Illinois Teacher Pensions Broke, Favor Wealthy Schools

Illinois Teacher Pensions Broke, Favor Wealthy Schools
August 3, 2012

Vicki Alger

Vicki Alger, Ph.D. (heartlander@vickialger.com) is a senior fellow at the Independent Women’s Forum... (read full bio)
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If Illinois school districts and teachers paid a share of their own pension contributions, scarce taxpayer dollars could go to the schools that need them most, according to a new report from the Illinois Policy Institute.

The state currently pays the “employer share” of a teacher’s pension contribution, which school districts pay in many other states. Many Illinois districts, in turn, pick up the “employee share” of a teacher’s pension contribution, meaning teachers contribute little or nothing.

In 2011, pension benefits for teachers cost the state approximately $800 million, yet school districts contributed only $50 million, according to the report, “Playing Favorites: Education Spending Favors Wealthy, Suburban Schools.” The wealthiest districts received the biggest payouts.

There is growing consensus Illinois’ teacher pension system must be fixed, a reversal in state culture, says Collin Hitt, IPI’s senior director of government affairs.

An Illinois teacher who retired in 2010 after 30 years of service, for instance, received a starting annual pension of $60,000 with continuous annual raises, Hitt explained.

“This is an extremely generous benefit continued at taxpayer expense,” he said.

The state currently owes $43 billion to the Illinois Teachers Retirement System (TRS). For decades, the state has been responsible for contributing the “employer share” of teachers’ pension payments, but it repeatedly issued I.O.U.s in place of real payments.

In April, the TRS admitted the pension fund could be insolvent in 16 years. State TRS funding will exceed funding for Illinois’ largest education fund in just five years, the report said.

Shifting Costs to Recipients
Gov. Pat Quinn (D) proposed that since school districts employ teachers and set their salaries, the districts should bear the “employer share” of pension contributions.

The average cost to school districts in Illinois for picking up the “employer” share of pensions would be just 3.7 percent of total expenditures.

Every unit of Illinois government, including Chicago Public Schools, pays the “employer share” of state pensions, notes John Tillman, IPI’s CEO.

“Only in K-12 education outside of Chicago is this not done,” he said.

IPI also recommends teachers contribute to their own retirement.

Teachers in two-thirds of Illinois school districts pay little or nothing toward their pensions, with districts paying the “employee share.” If school districts stopped this, 482 out of 866 school districts would enjoy cost savings, the report said.

 

Learn More:
“Playing Favorites: Education Spending Favors Wealthy, Suburban Schools,” Illinois Policy Institute, May 2012:  http://www.illinoispolicy.org/news/article.asp?ArticleSource=4821

 

Image by Ed Yourdon.

Vicki Alger

Vicki Alger, Ph.D. (heartlander@vickialger.com) is a senior fellow at the Independent Women’s Forum... (read full bio)