Capitol - Your Illinois News Radar » Both sides to the pension shift debate
SUBSCRIBE to Capitol Fax      Advertise Here      About     Exclusive Subscriber Content     Updated Posts    Contact Rich Miller
To subscribe to Capitol Fax, click here.
Both sides to the pension shift debate

Friday, Jun 22, 2012 - Posted by Rich Miller

* This should help put things into perspective about the school pension cost-shifting plan

Quinn aides released an internal report suggesting that almost all school districts are capable of assuming their own retirement costs.

Specifically, the report says that 95 percent of districts have reserves exceeding minimum recommended standards and that phasing out state payments over several years would affect their budgets only about 0.4 percent a year.

In my world, 0.4 percent is a budgetary rounding figure.

* Earlier this week, the governor’s office released a report showing that lots of school districts were sitting onbig cash reserves

Of local school districts, Limestone-Walters Community Consolidated School District 316 could fund the most days with its FY2011 cash reserves - $2.1 million for 484 days. The rural Peoria school district is one of eight feeder districts into Limestone High School and has an enrollment slightly over 200 students.

Dunlap Community Unit School District 323, which is considerably larger, has $34.6 million cash on hand, according to the state data. That’s enough to keep the district going for 441 days.

* But

The data showed that Peoria District 150 had $48.1 million on hand at the end of fiscal year 2011, or almost 70 days worth of funding.

Dave Kinney, comptroller at the city’s public school district, said his figures show the district with about $41 million in total reserves, though he believes that number is misleading. He said of that amount, about $38 million comes from borrowed funds used to infuse money into depleted cash accounts from previous years’ expenditures.

* And

The figures don’t take into account further school funding cuts passed this year by the General Assembly, the fact that many districts are using their reserves to deal with previous state budget reductions, delayed payments and rising costs — points echoed by the school districts themselves.

The data showed that the Springfield School District had $16.9 million on hand at the end of fiscal year 2011, about 82 days’ worth of funding.

District spokesman Pete Sherman said officials estimate the Springfield school system will have only $1.9 million in its main education fund by the end of fiscal year 2013. The state board is even less optimistic, guessing that the district will have $667,308 on hand by the end of FY13.



  1. - Liberty_First - Friday, Jun 22, 12 @ 11:06 am:

    They last section says it all. Like universities, schools have to keep cash on hand to cover short fall in state funding.

    Quinns mentality is what has the state in trouble all these years. See a nickle and spend it.

  2. - wordslinger - Friday, Jun 22, 12 @ 11:20 am:

    The state is tapped. The tax hike club is no longer in the bag. Given that, the gradual pension shift is reasonable.

  3. - Solution Man - Friday, Jun 22, 12 @ 11:42 am:

    The only way to pass the state’s share on to the school districts is to set up a pension fun with a tax rate, just like the Ed fund, Transportation Fund, etc. If you Don’t set up the fund, then you are taking away resources from Children. Period. Yes we need a funding source for the pensions. The employee is putting in 9.4% of the salary, the state NEVER set up a funding source for their end. So if they give up and pass it on to schools, school will need to set up a take rate for the fund. Yes this means the tax payer will have to pay, they always had to. The tax payer is the state of Illinois.

  4. - The Elderly Man You Used to Love - Friday, Jun 22, 12 @ 11:42 am:

    Perhaps someone could enlighten me as to why the property tax is so much more onerous than the sales tax or the income tax. Money is fungible – a dollar is a dollar, right? Perhaps someone could also enlighten me as to why the parties are seemingly taking the opposite position that one might expect given their usual ideological predispositions. Aren’t the Republicans the party of local control? Wouldn’t the Repubs object to the idea of a taxpayer in Cairo paying for the pension of a $300k-a-year superintendent in Winnetka? Aren’t the Dems the party of the sugar daddy? Wouldn’t the Dems rather pick up the tab for everyone to appease their teacher union allies? Without injecting too strong a note of partisanship into my comment, I must say the Repubs have taken a seemingly nonsensical position in bemoaning the possibility of property tax increases while not admitting that income or sales taxes might have to be hiked again to pay for pensions if nothing changes. According to the latest COGFA report on pensions, the State pension payment hits $10 billion by 2030. Can any lawmaker honestly look a taxpayer in the eye and say that a $10 billion annual pension payment can be made just by natural revenue growth alone?

