directly to schools–all to Springfield who will then rebate—after taking their cut of course.  Then they will give an equal amount per student to the schools which will cover teachers/aids, administration salaries and operating expense, Pensions as well as educational costs.  No school would then be allowed to use any tax—or private donations—to fund school operations/programs.

    Thus New Trier, Evanston, Chicago, Robbins, et al would get an equal [by student] amount for education.

    1. Good idea

      Level funding sounds great.

      Paxton ilinois has a per pupil expenditure of $4500. A house like this goes for under $160,000. 

      How much would a house like that cost here? 

      Equal expenditures assume equal costs. be sure of what you are asking for… you may not like what you could afford on a school budget like that.

  4. Another school alternative?

    If students are given a voucher and Chiaravalle Montessori School can be convienced to add grades 9-12, there would be two [that I know of high schools]—Roycemore being the other one—alternatives for them.  If nothing else competition would be good for Evanston.  Vouchers should be good for a substantial percent of the cost and should go with the student this would work especially well if school funding is cut loose from property tax.

    If the state would go further and make all schools accept students with vouchers [and funding independent of property tax], I'm sure many Evanston parents would love to send their children to New Trier.

  5. School funding

    Illinois ranks 50 out of 50 for the States total contribution to education as a percentage of the whole cost.  Suburban school districts have their pensions paid for by everyone in Illinois via State income taxes.  Chicago residents pay for their own teacher pensions and everyone else's teacher pensions.  Is this fair?  Of course not.  Republicans don't get it.  Local employees should have their pensions paid for by their employers who would be more likely to stand up in negotiations over salaries, benefits, etc if they were responsible for the pensions produced by the salaries given to their employees.  A phased in cost shift of all Teachers pension liability would be the greatest savings to the States coffers.  The Teacher's pension fund is responsible for over half of the States over all pension shortfall.  This shift would free up money to pay 9 billion in OLD State bills and to contribute more direct money for education which would lessen the State wide problem of over reliance on local property taxes to fund education.

    1. Who pays for what.

      First of all, Chicago only pays for the pensions of their own teachers, and not to the pensions of  teachers in the rest of the state, but who cares.      Evanston school districts pay the state teacher pension money that is collected through property taxes.

      1. Nope

        Details are important.

        Both Chicago and the rest of the state (TRS) teacher pension systems are controlled by the state legislature. each have a board that makes decisions on their local(?) domains.

        Both Chicago (CPS) and Evanston (65,202) pay a small percentage to the pension systems now – much less than 1% of teachers pay.

        The teachers pay the bulk of the pension funding to each system through their payroll deductions.

        The state supports public education across the state by taking the responsibility  for funding the "employer" portion of teacher pensions.

        The State of illinois is responsible for the amount that is approximately equivalent to what a business would pay to social security for an employee. This state money is what is not being funded to both teacher pension systems. This is the cause of the crisis.

        The state has held back the funding to the pension systems for years in order to use the money for other functions which benefit the whole state- things like roads, prisons, ghost payrollers, etc.

        By moving the pension payments to the local community, the state has more money to spend on these functions.

    2. How about elimating the

      How about elimating the pension and using a 401k type program and shift the burden off the tax payers?

      Republicans don't get it? Ya, Illinois is full of those….I personally blame Bush for the Illinois pension mess.

      1. You get what you vote for

        Eliminating the government union pension system and using a 401k type program is exactly what Illinois Republican Governor candidate Bill Brady proposed in the last state governor's election.

        Brady won every state county but three, including Cook County. You get what you vote for.

        1. “Brady won every state county

          "Brady won every state county but three, including Cook County. ."

           

          Al, counties don't vote…people do.

          Who really cares if Brady won Gallatin, Pope, Stark, or Scott counties, when each one of these has a population smaller than a single Evanston ward?

          If you believe that counties or land are more important than people, then you are just as bad as the NIMBYs who believe that the city should use its resources to support old buildings and empty lots instead of supporting municipal services.

      2. Elimination will still cost you

        By a 401k type program, do you mean one with matching funds like corporations have? That will cost you more.

        The pension problem is not the pension. it is the non-payment of the required contribution by the state.

        Eliminating the pension would cause the state to shift to social security. It requires the same amount of money and you HAVE to pay that.

        If you mean that the state should not pay anything, then the shcool districts, etc. will suddenly pay alot more. This will cost you.

        Property taxes will suffer or the schools will no longer do many of the things that make Evanston worth the taxes.Declining schools will lead to declining property values. This will cost you.

        By shifting the burden off the taxpayers do you mean eliminatiing public schools? Or is there a secret way to have students educated for free?

  6. Costs of educating our children

    The original point is/was:
    IF pension costs are shifted to local school district:
    The probable consequence will be increased property taxes to fund school operations, teacher salaries AND the new, total pensions costs. 
    Rich school districts will be able to afford the increased costs (absorb the new pension costs) of educating their children. 
    Poor school districts will NOT be able to absorb the necessary increase in property taxes needed to educate their children. 
    The State as a whole (that's ALL OF US) has the obligation to educate ALL of its children, equally.
    The gap between the rich and the poor will only widen.
    What am I missing here?

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