Effect of pension law changes on OPRF is unclear

State raises cap on late-career pension bumps from 3% to 6%

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By Michael Romain

Staff Reporter

State lawmakers have approved changes to the state's teacher pension system, but so far, it isn't clear how they'll affect teachers at Oak Park and River Forest High School. Oak Park Elementary School District 97 officials, however, say the changes won't have an impact on their teachers. 

Last month, Gov. J.B. Pritzker signed into law the fiscal year 2019 budget, which included a provision that increased from 3 to 6 percent the maximum level of annual pay raises that school districts are allowed to give teachers in the last four years of their careers without those districts having to make excess salary payments. The end-of-career payments are designed to boost teachers' pensions — a practice its critics call "pension spiking."

When reached for comment on the recent changes, District 200's superintendent and board president referenced the 2018-22 teacher contract, which gives the board significant leeway in making sure that end-of-career pay bumps don't exceed 3 percent. But the contract also introduces an opportunity for teachers to make up to 6 percent, given the recent change in law. 

The teacher contract was ratified in February, when the 3 percent threshold was still in place. In order to prevent teachers from exceeding the 3 percent threshold and triggering excess salary payments, the board has the right to make adjustments to veteran teachers' salaries. Teachers are also given retirement incentives, such as one-time payouts, designed to avoid pension spiking.

But the contract also includes something called a retirement contingency, which basically puts OPRF teachers in position to benefit from the provision that Pritzker signed in June.

According to the contract, if "the pension code is amended" to allow for end-of-career pay bumps of at least 5 percent "from year to year without requiring an additional employer contribution, before the end of this contract, the faculty member who retires under this provision shall receive four years of increases on salary at the higher rate (5%) not to exceed 6%."

District 200 board President Jackie Moore and Supt. Joylynn Pruitt-Adams declined to comment on recent changes in the pension system beyond referencing the contract language. 

When reached by phone earlier this month, Laurie Campbell, D97's outgoing assistant superintendent for human resources, said teachers in the elementary school district would not be affected by the new law, since the district phased out pension-related pay bumps several years ago. 

Last year, under former governor Bruce Rauner, state legislators enacted the 3 percent cap to limit the practice of teachers getting salary increases in the last four years of their careers in order to increase their pensions once they retire.

The law under Rauner was intended to take some pressure off the TRS, which is only 40 percent funded and in debt to the tune of $75 billion, according to the system's own figures.

But critics of the 3 percent threshold, such as Kathi Griffin, president of the Illinois Education Association — one of the largest education unions in the state — argued that the lower threshold shifted the cost burden for financing teacher pensions from the state to local taxpayers.

"The new language," Griffin wrote in an op-ed that was published in various newspapers across the state, meant that pension costs for raises above 3 percent for TRS employees in the last 10 years of their careers "would be paid by the employer and not by the state of Illinois. Keep in mind, teachers do not get Social Security, which is why TRS and SURS are so important to the profession."

CONTACT: michael@oakpark.com 

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Kevin Peppard from Oak Park  

Posted: July 30th, 2019 4:54 PM

For those who want to understand the Illinois pension problem, go to this site: https://us.pensiontracker.org/index.php "Pension Tracker" is compiled by an effort of Stanford University. The numbers are highly dependent upon the assumed rate of return on the funds over the future, which is subject to uncertainty. One rate assumes 7.4%, and leads to a liability of $36,708 per household for 2017 conditions (and this is only for credits already earned, and does not consider new liabilities that continue to be added as we still under-fund). Another assumes only a 3% return, and leads to $76,398 per household. For this and other measures, such as % under-funded, % of general fund expenditures, etc., Illinois is often #1 on the worst out of 51 list (counting Washington D.C.), and never better than 4th worst. Add about another 40% for local pensions (Counties, municipalities, special districts, etc.). It's truly staggering, and the Teachers Retirement System (TRS) is the biggest contributor. The WJ article describes how this system is going back to a bad practice of "pension spiking". Remember that Oak Park and River Forest are higher in average income than most of the State, so our share will be higher.

Bruce Kline  

Posted: July 29th, 2019 11:14 PM

Thank you Kevin. Just one point of fact. Arkansas did not file for Bankruptcy in the 1930s. It simply defaulted. Arkansas was simply flat out broke ... it was insolvent. Whether it was ultimately "bailed out" by the feds or whether it's debt was refinanced is an argument best left to the academics. No law can prevent insolvency and default. And that is relevant to Illinois. While Illinois can not declare bankruptcy, there is nothing under the sun to prevent Illinois from insolvency and default. And the lessons learned from Arkansas' default may indeed prove relevant sometime in our state's future. (My wife - Maureen - says you and I should "get a room" to further discuss these things rather than "hog" these posts. Ha ha.)

