Pension crisis made worse

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By Dan Haley

Editor and Publisher

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. 

Email: Twitter: @OPEditor

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Reader Comments

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Kevin Peppard from Oak Park  

Posted: August 10th, 2019 4:03 PM

Dan, you endorsed Gina Harris for the OPRFHS board, and she is an advocate for using the maximum pension spiking allowed. Twice on the Facebook page for Oak Park Property Tax Watch she has been asked to state her rationale for that, and at OPRFHS she can help determine whether or not that happens. Twice she has refused to do so in writing. Instead, she says she will discuss things in private, and not on social media, keeping her uncommitted. There is nothing preventing her from publishing an Op-Ed in your paper, which is more read than any electronic media. You and Ken can give her as much space as she needs. As a Director of the Illinois Education Association, does she represent that entity, or the people of Oak Park and River Forest?

Nick Polido  

Posted: July 3rd, 2019 5:38 AM

Wow what a epiphany Dan! Maybe you can have Don Harmon explain his fair tax that will soon be on the ballot that will do nothing to solve this issue. It is so pathetic that this paper continues to endorse these thieves.

Bruce Kline  

Posted: July 3rd, 2019 12:43 AM

Spare us your crocodile tears Mr. Haley. You've basically supported every cockamamie spend and tax scheme that has come down the pike here in Oak Park. And as Leslie Sutphen pointed out you endorsed an officer of the NEA for the D200 BoE, Ms. Harris, who was outspoken in regards to repealing the 3% and replacing it with the 6% bump. You must take your readers for fools.

Kevin Peppard  

Posted: July 3rd, 2019 12:14 AM

Dan: Past OPRF teacher Steve Gevinson solved the Sue Bridge problem (collecting a pension, while still wanting to teach). He retired from OPRF, and then taught at the University of Chicago Lab High School (collecting a pension of over $100K from the State-run TRS) That new school was outside the State system. Supt Pruiit-Adams collects a Missouri teacher's pension, and her compensation in our state does not affect that. In their later years, they were receiving many multiples of an entry-level teacher salary

Kevin Peppard  

Posted: July 3rd, 2019 12:01 AM

Dori B.: OPRFHS is not required to offer the spike, but if other Districts offer it, the attitude will be "Why not take our share?" Yes, we pay higher amounts for four years, but the teachers get the benefit"for life. TRS (the State) pays the pension. We will all pay for that under-funding eventually, but our moving that amount up is minimal., when spread across the other 800 districts in Illinois. Meanwhile, the accumulated amounts from others add up: New Trier, Evanston, Hinsdale ... So why not get ours, since we will be paying for the others? That attitude is why this must be controlled at the level of the State, for everyone. It's a case of where we have to be protected from ourselves, where locals think they're getting free money

Kevin Peppard  

Posted: July 2nd, 2019 11:44 PM

Dan: it's worse than you write. The 6% COMPOUNDS, and the salary by the last year is 26.2%, not 24%, higher than the base year. All the increases over the last four years accumulate to 63.7% above the base year. The pension is based on the average of the last four years, so it boosts things by almost 16% -- which has nothing to do with the amounts contributed by the teacher or State over the preceding thirty years or so, and the associated investment returns. "Age-Earnings" profiles collected by the Feds show that most people have their salaries or wages decline in their final years of employment. Past OPRF Superintendent Sue Bridge was under the old system (to which teachers want to return). She had said she would have loved to teaching English again. She would have taken a huge pay cut, and even so the State would not have allowed that. And working for free would have had the union on her back. Admittedly, even teachers who had "topped out in the Step/Lane Tables would have received some inflation adjustment, but not of this size.

Dori Bernstein  

Posted: July 2nd, 2019 11:04 PM

D97 and D200 are not required to change the pension spike back to 6%. If the School Boards are ethical they will eliminate the pension spike completely and raise and pay for the younger teachers.

Leslie Sutphen  

Posted: July 2nd, 2019 10:46 PM

Mr. Haley, You endorsed Gina Harris for D200 when her Facebook profile ran the IEA "Repeal the 3%" Banner during the election. She is a director of the IEA. Now she is going to be someone who decides salary increases. You should have done our homework.

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