Holding the line calls for unflappable board members and state pension reform

March 19, 2013

When will Governor Quinn and state legislators deal with pension reform which is sapping critical financial wherewith-all away from state programs that remain unfunded and/or unpaid because Illinois lacks funds?  Illinois has $96 billion in unfunded pension debt, more than $54 billion in retiree health care debt, and $9.7 billion in unpaid bills.

A typical state spends 3% to 4% on pension costs.  In Illinois the unfunded liability of the Teacher Retirement Fund (TRS) equals 7% (+/-) of Illinois’s general fund.  At $52 billion, it is bigger than Illinois’ general fund budget of $34 billion. If paying the $52 billion liability off like a home mortgage, it would require more than $4 billion a year just to pay off the unfunded liability. When the TRS is lumped together with Illinois’ four other pension benefit obligations (SERS, SURS, GARS, JRS), total pensions equal 14% (+/-) of Illinois’s General Funds budget..

Teachers are often heard voicing fear and anger in radio and TV ads over the possibility that pensions earned through a lifetime of teaching could be reduced.  The average teacher pension in Illinois is $46,252.  This reflects the formula under which teacher pensions are determined.  The maximum pension a teacher can receive is an average of 75% of their top four years of earnings while teaching.

Granted, most teachers don’t qualify for Social Security upon retirement, but even so the generosity of their teacher pensions, with yearly automatic 3% COLA raises, seems noteworthy when compared to what recipients of SS collect after a lifetime of work in the private sector where COLA increases when granted, if at all, are established on a yearly basis.

In 2012 about 55 million Social Security recipients received their first increase in benefits — a 3.6% raise — since 2009, but higher Medicare premiums most likely erased part of the raise.  Announced on Oct. 16, 2012, is that in 2013 monthly Security and Supplemental Security Income (SSI) will increase 1.7% for 62 million Americans.   http://www.ssa.gov/cola

Not to be forgotten is that here in Illinois teachers can retire at age fifty with full pensions after thirty years of teaching.  It is not unheard of for teachers to double dip after retirement, as many retire in their 50’s.

Suburban school boards are taking advantage of the fact that local taxpayers aren’t solely responsible for pension obligations created by educators’ salaries.  Since the state pays pension benefits and not the districts, taxpayers in poorer districts, where teacher salaries are much less, end up subsidizing millionaire pensions.

Throughout the state of Illinois less than 4% of TRS beneficiaries receive pensions of more than $100,000.  That percentage is greatly bolstered, however, by the 3,022 six-figure pensions received by retired teachers in  suburban school districts in the counties of Cook, DuPage, Kane, Lake, McHenry and Will.  In stark contrast, during 2012 less than 1% of the retired educators in Illinois’ other 96 counties received pensions of more than $100,000.   https://www.dailyherald.com/article/20130306/news/703069930/

The “Lake County Daily Herald” didn’t include pension information about my own town’s school districts, Lake Forest 115 and 67.  A request to  Bill Zettler made the information available to me.  Bill Zettler is Director of Research for the Family Taxpayers Foundation and has researched and written over 150 articles on Illinois public salaries and pensions since 2005.  He is the author of “Illinois Pension Scam.”

What I found was not dissimilar to the pensions being accrued by teachers in other school districts here in Lake County where teacher salaries are high and they increase with each new teacher contract.  It is a rarity that salaries are ever frozen.

Zettler’s spreadsheet for Lake Forest School Districts 115 and 67 included the Date of Retirement, Age at Retirement, Current Pension Amount, and To-Date Pension Amount for all retired teachers in both Lake Forest School Districts.  Listed were ninety-one retirees in District #115 and one hundred twenty-four in District #67.

In 2012 thirty-three of the retired District 115 and 67 teachers received $100,000 plus pensions, with the highest among them collecting $154,299.24; twenty-eight received between the $90,000 – $100,000 range; twenty-six collected between $80,000 – $90,000; for twenty-four retirees the range was $70,000 – $80,000; nineteen fell between $60,000 – $70,000; and twelve were in the range of $50,000 and $60,000.  This was a far cry from the average yearly statewide teacher pensions of $46,252.

Retired Lake Forest teachers whose pensions were more in line ($40,000 – $50,000 or below) with the state’s average pension, either retired years ago when salaries were much lower or their years of teaching were limited in numberInteresting to note is that forty-six Lake Forest retired teacher have already received in excess of one million dollars in pension payments.  One teacher who retired at age 51, whose current pension is $140,054.76, has collected to date $1,972,599.03.

The next wave of retiring Lake Forest high school teachers (District 115) will likely receive pensions in the range of $100,000 per year, or will reach that figure within a few years, given that LFHS salaries averaged $106,000 during the 2012 – 2013 school year.  Because of a new three-year contract, the average LFHS salary during the 2013 -2014 school year will top the $106,000 average of 2012 – 2013.

The same also holds true for other Lake County high schools where competition for teachers has precipitated the escalation of teacher salaries.

A proposal floating around for some time, but found highly objectionable by school districts state-wide, recommends that individual school districts take over more costs of funding their retiree’s pensions that the state now pays in full.  It is unlikely that such a proposal would ever pass in Springfield. If such a proposal were approved, it would adversely affect Lake Forest  and other wealthy communities, hugely decreasing property values.  On the plus side, however, it would alert boards and taxpayers that teacher pension

A  good pension reform has been proposed by Rep. Tom Morrison (R – Palatine).  Morrison’s proposal (House Bill 3303) takes retirement out of the hands of politicians and gives control back to government workers by moving the state towards a defined contribution pension plan.  The bill would lock in the defined pension benefits that public employees have earned to date.  For any future service, employees and their employers would contribute to a self-managed 401k accounts just as private sector workers do. http://illinoisreview.typepad.com/illinoisreview/2013/03/state-rep-tom-morrison-on-fox-business-varney-co.html?asset_id=6a00d834515c5469e2017d41c68335970c

With the worst funded pensions in the nation it is no longer possible for legislators to avoid pension reform.  Every day lawmakers fail to enact reform pension, state liability increases by $21 million.

Fiscal order must be restored to the state.  Unsustainable pensions and unfunded liabilities are vice-like in their hold on Illinois by preventing a flourishing economy so an environment is created where businesses can thrive and create jobs.

It is important to vote in the upcoming April elections.  Candidate for school boards must be considered who are willing to hold the line on teacher salaries.


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