Kevin Peppard from Oak Park  

Posted: July 29th, 2019 10:25 PM

Bruce: I couldn't find that old article, but I did find many lawyers disagreeing among themselves. Most agree that States cannot file bankruptcy, citing Article I Section 10, Clause 1 of the U.S. Constitution, but Arkansas did so in the 1930's and was apparently the only State ever to do so. Perhaps the same arguments were not made then. The Teachers' Retirement System (TRS) itself says that the State is protected by sovereign immunity under the 11th Amendment, presumably against retirees in other States trying to Federalize the matter. Its own citizens have no recourse to take the matter to the Feds. How do the Feds enforce many things against the States then, since Federal supremacy exists only on enumerated powers under the 9th and 10th Amendments? By broad interpretations of those powers, and by withholding money, and by 14th amendment enforcement provisions which broadened Federal power. TRS points out that a Governor would not want bankruptcy anyway, since a Federal Judge would start running everything. At the moment, this situation is not at all clearly defined. Your idea of simply not paying the full dollars, and where people have no recourse to the courts, might be possible. And Illinois will have the bond market closing its window on it.

Bruce Kline  

Posted: July 29th, 2019 12:13 AM

Oh Kevin I forgot. I would love to read that on line legal opinion that you cited ... if you can find it, let me know. Thanks.

Bruce Kline  

Posted: July 29th, 2019 12:01 AM

Kevin it seems I may be getting in over my head now. But I'll give it a shot. My reading of the history of the Constitution's contracts clause is that it's original intent has been much emasculated since the days of Hamilton. I think the law makers in Illinois were aware of this and for this reason incorporated language into the Illinois Constitution making public sector pension inviolate contractual obligations. Note also that other states have instituted pension alterations ?" much like the Illinois 2013 reforms (subsequently thrown out by the Illinois Supreme Court) ?" with out regard to the US Constitutional (state's) "obligation of contracts" clause. It seems that the "obligation of contracts" clause started to lose its original intent with the New Deal SCOTUS during FDR's Presidency. In 1933 (Home Building & Loan Association v. Blaisdell) the SCOTUS essentially said that the obligations of contracts clause had to be judged in the context of the overall good and needs of the public. Furthermore, the latest relevant SCOTUS decision (Sveen v Melin, 2018) continues this trend (not surprising I guess) meaning the clause is no wheres near absolute. On the contrary actually - it is very much sieve-like. It is certainly not a bedrock like the First. Only one Justice (out of nine in Sveen v Melin) ?" Justice Gorsuch ?" supported the original intent of Alexander Hamilton. So IMO, it is the explicit obligation of pension contracts in the Illinois Constitution that is of relevance here ?" and not that of the US Constitution's "obligation of contracts clause."

Kevin Peppard from Oak Park  

Posted: July 28th, 2019 7:32 PM

Bruce: I'm relying upon an online analysis by an Illinois lawyer. I'll try to find it again. States cannot walk away from their contractual obligations. See Article I, Section 10, Clause 1 of the U.S. Constitution. Alexander Hamilton pushed that provision. Some States wanted to do less than pay the full debts they incurred during the Revolutionary War. Their own citizens would come first, maybe then citizens from other Colonies (now States), and foreigners were likely to get stiffed. Hamilton realized that such practices would doom the creditworthiness of the new Nation, which would badly need foreign capital to develop its vast, untapped resources. And so, we got that provision and eventually became the world's safe haven for money. That would have to be amended out in some fashion, and then the Bankruptcy Code amended also. Only then would amending the Illinois Constitution make sense, and it would apply only going forward -- there are complicated issues It is, as I said, a Herculean labor. Ironically, Oak Park as a Village, although subordinate to the State, never has become an obligation of Illinois itself. It could go bankrupt, if the conditions existed. Look at what happened to Detroit. Your idea of the State simply stopping full payments would lead to the the Illinois Education Association going into Federal Court to enforce the Article I provision, and seeking to get paid before current vendors and others.

