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One Rauner AV change would cost schools “millions of dollars” and lead to “financial ruin”

Friday, Aug 11, 2017

* PJStar

A change slipped into this year’s budget, coupled with Gov. Bruce Rauner’s proposed changes to a school funding bill, could add another major financial challenge for area school districts.

As part of the spending plan in July, lawmakers approved shifting the state’s portion of pension costs for all future teachers to local school districts. And as part of his amendatory veto of Senate Bill 1, Rauner removed language that would take those added costs into account when determining districts’ financial positions — data that’s used to determine how much they receive in state aid. […]

“We’re talking about millions of dollars — additional millions of dollars — in pension costs,” Peoria Public Schools Superintendent Sharon Desmoulin-Kherat said at a news conference Wednesday to urge local lawmakers to reject Rauner’s proposed changes. “That would be very difficult.” […]

Canton District 66 Superintendent Rolf Sivertsen said he didn’t have an immediate calculation of the cost to his district, but estimated that the effect would run into the millions of dollars. […]

“If there is no levy with it, it’ll be financial ruin, and the governor will own that,” Sivertsen said. […]

If the governor’s amendatory veto is approved, efforts to move toward more adequate and equitable school funding will be “obsolete the very day that Tier 3 is created,” Michael Jacoby, executive director of the Illinois Association of School Business Officials, wrote in an emailed response.

Online criticism of this specific aspect of Gov. Rauner’s AV was what got his policy director all fired up on Wednesday, by the way.

* Related…

* 2020 Could Have School Districts Seeing Red

- Posted by Rich Miller        

25 Comments
  1. - Will Caskey - Friday, Aug 11, 17 @ 12:14 pm:

    I’m not without appreciation that rather than pick up pension costs for CPS Rauner just cut funds for every other school district. He’s not often this consistent and I guess deserves recognition for that.


  2. - Winnin' - Friday, Aug 11, 17 @ 12:17 pm:

    The provision to have locals pick up pension costs has had Republicans wailing in recent years…not to mention it is a Madigan-supported concept.
    Still, the Rauner Gop will follow Rauner off the cliff and blame Madigan.


  3. - Oswego Willy - Friday, Aug 11, 17 @ 12:18 pm:

    I guess this is “kinda-sorta” what Kristen McQueary was getting at?

    From her column today…

    ===Continually, Rauner’s focus seems to be at the wrong end: protecting wealthy school districts from losing what they have instead of advocating for low-income school districts and what they need.===

    This AV hurts Peoria, they claim it will ruin them.

    Rauner’s attempt to ruin CPS, CTU, actually all unionized teachers in the abstract, has a price tag.

    Districts like Peoria’s will pay the freight?


  4. - Chicago Cynic - Friday, Aug 11, 17 @ 12:22 pm:

    Thank God the #BestTeamInAmerica is on the job.


  5. - Retired Educator - Friday, Aug 11, 17 @ 12:26 pm:

    Just override this guy. Then spend the next couple years ignoring him. He has no clue what he is doing, and has surrounded himself with people who tell him he is right. Governor you are working on about 90% wrong at all times. Either hire some people who know what they are doing, or just give up and move on in 2018. If you were good at capital investment, then stick with it. You are wearing us out.


  6. - Henry Francis - Friday, Aug 11, 17 @ 12:30 pm:

    It seems the Guv’s only contributions to the legislative process are to insert poison pills.

    As a great statesman once said: Outrageous.


  7. - Rod - Friday, Aug 11, 17 @ 12:31 pm:

    Michael Jacoby could be speaking only for himself, because the Statewide School Management Alliance has yet to formally call for an override to the AV. To see their latest avoidance of taking an actual position on the SB 1 override, see http://iasb.com/govrel/alr10036.cfm


  8. - JS Mill - Friday, Aug 11, 17 @ 12:31 pm:

    I posted on this the other day on the Dusty Rhodes thread. I said then that this aspect of the AV is, by itself, enough to shut down most districts in the state. It would cost even the smallest districts hundereds of thousands of dollars.

    Cost shift is the right way to go for the annual pensions payments. It has to be done one of two ways to make it work

    A- over a long period of time.