  5. - Mark - Friday, Jun 22, 12 @ 11:47 am:

    Libery is correct. It’s not uncommon for suburban school districts to issue Tax Anticipation Warrants (TAW), which is short term borrowing, at the end of the fiscal year, while awaiting state funding. The balance of the Working Cash Fund of suburban school districts vary greatly and the amount in the fund varies throughout the year. Quinn wants the suburban schools to draw their savings account down to zero? Makes no sense. With that said, the teacher unions IFT and AFT watch the budgets like a hawk and during collective bargaining squeeze out everything they can for salary and benefit increases. That being said, the main reason we have the pension mess is the astronomical benefit increases passed into state law by the General Assembly and signed by Governors since the Pension Protection Clause was added to the Illinois State Constitution at the 1970 Constitutional Convention. Comparing 1970 to 2011 benefit levels of TRS pension plan, here are a few additions which jacked up teacher pensions. Early Retirement Option (ERO), COLA increases from 1.5% not compounded to 3% compounded, Accumulated Sick leave credit allowed to be exchanged for years of service so one can retire earlier increaed from .5 year to 2 years, the age for maximum pensoin decreased from 66 to 54. 5 years, number of years worked to receive maximum pension decreased from 45 years to 33 years, annual accrual rate which is multipled by years of service credit which is in turn multipled by pensionable salary (pensionable salary is typically annual average of last 4 years worked) increaesd form 1.5% to 2.2%. And that’s just a few. From 1970 to 2011 over 100 benefit increases were passed into state law, every year except 1976 and 1992. Look at the benefit increases.

  6. - Rich Miller - Friday, Jun 22, 12 @ 11:47 am:

    ===Perhaps someone could enlighten me as to why the property tax is so much more onerous than the sales tax or the income tax.===

    Property taxes aren’t based on the ability to pay.

  7. - Right-click Rick - Friday, Jun 22, 12 @ 11:57 am:

    One other aspect of the pension cost-shift debate that is being completely overlooked is the fact that the total normal cost in TRS will begin declining in 2030 – this also according to the latest COGFA report on pensions. This is a result of the Tier 2 reforms made by SB 1946. When you take out the contributions that the teachers kick in, the employer’s normal cost becomes a negative number in 2035. When you factor in teacher contributions, the employer’s normal cost starts to decline immediately. What this means is that the school district share of normal cost would be a declining number every year until 2035, and in 2035 the school districts would be paying absolutely nothing towards TRS because the teacher contributions will exceed the total Tier 2 normal cost of the system. This is all adequately displayed on Page 41 of COGFA’s Report on the Financial Condition of the State Retirement Systems.

    Hence, I present you with my solution, which I call the 3/3/3 solution. School districts will pay 3% towards the normal cost, plus they will pay the present value of any increase in liabilities associated with pay raises over 3% granted in the teacher’s final 3 years of employment. This is a reasonable compromise.

  8. - mythoughtis - Friday, Jun 22, 12 @ 12:09 pm:

    Property taxes are (as Rich imples) based upon the current value (or estimated value) of the property. That has nothing to do with your current ability to pay. Especially for the elderly, who paid their homes off when they were working, and who now have a much more limited income. Many retired folk end up selling their homes in small towns and moving to an apartment in a bigger town because the rent is less than the property taxes they were paying.

    Honestly, is there anything covered by the property tax that really relates to the value of the property? Should your cost of the library, community college, road commission, etc really be more because your house is more valuable?

  9. - The Elderly Man You Used to Love - Friday, Jun 22, 12 @ 12:14 pm:

    Allright, then I would re-prhase my question: why would a property tax hike that resulted from a TRS normal cost shift be so much more onerous than a property tax hike associated with IMRF? When Bellwood decided to pay their village manager 9 different salaries concurrently (or whatever the number was), were they concerned about seniors living on fixed incomes?

