Quinn’s Proposal for Suburban School Districts to own ‘Employer’ TRS Benefits could be a ‘Blessing in Disguise’ for Taxpayers

May 13, 2012

In April Governor Quinn released his reform pension plan. Five basics tenets were noted, but the one that seems to be generating the most controversy among educators is Quinn’s number four agenda item: “Gradually shift the payments for retirement system back to the local taxing bodies over a 3-year period.”

The proposal remained a proposal until May 2nd when the Illinois Policy Institute released a study which was in sync with Quinn’s reform proposal and which immediately created a fire storm of protest by the head of the Illinois Education Association and a spokesman for the Teachers’ Retirement System (TRS).

The May 2nd IPI study, entitled Playing Favorites: Education pension spending favors wealthy, suburban schools, found that teachers in two-thirds (555 out of 867) of the school districts outside of Chicago pay little to nothing toward their own retirements. Instead, their local school districts pick up some or all of the teachers’ “employee” TRS pension contributions — a luxury that those in the private sector are rarely if ever accorded –negotiated at the local level by teacher unions. The TRS spokesman, in a counter attack, did concede that education pension spending does favors wealthy, suburban schools.

Not only do sweet “employee” TRS pension deals exist in two-thirds of the school districts outside of Chicago, but the state of Illinois is on the hook to pay for the entire Teacher Retirement Service “employer” pension contributions. Employer contributions are based on how much local school districts pay their teachers. When wealthier local school districts submit their bills to the state for payment they do very well, as their teacher salaries are at the high end of the pay scale.

Consider my own Lake Forest School District #115 where 93 teachers make over $100,000 per year and many more earn over $90,000. And this doesn’t include added bonuses and negotiated health care coverage.

Pension costs should never have been at the state level to begin with. Why then is our state obligated to assume the responsibility as the “employer”? The Teacher Union pushed for the plan knowing that if employer pension obligations were shifted to Springfield, unions could negotiate much higher pay for teachers locally than they would have been able to do otherwise. For who cares what effect large salary increases have on pension costs if the state is assuming them!

Illinois has only so many dollars available to fund education. Because of the state’s negotiated obligation to pay in full the employer share of TRS pension payments, the state has less money available for its General State Aid (GSA) funding program which was set up to counter inequalities in school districts where property taxes are not sufficient to generate what is considered the base amount needed to educate each student.

Quin’s proposal to require school districts to absorb some of the “employer” TSA contribution could be a blessing in disguise, despite claims by Illinois school leaders (locally and at the state level) that the change would result in program cancellations, increased class sizes, property tax increases and even the destruction of public education, with threats that property taxes would need to be raised.

Should property tax increases be suggested as a remedy in your local school district, they must be countered with attendance at your local school board meetings where public comments can be voiced. There are many cost saving measures open to school districts which would provide more than adequate financial resources to handle TRS employer payments should they revert back to local taxing bodies.

One obvious way would be to have future local school contracts written that would require teachers to pay at least some of their own TSA retirement fund obligations (9.4%) and health-care costs.

Other options might include:

1. Freeze teachers’ salaries for one year.

2. Limit teacher salary increases to 3.65% for three years.

3. Eliminate the two year sick-leave credit available for retiring teachers.

4. Eliminate the automatic 25% salary increase over the last 4 years of retiring teachers.

If Illinois were to follow the lead of Wisconsin, with its much lower K-12 education costs for salaries and pensions, our state could save $5 billion a year:

1. Full retirement age is not reached until age 65 in Wisconsin. It’s 55 in Illinois.

2. The maximum that can be received is 70% of final salary in Wisconsin compared to 75% in Illinois. The lower Wisconsin benefit is calculated against a much lower salary to begin with.

Dr. Harry Griffith, of Lake Forest District 115, is the poster boy for overpaid school employees. When comparing the top 10 administrator salaries in 2011 in Illinois vs. Wisconsin, Superintendent Harry Griffith ranked first in Illinois at a salary of $362,335. Superintendent Nerad ranked first in Wisconsin with a salary of $198,500, a difference of $163,838. Add perks and benefits to Dr. Griffith’s salary and the amount mushrooms to over $400.000! Superintendent Nerad oversees a school district with 40,00 students compared to Griffith’s 4,000 students. So Wisconsin tax payers gets schools with 10 times as many students supervised for $164,000 a year less.

Dr. Harry Griffith will be retiring as of June 30, 2012. Taxpayers in Lake Forest School District #115 seem unconcerned that the beginning salary of the superintendent hired to replace Harry Griffth on July 1, 2012, Michael Simick, is set at $250,000. Michael Simick’s final salary in a similar shared superintendent position at the Berkley Schools in Michigan was far less.

3. In Illinois the Cost-of-Living Adjustment (COLA) is always 3% a year even if the Social Security is zero. In Wisconsin pensions only increase if investment returns are above a certain amount. For the last few years there has been no increase in Wisconsin.

4. There are no retirement or sick-leave credits in Wisconsin. In Illinois teacher and administrators can accrue up to two years of sick leave and then apply those two years when calculating their pensions upon retirement. In Wisconsin pensions are based upon years actually worked.

If educators in local school districts are still averse to taking upon themselves the employer obligation for their own teachers, might they be reminded that every unit of government is responsible for paying the ’employer share’ of pension costs. Only in K-12 education outside of Chicago is this not done.

One of the gimmicks used by teacher unions is to convince the public that the state taxpayer is somehow unrelated to the local taxpayer when they are one in the same.

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