Does it matter if districts cover teacher contributions?
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Analysis of suburban school districts shows there's no significant financial benefit for teachers who have retirement contributions paid for them by the district versus teachers who cover those costs themselves.
Illinois teachers are supposed to put 9.4 percent of their salaries toward their pensions.
Yet, teachers in at least 27 suburban school districts have some or all of their retirement contributions paid on their behalf by the district.
Those districts are among about 600 school districts or education cooperatives across the state that provide a similar benefit, according to an annual salary study by the Illinois State Board of Education.
But that's not as extraordinary as it may sound.
It turns out total compensation for suburban teachers who receive this benefit is about the same as for those who don't, an analysis of salaries shows.
In cash-strapped Illinois, this apparent perk has been a target of people who want school districts to shoulder more of the burden when it comes to funding the Teachers' Retirement System. They believe if the school districts have the funds to pay teacher retirement contributions, then they should be able to take some of the financial pressure off the state, which is responsible for most of the employer's share of funding teachers' pensions.
However, it's actually a little more complicated than that.
An analysis of salary data for suburban school teachers shows that for educators who get the district-paid benefits, base salaries plus the retirement benefits are comparable to just the salaries of teachers who have to pay the 9.4 percent themselves.
Looking at 12 unit districts in Kane and DuPage counties, for instance, the total compensation for a new teacher with no experience at the six districts where the retirement contributions are covered by the school board averages $41,368.67. The same salary package at the six districts where employees cover the retirement costs themselves is $41,330.67.
"To me, it's six in one hand and a half-dozen in the other," said Mary Kalou, assistant superintendent for business at Maine Township High School District 207, which pays teachers' pension contributions. "How we look at it is that it's in lieu of their salary."
TRS even treats the district-paid retirement contributions as income, so those teachers' total compensation is treated the same as for their peers in districts that don't cover the contributions. TRS collected $917.6 million in member contributions last year, according to the agency's website.
While the teachers' share of paying toward retirement benefits is 9.4 percent of their salaries, school districts contribute a little more than half of a percent of educators' total earnings toward the pension fund, and the state contributed last year at a rate of 8.23 percent.
There is no significant advantage to handling teacher contributions one way or the other, according to school district, union and pension plan officials.
"There is a small tax advantage if the contribution is covered by the district," said Dave Urbanek, a TRS spokesman.
According to the TRS website, because the contribution is "deducted pretax," there is an income tax savings for those teachers where districts cover the contribution costs.
Bob Ray, the media relations director for the Illinois Education Association, said union groups that favor the practice of districts covering contributions say it's mainly because it provides "stability" in funding.
School district officials say there's an advantage to the taxpayer to have contribution amounts spelled out in the teacher contract, rather than simply saying the school district will cover teacher contributions.
"If the legislature increases the contribution amount for teachers, the district would be responsible for any increase if we didn't have this in the contract," said Mark Bertolozzi, business manager at Wood Dale Elementary District 7. "Doing it this way protects the district. It protects the taxpayer."
Yet, the practice has critics. Ted Dabrowski, vice president of policy at the Illinois Policy Institute, said contracts become overly complicated and inaccessible to the general public when there are wide swings in funding policies among school districts. Dabrowski studied the issue in 2010 and found that there is no uniform contract language or reporting practices. In some instances, he found some districts that reported to the state that contributions were covered by the district, but they really weren't.
"When you have so many variables and a lack of transparency regarding benefits that aren't properly spelled out, the common taxpayer won't be able to figure out what they're paying for," Dabrowski said. "We need to simplify contracts and let taxpayers read them so they have a voice in them before they are signed by boards."
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