D200 finance committee dissects pension reform

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The District 200 Finance Advisory Committee on Monday weighed in on the state's looming decision to shift the burden of funding employee pensions to school districts. The issue was among several topics discussed. State lawmakers have been trying to craft pension reform legislation this summer.

A final bill could come sometime this fall. But without knowing the details of the final bill, school districts are somewhat in limbo in terms of preparing for the change, explained Erika Lindley of the organization ED-RED (Education Research Development), an education advocacy group for suburban school districts.

Lindley, ED-RED's executive director, gave a presentation at Monday's meeting about the status of pension reform.

A committee of state lawmakers are currently working on a bill, but have not said when it will be ready. Lindley said a bill could come by late October, based on her reading of legislators' work so far. ED-RED, which has been around since the early '70s, includes representatives from 80 suburban school districts, including D200 and elementary school districts 90 and 97.

Those districts have generally opposed the state's plans to shift the pension burden onto their shoulders. Lindley said lawmakers have been discussing pension reform since 2008. Various bills have included changes to the retirement age and employee contributions or moving employees into a 401K-style plan.

A change to the cost-of-living adjustment (COLA) provision, Lindley noted, is another major change lawmakers are exploring.

Whatever plan lawmakers adopt must include some caveats for school districts, Lindley stressed.

"Will the cost-shift happen? If it happens, what will the phase-in period be and, if it happens, what will be the normal cost be — so what will that high-end number be that we'll at some point reach?" she asked. "And, of course, those are three questions I absolutely cannot answer because of where the conversation has been in the past five years."

Currently, teachers contribute 9.4 percent of their creditable earnings into the Teacher Retirement System (TRS). Lawmakers have proposed increasing that contribution by 2 percent.

Another critical piece for school districts to consider is the phase-in period of any changes, Lindley said. Currently, school districts are paying .5 percent into TRS. The state is looking to increase that to anywhere from 4 to 8 percent. Various proposals call for an annual increase of between .5 and 1 percent for school districts in order to meet that high-end number.

"The number we've been talking to legislators about — the number that seems to stick — is .5 percent. So right now public districts are paying .58 percent of creditable earnings to TRS. So what that means is if this bill became effective in the next school fiscal year of July 1, 2014, it would go from .58 to 1.08, and would continue to go up .5 percent until you've absorbed the entire normal cost," Lindley told the advisory committee.

She added that the high-end number is unknown right now, but she said the .5 percent is a safe assumption for districts to make.

The committee on Monday also looked at OPRF's current financial projections in its budget and enrollment projections.

Their next meeting is scheduled for Monday, Sept. 9.

CONTACT: tdean@wjinc.com

Reader Comments

13 Comments - Add Your Comment

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muntz  

Posted: August 23rd, 2013 1:22 PM

@rdglnd-That doesn't mean it gets pumped into pension funding, especially with zero pension reform. That $135M is tax $$ already levied, so basically we'd be taxed on the pension gap to cover the under balance, then again to cover future payments. No thanks.

rdglnd  

Posted: August 23rd, 2013 9:26 AM

isn't d200 sitting on $135 million?

Want to stay in Oak Park from Oak Park  

Posted: August 22nd, 2013 5:35 PM

Pension reform, pension deficit, whatever. It's arithmetic. There is a huge shortfall of funds. Taxpayers will have to pay more, retirees will have to receive less. School districts that provided more generous benefits caused proportionately more of the problem and will need to provide proportionately more of the solution. I wish the committee and the school board wisdom, strength and thick skins. They are going to need it.

OPRFDad  

Posted: August 22nd, 2013 1:40 PM

D200 should immediately file for bankruptcy. The state can't go bankrupt, but municipalities can. Take advantage of that and pull the plug before we throw good money after bad. And yes, it is too bad that people will lose their pensions, but they've been overpaid for decades, so this is cost of doing business.

muntz  

Posted: August 22nd, 2013 9:48 AM

@OPB-That may be true, but it's currently the state's responsibility to manage. If they want to pass off the pensions to the local districts, that should happen after their under-funding issues are resolved or from a point going-forward. They shouldn't be able to pass the debt of their mis-management onto other taxing bodies. Otherwise, we're essentially being taxed twice.

Alberg from Oak Park  

Posted: August 21st, 2013 11:33 PM

Why not just roll all pensions of all government employees into Social Security - like the rest of us? The problem with teacher pensions is the "golden parachutes" given for the last year or two before retirement. All the school districts did it since they wouldn't be paying the pensions directly, but now it's come home to roost!

Oakparkbob  

Posted: August 21st, 2013 10:18 PM

Having the local school district pay pensions makes sense since the teachers are NOT state employees. Why should the state pay teacher's pensions when they are not state employees?

OP Res253  

Posted: August 21st, 2013 1:41 PM

Math issue! Teachers pay 9.4%-actually boards "pick-up" some or all of that frequently (D97 picks up later in career up to 5%, CPS picks up nearly 8% for everyone). Regardless, private sector pays about 13% on earnings into Social Security, for 30% longer and receive about 80% less benefit. And yet, folks think this works HOW??

Done from Oak Park  

Posted: August 21st, 2013 11:05 AM

Muntz - agree 100%. Pushing the pension problem to local school districts does not solve or help the problem - it only finds a way for it to be paid for. I sure as hell hope that there is some kind of backlash toward Springfield once this plan before this concept takes place. To me, it is kind of like Obamacarein that it doesn't address the problem of healthcare COSTS - only who is going to pay for it.

muntz  

Posted: August 21st, 2013 10:28 AM

@Done-Of course we already did our part. When the state raised our income taxes 66% to 5%, they said it was to pay for the $6B in unpaid bills. Instead, they siphoned it off to the pension funds. If the state didn't want to own the pension crisis, why dump that extra money into pensions and just pay the backlog of bills where the money was supposed to go in the first place? Pushing pension funding to the local level does NOTHING to address the fundamental flaws of the pension system.

Done from Oak Park  

Posted: August 21st, 2013 9:11 AM

And in preparing for this inevitibility of our pathetic lawmakers down in Springfield, how about using a small portion of the $100M+ D200 funds to make the current unfunded balance fully funded? Don't you dare come back to me asking me to approve a referendum giving you more money because you can't fund the pensions! Do the right thing and at least make them 100% going into this fiasco. That being said, didn't we as taxpayers already pay our part to Springfield?

Sean Ristau from River Forest, Illinois  

Posted: August 21st, 2013 7:29 AM

This should get real interesting....it's definitely going to spell out more taxes for the community to fund these programs....got to love the State Of Illinois, the slogan for this state should be "Always passing the buck!"

muntz  

Posted: August 20th, 2013 10:50 PM

I cringe at the thought of opening my next property tax bill if this burden shift goes through. It's a shell/pass-the-buck game that doesn't resolve the underlying issue that pensions, in their current form, are unsustainable. But I assume the state will lower the income tax rate to 2% now that pensions are not in their budget? How about taxing IL pensions first which are currently taxed at ZERO?

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