  10. - Shemp - Friday, Jun 22, 12 @ 12:17 pm:

    Locally, our district has a fund balance, but they keep eating into it due to delays and cuts from the State. So what good is the balance when they are already eating into it yearly and now they’re going to get stuck with an added expense? Those reserves are just going to disappear faster. It’s not difficult to understand, unless you spend any time at the capitol….

  11. - Ahoy! - Friday, Jun 22, 12 @ 12:18 pm:

    Here is a proposal to the pension shift -

    Eliminate the School’s ability to pay the employee cost (set a timeframe so it does not interfere with current contracts)

    State pays half the actual pension cost and the employer pays the other half the actual pension cost. If the State is going to control the bennifits and the employers are going to control the salary’s, they should split the cost that way they both have a stake in keeping the costs down.

  12. - Right-click Rick - Friday, Jun 22, 12 @ 12:29 pm:

    Ahoy, I agree with the first part of your proposal. However, the second part ignores the declining normal cost due to Tier 2. Better to make school districts pay a flat percentage.

  13. - Foxfire - Friday, Jun 22, 12 @ 12:48 pm:

    ===In my world, 0.4 percent is a budgetary rounding figure.===

    Maybe on a one-time basis, I can agree with this statement. But, we’re talking about a period of 10 years or more, right?

    Look, I agree that locals should have some responsiblity for pensions. But the Governor is wrong in saying that the amount is “imperceptible.” You can’t make that argument at the same time that you say it’s an important part of the pension solution. At least not with a straight face.

  14. - Yellow Dog Democrat - Friday, Jun 22, 12 @ 2:01 pm:

    === They last section says it all. Like universities, schools have to keep cash on hand to cover short fall in state funding. ===

    Actually, I believe that the hoarding of reserves can be traced back to enactment of property tax caps (Thanks Rick Winkel!)

    In response to tax caps, school districts began raising their property taxes the maximum amount allowable and hoarding the excess, to create a “rainy day” fund for the eventual time when expenses would exceed the cap.

    === Look, I agree that locals should have some responsiblity for pensions. ===

    Some?!? I’d love to hear your argument for why it should be less than 100 percent.

  15. - Foxfire - Friday, Jun 22, 12 @ 2:09 pm:

    ===I’d love to hear your argument for why it should be less than 100 percent.===

    Because the locals have zero say in pension benefits. For most local governments, the state writes the check and the locals get to cash it.

    There hasn’t been accountability for those decisions, even now. No one has stood up and said, “I screwed up” even though there are many in both parties that should be lined up to do so.

  16. - Rich Miller - Friday, Jun 22, 12 @ 2:11 pm:

    ===Because the locals have zero say in pension benefits===

    Um, huh? Salaries drive pensions, and Spfld doesn’t control salaries, locals do.

  17. - Anonymous - Friday, Jun 22, 12 @ 2:44 pm:

    * This should help put things into perspective about the school pension cost-shifting plan…”

    Quinn aides released an internal report suggesting…”

    Why and how? ‘perspective…aides….internal’ report

  18. - Endangered Moderate Species - Friday, Jun 22, 12 @ 2:58 pm:

    We talk about the State and Locals as if they are great uncles. They are both us! If you live in a school district with administrators and teachers making below normal rates why are you happy that your state income taxes are paying for school district pensions with higher than normal rates?

    The difference is the income tax is a payroll deduction, we don’t see it so it doesn’t feel like we ever had it. The property tax is another animal all together and it causes us to dip into our accounts twice a year.

  19. - Yellow Dog Democrat - Friday, Jun 22, 12 @ 3:04 pm:

    @Foxfire -

    Rich is correct.

    Moreover, as was reported earlier this week on CapFax, “many” school districts have written end-of-career raises for teachers into their contracts. Clearly, the cost-shifting is intentional.

    The only way to discourage fiscal irresponsibility is to end the pattern of cost-shifting from local school districts to state taxpayers.

    Its called “budgeting with hard constraints”, and its embraced wholeheartedly by every conservative economist.

  20. - Yellow Dog Democrat - Friday, Jun 22, 12 @ 3:29 pm:

    As I’ve said before, the way to deal with school finances honestly is to eliminate the pension payments but fix the school funding formula, either by funding all schools at 100% of the EFAB recommended levels or funding the poorest districts at 100% first.

