Chicago’s new mayor wants the state’s new governor to consider taking on the city’s employee pension funds. Illinois’ new governor demurs, pointing out the state’s bond status remains just a blink above junk status.
The obligations villages, cities, counties and this state have consciously taken on over past decades for the pensions owed to retired employees are in active jeopardy — right now, not in some gauzy future moment — of swamping every public budget. Swamping as in forcing property tax hikes, creating new taxes, and sharp cuts to government services we all rely on. It is happening in Oak Park, in Cook County, across the state.
The hole is gigantic and it will keep on growing for some while. What’s the cliché about the best way of digging yourself out of a hole? Stop digging.
A year ago, in a moment of fiscal sanity, state legislators reduced the maximum amount local school districts could bump the salaries of retiring teachers over their final four years of work. The cap went from 6 percent (multiplied by four years = 24 percent pay hike) to 3 percent (multiplied by four years = 12 percent).
Now in the blaze of end-of-session lawmaking that captured our attention a month ago, it turns out that the Democrats who run Springfield — house, senate and the governor’s mansion — very quietly did the bidding of union teachers and reset the bump to 6 percent.
For the few folks reading this column with the luxury of having a defined pension, in the public sphere pensions are based on earnings in the final years of employment. So bumping salaries over those final years directly bumps up pension payouts in perpetuity. While I’ve been writing about the now-arrived pension crisis for 20 years, we don’t hear more about the outrage of these once-even-higher pay bumps in education because, for this moment, teacher pensions are the responsibility of the state’s Teacher Retirement System. So local school districts bumping salaries for teachers and administrators is no skin immediately off the nose of local taxpayers.
Ask a school board member, though, and they’ll tell you they live in fear of the day, almost sure to come, when the state says it is shifting pension responsibilities to the school districts. It is near universally assumed this will happen, the questions being when and on what terms.
Also keep in mind that currently the TRS is funded at just over 40 percent of its long-term obligations to retired teachers. This bump won’t help.
Teachers will say none of this is their fault. They negotiated contracts and pensions in good faith. That’s true. The state perpetually chose not to fully fund those pensions because, in my estimation, they were cowardly. They didn’t cut costs 20 years ago to allow full payments into pensions. They didn’t raise taxes to allow those pension payments to be made. They assumed they’d be long gone before this brick wall derailed the train.
Now though, the statewide teachers union, the Illinois Education Association, crows about their success in lobbying Springfield Democrats and restoring the higher bump claiming that lawmakers “took action to help save the teaching profession.”
Serious overstatement. If you “save teaching” but bankrupt the taxpayers paying those teachers, what has been accomplished?
The question now is how does this play out locally. On one level, at least for now, it doesn’t matter. Keep the bump at 6 percent and the obligation gets shared with all our fellow Illinoisans. Will teacher pensions be shunted back to local districts someday? Local elected can play the same “We’ll be long gone” game of willful denial that state legislators and governors of both parties have played since the 1970s.
The bottom line is that a state mired in a disastrous pension crisis just made the crisis worse.