    B- or spread over a few years and with the option for districts
    to levy for it. Then it is up to local school boards (elected so local control is followed) to decide what is right for them.

    Absent either of those options it will close schools fast.


  9. - wordslinger - Friday, Aug 11, 17 @ 12:31 pm:

    So who exactly wants to vote in favor of accepting these AV changes? Piling millions on property tax payers in districts all over the state?

    For those who won’t vote for an override, what’s the game plan for starting at square one in mid-August for a funding plan that will need a super-majority?

    For crying out loud, the state is still short $500M to the schools for last year, and has missed the first payment for the coming year.

    Like Capt. Willard told Col. Kurtz, “I don’t see a method at all, sir.”

    Unless the plan is squeeze the beast for K-12.

    Morality aside, that’s just nuts. You will reap the whirlwind.


  10. - PAM - Friday, Aug 11, 17 @ 12:35 pm:

    So, the School Districts keep getting ’state dollars’ and don’t have incentive to control pension costs, or pension money comes out of their funds and they pay more attention. The first option has all the adults in a district paying higher state taxes, the second has all the adults in the district paying higher local taxes. Seems like local control might save the taxpayers. State control hasn’t helped much.


  11. - My New Handle - Friday, Aug 11, 17 @ 12:38 pm:

    I read somewhere that a legislator believed that Rauner was operating in the extreme. Hmmm. Wush I could remember who said that, and what the criteria were for such an assessment.


  12. - ArchPundit - Friday, Aug 11, 17 @ 12:39 pm:

    ===The provision to have locals pick up pension costs has had Republicans wailing in recent years…not to mention it is a Madigan-supported concept.

    I think many people would be willing to shift some of the cost to districts. However, doing that in a way that doesn’t create a huge problem in transition is how a responsible Governor would pursue that.


  13. - Winnin' - Friday, Aug 11, 17 @ 12:39 pm:

    It is really gettin’ hard to follow the Rauner bouncin’ ball. Lets saddle local local property taxpayers with higher taxes while callin’ for property tax limits.
    Either Rauner is confused, duplicitous or he is being led by the nose by IPI. Maybe all three.


  14. - Norseman - Friday, Aug 11, 17 @ 12:40 pm:

    The GOP minions don’t care about Rauner’s AV. They know it’s dead. Unless Cullerton wants to force Senate minions to vote on it should the override fail, they get off easy. Either way, the House minions are free and clear of AV blowback.

    This leaves us back to the issue of funding reform. I see it dying an unfortunate death.


  15. - Arthur Andersen - Friday, Aug 11, 17 @ 12:42 pm:

    JSM, I bow to your expertise here, but I’m a little confused. If the cost shift includes normal costs only and applies only to new hires, doesn’t that by itself create somewhat of a phase-in of the cost?

    Ultimately though, over a billion dollars of normal cost gets shifted.


  16. - Oswego Willy - Friday, Aug 11, 17 @ 12:56 pm:

    From the article above…

    ===Canton District 66 Superintendent Rolf Sivertsen said he didn’t have an immediate calculation of the cost to his district, but estimated that the effect would run into the millions of dollars.

    He said the choices for his district would be stark — a substantial tax increase to cover the added expenses, or deep financial harm to the district.

    “If there is no levy with it, it’ll be financial ruin, and the governor will own that,” Sivertsen said.===

    So…

    Let’s break down “this”

    ===“If there is no levy with it, it’ll be financial ruin, and the governor will own that,” Sivertsen said.===

    So, a “local” tax increase would be needed to cover Rauner’s AV, or the district will be in ruins.

    There would be no need for a tax increase without Rauner’s AV.

    Rauner will own the tax increase.

    “Why would Rauner own the tax increase?”

    Only a governor can veto, or in this case, AV.

    So, to bring back before, you know, where a superintendent tells us “Governors own”…

    ===… the choices for his district would be stark — a substantial tax increase to cover the added expenses, or deep financial harm to the district.===

    … brought on… by Rauner’s AV… and Rauner owns these two options.

    And there’s a worry Rauner won’t own this?

    Superintendents know. Governors own.


