Pension Shifts

PENSION SHIFTS ARE BACK ON THE TABLE

As reported by BND News (Illinois) on May 2, 2013:
"SPRINGFIELD — A plan to fix Illinois' roughly $100 billion pension debt won passage Thursday in the Illinois House, and it likely will end up including a so-called cost shift that would force local school districts to shoulder most responsibility for teachers' retirements.
House Speaker Michael Madigan, D-Chicago, told fellow House members that as part of his plan, he will pursue a shift in pension costs for public school teachers from the state to school districts. That idea had been a major point of disagreement in negotiations and the reason reform efforts collapsed in last spring's legislative session. A shift would affect downstate and suburban school districts; Chicago schools have their own pension system."

"The Madigan plan is opposed by a coalition of unions representing teachers and state workers. The We Are One Illinois coalition issued this statement:
"Senate Bill 1 is unfair to the active and retired teachers, nurses, police, and other employees who paid out of every paycheck to fund their pensions, even as the state shorted its share. On top of that, it is blatantly unconstitutional and thus saves nothing. It simply exacerbates Illinois' fiscal problems."

This is not the first time this issue has been proposed:

In October of 2012 State Rep. Larry Walsh Jr. went on W.J.O.L. radio and spoke that he is in favor of "pension shifting."  This would negatively affect citizens of District 86 (Joliet, Crest Hill, Rockdale, Elwood, Channahon).

The problem is not the shifting of a pension system that is fully (or sufficiently) funded, the issue comes from shifting pensions that are unfunded and "dumping that debt" straight onto the backs of local property tax payers.  See the effects of this pension (debt dump) would have on the citizens of District 86 (and other Will County citizens):

It is true that shifting pensions to local school districts could be a proper reallocation of resources, make local school boards more responsible for the costs of running the school districts and take a load of future debt off the back of the State of Illinois.... However, in our opinion, this should only be performed when funding of these pensions have reached a more manageable level and can be safely transferred to districts without additional burdens on local tax payers.

The Daily Herald reported on this issue in January 2013, the article states:
"That means the average suburban homeowner could pay about $165 more a year in property taxes if the full burden was shifted today, based on an analysis of Teachers' Retirement System data and property tax records of numerous suburban school districts in six counties. But the average homeowner in some suburban school districts could see increases of as much as $270 a year."

An April 22, 2013 Chicago Crains (business news) article states the following:
"A majority of the 618 voting-age residents surveyed still back big changes. But the size of the majority is down to a bare 52 percent despite frequent statements from Gov. Pat Quinn and others that the state faces a financial crisis that will hurt funding for education, public safety and other programs. And those surveyed gave a big thumbs down when asked about a proposal similar to one being pushed by Illinois Senate President John Cullerton to force workers to choose between paying more for their pension or losing their retiree health insurance."  [A survey of this size is a bit small and the article doesn't explain who exactly they called - what demographics were used, so take this information for what it is.]

The article continues to state:
"Those surveyed were widely in agreement on one thing, though. Asked who they blame most for Illinois' pension woes, small, single-figure numbers cited only Mr. Quinn, lawmakers or unions. But 52 percent said "all of them"."

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The St. Louis Post Dispatch, on February 21, 2012, stated the following:
"Illinois Republicans are calling a plan to shift portions of the state's pension obligation to local school districts a "recipe for disaster."

Gov. Pat Quinn has discussed supporting a plan to pass the employers' portion of teacher retirement benefits, which has a $1 billion dollar price tag, on to the local school districts. The idea to let school districts foot the bill has gained support from Democratic leaders.
State House Republicans held a press conference Tuesday to urge Democrats to rethink the plan.

"The idea that the speaker, the senate president and the governor are now speaking from the same talking points lends some credence and some concern to those at the local school district level," Sen. Ron Sandack, R-Downers Grove, said. "Particularly, the way they fund and operate their schools might be in harm's way."

"It could either be a property tax increase or depending on how they structure the deal they're going to have to cut whatever those costs are within your school district," Rep. Ed Sullivan, R- Mundelein, said. "So you're either going to lose teachers or have a massive property tax."

Sandack said that school districts are "ill-prepared" to handle these types of payments. "It's a recipe for chaos and instability to the school boards, and of course, and more importantly, chaos and instability to the taxpayer," Sandack said."

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In nearby Lemont Illinois, pension shifts would have a negative effect on their school district (as reported):
"Officials in Lemont High School District 210 and Lemont-Bromberek Combined School District 113A have publicly expressed their opposition to the plan in recent weeks, claiming the shift would have devastating effects on the quality of education in Lemont.

Plan would cost District 210 approximately $730,000 each year, officials say
District 210 sent out a press release detailing the proposed pension shift, and the “catastrophic effects” it would have on the high school’s annual budget and quality of education provided to students.

According to the release, taking on the responsibility of teacher pension payments would cost District 210 an estimated $730,000 annually. The cost is equivalent to the salaries and benefits of 11 teachers—or more than 10 percent of the school’s faculty—and represents more than 60 percent of the school’s annual budget for extracurricular activities and athletics, officials said."