Local control of pension funds may sound good on paper, but the idea of the state shifting the burden of millions of dollars in teacher retirement costs onto school districts is fraught with problems, say the Republican hopefuls for the 28th Senate District seat.
Roselle Mayor Gayle Smolinski and Jim O'Donnell of Park Ridge, a chief financial officer, are vying for their party's nomination in the March 20 primary. The winner will face state Sen. Dan Kotowski, a Democrat now representing the 33rd District, in November.
The newly drawn 28th District runs from Roselle east through Schaumburg, Elk Grove Village, Des Plaines, Rosemont and Park Ridge. It includes the 55th and 56th state House districts.
During Daily Herald endorsement interviews, both Republican candidates said they strongly oppose the proposal being floated by some lawmakers that would require school districts to manage their pensions themselves.
O'Donnell said sending pension liabilities back to the communities is code for future property tax increases.
"I see it as a huge cop-out," O'Donnell said. "They are going to run away from their obligation. They are going to not have to make a tough decision. And they are going to pass it down to all these communities that then are either going to have unbelievable layoffs or unbelievable increases in property taxes to handle the problem."
Smolinski said locally controlled police and firefighter pension funds are hurting because municipalities have little control over state-mandated benefits.
"The majority of people who sit on those funds are police and firefighters," Smolinski said. "The municipality who is putting in twice as much money ... we have the minority voice on that board.
Smolinski said each of the hundreds of locally managed police and firefighter pension funds across the state has its own money manager, lawyer, and no rules and regulations.
"If you gave pension funds to each individual school district, just think of the cost that would just exponentially rise when each of them now have to hire their own fund managers ... their own lawyers," she said. "If it's a majority of teachers/beneficiaries who are running the fund, you don't have local control."
However, Smolinski said local control has worked for the Illinois Municipal Retirement Fund and believes state employees and teachers could be enrolled into pension funds modeled after IMRF.
"The difference is the benefits haven't changed in 40 years (with IMRF)," she said. "It's invested wisely. It's one fund that's just very well run."
Both candidates support a leading proposal on pension reform -- backed by Illinois House Speaker Mike Madigan and House Republican Leader Tom Cross -- that would allow current employees in the teacher retirement system to opt out or agree to a much higher contribution rate to stay in.
"People really need to be paying in more in order to justify the level of benefits or the level of benefits can't be quite as high," O'Donnell said. "If we went to a defined contribution ... you would eliminate all those (pension spiking) abuses."
Pension spiking is when employees or administrators hoard sick days and vacation pay to drive up salaries at the end of their careers and inflate their pension benefits, he said.
O'Donnell said Illinois should consider a hybrid retirement plan offering employees a 401(k)-type option with annuities tacked on.
Smolinski said the House proposal falls short because it does not include police and firefighters.
"Myself and all the other mayors in the greater Chicagoland area, we've been living with this pension problem and have been calling it out for about 15 years now," Smolinski said.