Schools: Pensions could hurt us like they hurt towns
SPRINGFIELD — Suburban mayors have seen their budgets drained over the past several years by rising pension costs for police officers and firefighters but are unable to cut retirement benefits because state lawmakers control the rules.
Now, suburban school officials say they eventually could end up in a similar spot — if not in a worse budget position — if the state passes teachers' pension costs on to local school districts.
What's on the table
Lawmakers have deadlocked so far in a bid to save the state billions of dollars in retirement costs for teachers and state workers. Here's what's been proposed so far.
Benefit cuts: Lawmakers propose cutting cost-of-living pension increases for retirees, now at 3 percent compounded annually. Under the proposal, workers and retirees could keep that benefit only if they gave up state help with their health care. Otherwise, they'd get a smaller yearly increase based on the consumer price index or 3 percent simple interest, whichever is lower.
Cost shift: Top Democrats want to shift the state's future pension costs for teachers onto local school districts, community colleges and universities beginning in the 2013-14 school year. The change would be phased in over a number of years until schools have picked up the full cost.
Late-career raises: Republicans offered an alternative, proposing school districts be required to pay pension costs triggered by any end-of-career raises given to teachers. Now, districts are penalized for giving late-career raises of more than 6 percent.
Under a plan being considered by Illinois lawmakers, suburban and downstate schools would have to assume future teacher pension costs now paid by the state, but state lawmakers would keep control over benefit levels.
"The state sets the rules, but they want to shift the burden to us," said Wheaton Warrenville Unit District 200 Superintendent Brian Harris. "We have no voice at that table."
Legislative leaders and Gov. Pat Quinn will meet again as early as this week to try to hash out a compromise on pension reform. Democrats and Republicans generally agree to a plan to cut annual pension raises for teachers and state workers who are retired, over the strong objections of unions.
The impasse is largely over Democrats' plans to shift costs of about $1 billion a year to schools. Estimates released so far set the cost per school district anywhere from 3 percent to 9 percent of current payroll expenses.
Proponents say it would force schools to be more responsible about setting salaries, which drive pension costs. School officials say it would leave them at the mercy of state lawmakers — echoing the complaints of suburban mayors who say the legislature has raised benefits for firefighters and police officers over the years and left local taxpayers with the bill.
A Daily Herald survey of 62 suburbs across seven counties showed the amount of taxes levied for public safety pensions was 25 percent of the total taxes collected by those towns in 2010, up from 18 percent in 2006.
"This is not something we have budgeted for in the short-term or the long-term sense," District 200's Harris said.
But state Rep. Elaine Nekritz, a Northbrook Democrat and top negotiator in state pension talks, said there are big differences between pensions plans for school districts that will avoid what towns are facing now for fire and police pensions.
First, she said, no one is talking about raising benefits as the state stares down $83 billion in retirement debt. Instead, Illinois is following a nationwide trend to cut benefits.
"We're talking about reducing benefits right now," Nekritz said. "That's the direction we're heading."
And Illinois voters will have a chance in November to vote for a constitutional amendment that will force state government to have 60 percent majorities to raise pension benefits in the future, she said.
Mayors often acknowledge the same dilemma state lawmakers face — much like it's difficult to justify cutting benefits for teachers who care for children every day, it's tough to advocate for reducing benefits for public safety workers.
Yet, school officials have vocally worried about taking on pension costs even with reduced benefits. And some mayors say school districts could have it worse than they do if they take on pension costs.
As costs for a town go up, officials have more options to come up with the money than schools do — especially suburban school districts that have caps on tax increases. Towns can raise other kinds of taxes and fees to cover costs even if their property tax hikes are capped.
"I might not like to raise taxes," said Itasca Mayor Jeff Pruyn. "But I have the ability to."
Schools with property tax caps would almost certainly have to look to major cuts if pension costs went up more than expected, several mayors say.
"We don't have a lot of flexibility, but we have some," said Roselle Mayor Gayle Smolinski.
Mayors want in on the push to reduce retiree benefits, but lawmakers so far have not included police and firefighters.
State Sen. Kirk Dillard, a Hinsdale Republican, said the political power of Chicago Mayor Rahm Emanuel — who also wants police and fire benefit cuts — could move that issue.
"It's a force that the (Illinois Municipal League) needs to harness," Dillard said.
Republicans like Dillard have warned that current teacher pension proposals also would saddle school districts with any future pension debt created by increased benefits or investment losses — a major contributor to today's state pension crisis. But Nekritz has said the plan allows districts to spread those losses out over 30 years.
On Monday, Quinn told reporters the idea that shifting pension costs to schools would lead to higher property taxes was a "canard," saying it would have an "imperceptible impact" on local taxes if it's phased in over a long time.
"That's just a fact," Quinn said.
Democrats' chief argument in trying to shift pension costs to local schools after decades of the state paying the bill is that school boards, by raising teachers' salaries, hike pension costs without having to pay for it.
Harris said the District 200 school board has heard that argument loud and clear.
He helped finalize a contract just last week that takes away automatic 6 percent raises for teachers at the end of their careers that help raise their retirement benefits. Many school districts still have such provisions.
How arguments among state lawmakers play out in the coming days, weeks and months is far from clear. And it's possible the political posturing of an election year could prevent any pension changes from happening this summer.
St. Charles Unit District 303 Superintendent Don Schlomann says he still expects something to happen, but local officials just don't know what.
"What that looks like, I don't know yet," he said.
• Daily Herald Staff Writer Jake Griffin contributed to this story.
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