  17. - Lester Holt's Mustache - Friday, Aug 11, 17 @ 1:08 pm:

    These superintendents aren’t the only ones bashing the AV lately. There was a hearing Wednesday where several supts. from Lake County schools testified that this AV would kill their districts in 2020.

    But the Gov did have Jeannie Ives there to support it, so, you know, Bruce had that going for him.


  18. - Anon221 - Friday, Aug 11, 17 @ 1:32 pm:

    Jeannie didn’t stick around to face the number crunchers though at that hearing. When Matire and the other two gentlemen were called, she made a statement on how great the AV was, then left because she had a train to catch. Would have loved to hear her try her schtick with that panel. Near the end of the second superintendent panel, they were getting tired of her act, and pushing back in her “facts” pretty hard.


  19. - RNUG - Friday, Aug 11, 17 @ 3:11 pm:

    -Sue- yesterday was actually on to how some of the school districts can afford a pension shift: phase out the school district picking up the employee portion of the pension contribution.

    If, and it is a really big IF, the local school district can do that without having to give a salary increase in exchange, a lot of districts could absorb the cost. The contract talks won’t be pretty, but maybe some non-monetary items like overly restrictive classroom and work rules could be horse traded.

    The State could help that aspect by streamlining mandatories and giving local districts some flexibility. In fact, that action is mostly within Rauner / ISBE’s control right now.


  20. - Arthur Andersen - Friday, Aug 11, 17 @ 3:27 pm:

    RNUG, what am I missing? Why is normal cost on new hires such a perceived budget-buster? Has teacher turnover increased recently?


  21. - Arthur Andersen - Friday, Aug 11, 17 @ 3:52 pm:

    RNUG, upon further reflection, I’m convinced that it’s all but impossible for these districts to know the impact of the cost shift with any certainty and, absent seeing numbers to the contrary. have to conclude the fiscal ruin remarks are premature and overstated.


  22. - PragmaticR - Friday, Aug 11, 17 @ 4:29 pm:

    It is very counterintuitive, but school districts choosing to pay the employee pension contribution, the pension pick-up, has likely lowered the state’s pension liabilities by billions of dollars. Which is worse for the state’s pension liabilities? Paying 1% of salary as a pension pickup or instead raising salaries by 1%. What if an employer trades 1% lower raises for 1% more of pension pick up in a contract negotiation every year for five years? Once everyone understands that these two options are not the same for pension liabilities and for salaries in general, it becomes obvious why the pension pick up is better than a salary increase for the employers and the state.


  23. - EchoTheBunnyman - Friday, Aug 11, 17 @ 4:38 pm:

    My best friend worked at Stevenson for about 10 years as an administrator. It was actually obscene what the pay and benefits were. The retirement of the administration even after the supposed loophole was closed still provided astronomical retirement salaries. There are many high paying districts in collar counties. Some districts are not what you would consider without research. The point is, that people think the north shore one school districts are outliers. They are not when you dig. The cost shift is truly the only way to equalize state funding. Should Peoria pay the high retirement of New Trier employees? If the local tax payers want a business manager at Stevenson that over seeing one school to make over $200,000 in retirement they should pay that cost no? Actually, they have 2 of those examples. And superintendents and and… cost shift is what Madigan has wanted and frankly, he is correct. It’s the only close to fair prospect. Even if nothing ever passes. That alone will force or consider the consolidation of far too many districts. It’s the long game he’s playing. Nobody can vote politically for consolidating but cost shift forces it. Sorry for the rant. But I’ve ranted this here for too many years. I hope that happens at least.


  24. - Arthur Andersen - Friday, Aug 11, 17 @ 4:40 pm:

    PragmaticR, wrong. Picked-up employee contributions are TRS creditable earnings, the same as regular salary. No effect on the liability. Google Illinois TRS Employer Guide if you don’t believe AA.


  25. - IllinoisBoi - Friday, Aug 11, 17 @ 4:42 pm:

    I found all this school funding rather confusing and complicated, but then I remembered: in the final analysis, everything Rauner does is designed to harm common people and cut taxes for the super-rich. He’s 100% consistent.


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