Bruce Kline  

Posted: July 28th, 2019 4:50 PM

Kevin well said. But I disagree on one major point. With out saying whether it is right or wrong ("a promise"), one would not have to amend federal bankruptcy law nor the US Constitution to retroactively change public sector defined benefit pensions in Illinois. That is purely a local issue. Only the Illinois State Constitution would need amending. And yes obviously Mr. Martire and Ms. Harris (and many others) would fight "tooth and nail." Bankruptcy of a state however is a federal issue as you imply. Namely federal bankruptcy law was never written with states in mind since the US Constitution effectively forbids states (sovereigns) from declaring bankruptcy in the first place. (However, no law can prevent insolvency and default, which is where Illinois - and its pensions - are headed).

Kevin Peppard from Oak Park  

Posted: July 28th, 2019 12:57 PM

Again, putting this discussion back on track about teacher pensions: Teachers have a pension plan that most people don't. It's a "Defined Benefit Plan", where a certain amount was promised, and if the investment returns were not there to back that up, the employers have to make up the difference. The employers take that risk. A "Defined Contribution Plan" only states the amount that you and your employer pay in along the way. If the investment returns are not what was expected, your benefits decrease from that expectation. YOU take that risk. The Feds' Bureau of Labor Statistics reports that in March 2018 (the latest data), non-unionized workers in the private sector had the following retirement benefits; 12% had a Defined Benefit, 64% had a Defined Contribution, and 24% had nothing from their employer. Furthermore, teacher pensions grow after a certain age by 3% per year, no matter what the Consumer Price Index is. They get health care benefits until Medicare is available for them at 65. To further juice things up, pension payouts are based on the last four years of service, and that's where the gaming starts with pension spiking. Pension payouts bear little relation to what was paid in and invested over the preceding three decades. The article mentions how some want to restore the worst part of that practice. To fix these problems requires amending the Federal and Illinois Constitutions and the Federal Bankruptcy law, a Herculean labor. Interest groups other than teachers would resist, including other States that now house our retirees, and have their financial affairs more in order. As the Chinese say, the journey of a thousand miles begins with the first step. Board members Harris and Martire will resist this tooth and nail.

Brian Slowiak  

Posted: July 27th, 2019 2:47 PM

@ Alice Caputo: Thank you. I cant quote the Jewish proverb completely, but the proverb states something to the effect of, if you are silent about a mistake/wrong/lie, you are actually support the mistake/wrong/lie.

Alice Caputo  

Posted: July 27th, 2019 1:43 PM

It got off track because the article quoted Kathi Griffin as saying that the teachers don't receive social security, implying that they are entitled to it and we tax payers should be willing to increase our subsidy to their already generous pension.

Kevin Peppard from Oak Park  

Posted: July 26th, 2019 10:51 PM

Somehow this thread got off track (it was about teacher pensions) and became a discussion of Social Security. Back to pensions: According to the Better Government Association Illinois Public Employee database (online), past OPRFHS Superintendent Sue Bridge got over $241 thousand in benefits in 2017. That's in retirement. Here an attempt to paste that data: LAST NAME AGENCY PENSION AMOUNT YEARS OF SERVICE BENEFIT START DATE DATA YEAR Susan J Bridge Downstate/Suburban Teachers (TRS) $241,310 40 6/30/2007 2017

Edwin Haag  

Posted: July 23rd, 2019 11:09 PM

I love how our government refers to S.S. and Medicare payments as "contributions". As if I have a choice in the matter.

Bruce Kline  

Posted: July 22nd, 2019 11:04 PM

I beg to differ Bill. Voluntary participation - or not - is not the crucial issue. The crucial issue is the numbers of "new recruits" required necessary to support the "old recruits". Hence I was referring to the underlying basic structural similarities between a Ponzi scheme and SS. The Ponzi scheme must recruit new members in order to pay out older members. It is very similar to SS which in its "pay as you go" design necessitates that present beneficiaries are dependent on future beneficiaries. Just like a Ponzi scheme which is dependent on recruiting new members to support old members. This is basically the structure of SS. At some point in a Ponzi scheme there are not enough new recruits to support the system and the system collapses. Even though, as you point out, SS is mandatory (and the classic Ponzi scheme is not) both are subject to a mathematical point of collapse. Sixty years ago SS had thirty to forty workers supporting one retiree. Now I think we're down to three workers supporting one retiree and this ratio is projected to get worse as more and more baby boomers retire - eventually reaching a point of collapse (with out further Congressional "adjustments"). Given this trend SS can not be self supporting (truly "pay as you go" whereby present beneficiaries are supported by future beneficiaries - present workers ) as FDR originally envisioned. Obviously Ponzi schemes are illegal. SS is not. But the primary underpinning design - recruit "new members to pay out older members" - is common to both similar.