    Peoria would get roughly $13 million more per year from the state if K-12 education line items were fully funded. That would more than offset their pension costs.

Sorry, comments for this post are now closed.

* Reader comments closed for the weekend
* Isabel's afternoon roundup
* SUBSCRIBERS ONLY - Another supplement to today's edition (Updated)
* Question of the day
* Illinois State Library closed after emailed bomb threat
* SUBSCRIBERS ONLY - Campaign news
* *** UPDATED x1 *** Illinois *not* spared from expanded UAW strike
* Bailey back to his election-denying ways
* Today's quotable
* SUBSCRIBERS ONLY - Supplement to today's edition
* SUBSCRIBERS ONLY - Today's edition of Capitol Fax (use all CAPS in password)
* Open thread
* Isabel’s morning briefing
* Live coverage
* Yesterday's stories

Visit our advertisers...



Main Menu
Pundit rankings
Subscriber Content
Blagojevich Trial
Updated Posts

September 2023
August 2023
July 2023
June 2023
May 2023
April 2023
March 2023
February 2023
January 2023
December 2022
November 2022
October 2022
September 2022
August 2022
July 2022
June 2022
May 2022
April 2022
March 2022
February 2022
January 2022
December 2021
November 2021
October 2021
September 2021
August 2021
July 2021
June 2021
May 2021
April 2021
March 2021
February 2021
January 2021
December 2020
November 2020
October 2020
September 2020
August 2020
July 2020
June 2020
May 2020
April 2020
March 2020
February 2020
January 2020
December 2019
November 2019
October 2019
September 2019
August 2019
July 2019
June 2019
May 2019
April 2019
March 2019
February 2019
January 2019
December 2018
November 2018
October 2018
September 2018
August 2018
July 2018
June 2018
May 2018
April 2018
March 2018
February 2018
January 2018
December 2017
November 2017
October 2017
September 2017
August 2017
July 2017
June 2017
May 2017
April 2017
March 2017
February 2017
January 2017
December 2016
November 2016
October 2016
September 2016
August 2016
July 2016
June 2016
May 2016
April 2016
March 2016
February 2016
January 2016
December 2015
November 2015
October 2015
September 2015
August 2015
July 2015
June 2015
May 2015
April 2015
March 2015
February 2015
January 2015
December 2014
November 2014
October 2014
September 2014
August 2014
July 2014
June 2014
May 2014
April 2014
March 2014
February 2014
January 2014
December 2013
November 2013
October 2013
September 2013
August 2013
July 2013
June 2013
May 2013
April 2013
March 2013
February 2013
January 2013
December 2012
November 2012
October 2012
September 2012
August 2012
July 2012
June 2012
May 2012
April 2012
March 2012
February 2012
January 2012
December 2011
November 2011
October 2011
September 2011
August 2011
July 2011
June 2011
May 2011
April 2011
March 2011
February 2011
January 2011
December 2010
November 2010
October 2010
September 2010
August 2010
July 2010
June 2010
May 2010
April 2010
March 2010
February 2010
January 2010
December 2009
November 2009
October 2009
September 2009
August 2009
July 2009
June 2009
May 2009
April 2009
March 2009
February 2009
January 2009
December 2008
November 2008
October 2008
September 2008
August 2008
July 2008
June 2008
May 2008
April 2008
March 2008
February 2008
January 2008
December 2007
November 2007
October 2007
September 2007
August 2007
July 2007
June 2007
May 2007
April 2007
March 2007
February 2007
January 2007
December 2006
November 2006
October 2006
September 2006
August 2006
July 2006
June 2006
May 2006
April 2006
March 2006
February 2006
January 2006
December 2005
April 2005
March 2005
February 2005
January 2005
December 2004
November 2004
October 2004

Blog*Spot Archives
November 2005
October 2005
September 2005
August 2005
July 2005
June 2005
May 2005


RSS Feed 2.0
Comments RSS 2.0

Hosted by MCS SUBSCRIBE to Capitol Fax Advertise Here Mobile Version Contact Rich Miller