Free college? Just a theory in Illinois without pension reform

  • Adam Schuster

    Adam Schuster

 
By Adam Schuster
Guest columnist
Updated 9/27/2021 1:16 PM

Illinois Gov. J.B. Pritzker announced his re-election bid with a campaign pledge that everyone at the state median income and below "ought to get to be able to go to college for free." But there's a big gulf between the "ought to" of a campaign promise and the Illinois reality.

During the past two decades, Illinois has steadily spent less on higher education funding each year. Take Harper College in Palatine as an example: The school received $8.1 million from the state in 2002, and just $7.5 million in fiscal year 2019. When funding is adjusted for inflation, that means the state is sending 35% less to students now than it used to.

 

Pritzker's intentions may be noble, but the situation is an impossible one. Rising pension costs are crowding out the state's ability to keep up with past commitments to colleges and universities, much less devote more money.

The $2.1 billion going to the State Universities Retirement System, or SURS, exceeds the $1.99 billion being spent on higher education costs in the latest state budget. The Illinois Policy Institute recently found that absent the pension crisis -- or if the state still spent the same 4% of its budget on pensions it did in the 1990s, rather than more than 25% -- Illinois could afford to give every undergraduate enrolled in public universities nearly $70,000. Instead, only a small fraction of students receive state tuition assistance, worth an average of just $3,000.

A decade ago, annual spending on higher education was more than three times what the state paid for university employee pensions. But, as spending on pensions has exploded, an ever smaller share of the pie is available for higher education spending that benefits students -- and in turn builds the state's economy.

And for what it's worth, the same is true for state aid in K-12 education, where pension costs have crowded out classroom spending across Illinois school districts. Since 2000, Illinois has increased its spending on teacher pensions by 200%, while funding for classrooms has only grown by 20%.

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It doesn't have to be this way. The Illinois Policy Institute developed a plan for "hold harmless" pension reform that would preserve benefits earned for work already performed, while allowing for modest reduction in the future growth of benefits, such as by replacing 3% compounding post retirement raises with a true cost of living adjustment tied to inflation. The plan would save $2.4 billion the first year alone and eliminate pension debt over time, freeing up scarce resources for investments in higher education and other services.

Illinois politicians have so-far failed to adopt such common-sense reforms necessary to stabilize the pension systems. Students lose now, but in the end, Illinois is robbing itself of its future.

At Harper, Avis Proctor was hired in 2019 to serve as the school's sixth president with a $305,000 annual salary through 2022. But as the Daily Herald reported, when the school's board approved that contract, it also approved a parting $45,000 bonus for outgoing president Ken Ender, to be added to his base salary of more than $325,000.

Because university retirees' annual pension benefits are determined in part by their final average salaries, large salary increases, coupled with generous pension rules, have boosted the retirement benefits of university employees far beyond what state taxpayers can afford. It's not just Ender, or the lucrative severance packages of College of DuPage President Robert Breuder, Northern Illinois President Doug Baker, Chicago State President Thomas Calhoun Jr. and others.

                                                                                                                                                                                                                       
 

Of the over 59,000 SURS retirees, 42% retired in their 50s and 20% retired before age 55. Almost half will see their annual pension benefits double during the course of their retirement, based on average life expectancy, thanks to annual 3% compounding post retirement raises given regardless of changes in the cost of living. Over 40% will receive more than $1 million in total retirement benefits, and over 9,500 will receive more than $2 million in benefits.

"We had almost no money for resources, books, supplies, etc," said Holly Hasten Jarovsky, Harper's director of clinical education and a physical therapy instructor. "In higher education, the costs are inflated and continuing to rise, but it's not translated to the teaching staff. It's not translated necessarily to the students by way of resources."

Without common-sense pension reform, Illinois residents face a future in which they're asked to pay ever more in taxes to receive increasingly worse services.

• Adam Schuster is the senior director of budget and tax research at the non-partisan Illinois Policy Institute.

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