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.