William Dwyer Jr.  

Posted: July 22nd, 2019 8:31 PM

Very inaccurate analogy, BK. If SS were a "Ponzi scheme" people would have there option of declining to participate. That's not the case for the vast majority of tax payers.

Brian Slowiak  

Posted: July 22nd, 2019 5:48 PM

@ BK: There was a promise of a return made to me. The SSA sends me a yearly statement as to my SS benefit every year I wont get that benefit..What I learned afterwards is exactly what you have stated. There is no guarantee, and the expectations might be diminished or nothing more than a lie. Again, I do not want a "full share that was promised me, I want the share that was promised to me a "share" based on to what was forcibly taken from me. . Or I would have taken the choice of what Pres. Bush II proposed, to get out of SS by portion or completely. I will submit to you that The Illinois State Constitution has the amendment that no government pension can be reduced in anyway because of this issue with SS and The POG. Thanks for the challenge, the challenge keeps me sharp, and possibly incorrect.

Bruce Kline  

Posted: July 22nd, 2019 12:14 PM

Tom its the "worst deal ever" because SS is just a tax and welfare program. No promises of returns are made. Most people like Brian think otherwise. He thinks that he has a right to all "his" money he supposedly put into the system over ten years. He thinks SS is a "promise". Wrong. The SCOTUS said in 1960 (Fleming v Nestor) that our SS benefits are not a legal contractual right at all. No promise ever. That is why SS (the Congress) can change benefit payouts at any time for virtually any reason. Hey SS is actually a legal Ponzi scheme.

Tom MacMillan from Oak Park  

Posted: July 21st, 2019 3:46 PM

Add up what your employer and you contributed to Social Security over your lifetime. The puny amount you get each year in exchange for that is sick. And of course when you die, not a dime goes to your children. Worst deal ever.

Bruce Kline  

Posted: July 20th, 2019 7:29 PM

Is SS really a promise? Did SS really make a promise to you in 1966 (and me as well)?. You see Brian, under current law Social Security benefits are guaranteed, like a promise. But unlike a promise Congress reserves the right to change those benefits (those "promises") by changing the law. And in fact Congress as you know has done that not infrequently. So is SS really a promise? I don' think so. You would be naive to think otherwise.

Bruce Kline  

Posted: July 20th, 2019 7:08 PM

Brian. I hear you. But guess what it ain't me. It's SS. Your argument is wth the bureacrats at SS and their rationale of which you disagree as well as how SS defines "full benefits." So go tell them; not me. And good luck. Really. Read the article I cited. It's informative. It fully explains why federal employees under the old civil service plan are in the same boat you are in (if they worked as you did qualifying for SS benefits), and why present federal employees under FERS are not. Hey remember SS was not subject to income taxes at one point either. SS changes the goal posts as needed. In this case the change was in 1983. So yeah of course there was no mention of the WEP in 1966. And those posts will be changed again shortly I am sure. Are you really surprised? The larger point is government workers can qualify for full SS benefits - under present SS rules - if they and their employers and unions really want to. You gotta pay into the system for the whole time that you work ... just like federal employees do now. And yes that you are absolutely correct about your survivor benefit from your wife. That is the "double whammy" to the WEP "penalty." So tell me Brian how come most public sector employees and their unions choose not to partake in SS, when they surely can - just like present federal employees do.

Brian Slowiak  

Posted: July 20th, 2019 1:36 AM

@ BK: Sorry, I completely disagree. I am not looking for a full SS Benefit. I only want the benefit that I paid into both before and after my pension. That would be my 40 quarters worked before becoming a police officer. I am not looking to be "maintained" I just want what I put in, nothing more, and what I was promised. In 1966 there was no mention of the possibility of a POG. what they did to us, the government will do the others. either by cutting benefits or making a higher age threshold. I might get this wrong, but I don't even get a full survivor ship benefit from my wifes SS if she passes first.

Brian Slowiak  

Posted: July 20th, 2019 1:07 AM

@ BK: Sorry, I disagree. I am not looking for a full SS benefit.

Bruce Kline  

Posted: July 19th, 2019 8:35 PM

Brian it's a little more complicated than that. You don't get full SS benefits not because you are a government employee. You don't get full benefits because of the original intent of SS. Namely, if you only worked ten years ?" and therefore presumably were "poor" - SS was meant to provide 90% of your "maintenance." If on the other hand if you worked 30 years and presumably were middle class SS was intended to provide 40%. In your case the SS computers just see ten years worked. They do not see the 30 years you worked outside the system ?" those years in fact are calculated by SS computers as zero income. Therefore, the original SS calculation would be the 90% benefit originally intended for persons of limited means. Since the wise men of SS determined this would be "unfair" in your case - since you fall into the 40% not the 90% SS "maintenance" category ?" you are subject to the off set or windfall profit (WEP) correction ?" supposedly to make things "right." Now if you as a government employee worked 30 years and also paid into SS you would - like all present federal employees since 1984 under the FERS ?" be entitled to a government pension as well as FULL SS benefits. Clearly as Nick explained public sector unions ?" outside of the federal government - do not want to do that. https://www.creators.com/read/your-social-security/08/12/those-darn-social-security-offsets

Kevin Peppard  

Posted: July 19th, 2019 8:13 PM

Monica & Nick: What's amazing is that the teachers near retirement do not really have bargaining power on this.What are they going to do, say "We'll leave to go elsewhere?" No one will hire them at that seniority level, and certainly not give them a bonus, when they haven't worked there for the preceding decades. In fact teachers of any seniority have hard time changing schools, other than at the start of their careers. Again, they get too expensive, and may be less mold-able to the new school's culture. This practice is continued out of some misguided sense of identification with the teachers, a sort of Stockholm Syndrome (sympathizing with those who have taken you captive). Think Patty Hearst. The teachers are the Symbionese Liberation party

Monica Sheehan  

Posted: July 19th, 2019 7:20 PM

Nick, Excellent summary, and yes, of course, Senator Harmon should answer publicly for his vote to increase pension sweeteners for teachers at the expense of the state's taxpayers. Moreover, Harmon should address the very existence of public employee pension spikes. In the words of comedian John Oliver, "How is this still a thing?"

Brian Slowiak  

Posted: July 19th, 2019 5:19 PM

@ Nick A. Binotti: You are completely correct about teachers not paying into Social Security from their salary as a teacher. However, there is a POG, pension offset group. The POG states that if a person has a government pension, then their Social Security is diminished to a 19-26 percent return on the jobs the teachers worked prior to becoming teachers. In my case I started work in 1966 and worked ten years to obtain 40 credit quarters of Social Security pension benefit. When I became a police officer in 1974 and worked to 2004, I did not pay into SS. However, when I retired in 2004 I went to the SS office in Hillside and it was explained to me that because I have a government pension, I will not get a 40 quarter full benefit pension, but I will get a benefit that is reduced to 19-26 percent of the 40 quarter benefit. Worse, I went back to work in 2004 and paid in a full SS tax, and I still will only get a 19-26 benefit. My government has full knowledge that I will not obtain a full benefit and taxed at a higher rate. Speaking for my fellow officers, we only want what we were promised by the Feds. Lesson to you kids is what Uncle Sam promised you is up for further review .There are some police and fire departments paying in to SS as an additional retirement program benefit.

Nick A Binotti  

Posted: July 19th, 2019 2:03 PM

Teachers do not get Social Security because they do not *pay* into Social Security. If teachers are willing to deduct 6.2% from their gross pay for the employee portion...plus an additional amount from their gross pay for the employer portion (because employers factor in *their* costs of Social Security when determining your gross pay)...plus work an additional 6-8 years to reach full pension vesting (because states that offer combined SS/pension plans have smaller service year multipliers)...then they are more than welcome to join the Social Security party. Any volunteers? Anyone? Bueller?

Alice Caputo  

Posted: July 19th, 2019 11:10 AM

The reason teachers don't get social security is because they don't pay into it. They aren't entitled to it any more than I am for a teacher's pension. The previous abuse of the teacher pension system (large salary increases for the last 4 years) burdened the entire state and has had a direct contribution to the Illinois pension mess. Ms. Griffin is either ignorant or being intentionally misleading.

Nick Polido  

Posted: July 19th, 2019 9:42 AM

More importantly why not a comment from Don Harmon on this vote. This paper continues to give the Senator a pass over and over again! Lastly, Kathi Griffin, president of the Illinois Education Association poor mouthing her pensioners since they don't qualify for social security benefits as some type of punishment. I know of no one receiving social security in excess $100,000 or over &$50,000 plus continued health care!

Monica Sheehan  

Posted: July 18th, 2019 7:24 PM

Michael, I thank you for trying to get a definitive response from D200's superintendent and school board president regarding pension spiking. D97 reportedly phased out pension-related pay bumps several years ago. Why not D200?

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