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Unintended consequences

Tuesday, Jun 18, 2019

* Remember when I told you on June 3rd that heads were gonna explode over a provision in the BIMP which repealed a 2018 law that forced local school districts to pay the costs of any end-of-career raises above 3 percent? The new provision moved that cap back to 6 percent, where it had been for several years.

Heads did indeed explode…

* Sun-Times: Teacher pension ‘spiking’ is back — and we’ll all pay
* Crain’s: Who’s really in charge in Springfield? - This giveaway to teachers unions is the strongest sign yet that the Democrats who control both houses of the General Assembly as well as the Governor’s Mansion work for them and no one else.
* Tribune: Pritzker, teacher’s pet, allows more pricey pension spiking
* Illinois Policy Institute: Pritzker budget lifts cap on pension spiking
* Center Squared: Repeal of pension spiking ban a final blow to taxpayers
* Forbes: Hidden In the Legislate-A-Thon, Illinois Restores Pension Spiking
* News-Gazette: Teachers spike pension ball
* Journal-Courier: A backslide on curtailing cost of public pension

* But this is from a June 2nd Illinois Education Association press release

Because educators can qualify for a pension after five years and can leave their school district at any time, school board attorneys had been arguing for a 3 percent limit on all salary increases across the entire length of an educator’s teaching contract, creating havoc in districts in the midst of negotiations.

Whoa. That’s crazy, but it makes a certain sense. The 3 percent cap applied to the final ten years of a career, but the final ten years of an educator’s career could very well be the only ten years of that career, particularly with all the K-12 teacher turnover out there.

* I followed up with the IEA’s Bridget Shanahan, who sent me this partial list…

In all these districts the 3% law was brought up and the school board or community college board in some way suggested limiting raises to 3% across the board. The end results vary from district to district.

    Antioch
    Wauconda
    Hawthorn 73
    Grayslake 127
    Zion 6
    Carrier Mills
    Galatia
    Harrisburg
    Hardin Co.
    JAMP special education
    Massac Co.
    Meridian
    New Simpson Hill
    Pope County
    Williamson Co. Special Education Cooperative
    Beardstown CUSD #15
    LaHarpe CSD #347
    West Prairie CUSD #103
    Aptakisic-Tripp Geneva
    West Aurora 129
    Batavia 101
    Lewis and Clark Community College
    Genoa-Kingston 424
    Riley School District 18
    Scales-Mound School District
    Vandalia
    Edwardsville
    Collinsville
    Effingham Community Unit District 40
    Teutopolis Community Unit District 50
    Clay City Community Unit District 10
    Lawrenceville Community Unit District 20
    Oblong Community Unit District 4
    Illinois Eastern Community College

Not all of these districts were successful at limiting the raises, but it’s at least worth pointing out. And keep in mind that this is just the IEA. The IFT likely has its own list.

- Posted by Rich Miller        

44 Comments
  1. - Steve - Tuesday, Jun 18, 19 @ 9:13 am:

    The people have spoken as Mayor Koch has said and now it is time to be punished. JB ran on an agenda. JB passed his agenda. JB didn’t mislead people. Taxes have to go up even higher because those pensions have to be paid.


  2. - Thomas Paine - Tuesday, Jun 18, 19 @ 9:15 am:

    Dear Illinois:

    Only apply the pension dampener to salaries That exceed twice the minimum salary for educators, which you just indexed to inflation, correct Senator Manar?

    Ima going back to fishin now, wish me luck!


  3. - Moby - Tuesday, Jun 18, 19 @ 9:18 am:

    So I completely understand the finger pointing at Democrats for ALLOWING the pension spiking, but isn’t a large majority of downstate school administrators and teachers actually IMPLEMENTING the pension spiking probably Republicans?


  4. - Dude - Tuesday, Jun 18, 19 @ 9:26 am:

    This will have to be adjusted back down or the Legislator bashing will commence in short order and will not cease as this practice is indefensible in the arena of public opinion.

    Likely Veto Session fodder.


  5. - Nonbeliever - Tuesday, Jun 18, 19 @ 9:27 am:

    @Moby

    Please explain and verify your comment. Also, are you saying that Chicago and Suburban teaching districts are not doing this and that it is only downstate?


  6. - Steve - Tuesday, Jun 18, 19 @ 9:28 am:

    There’s no need to finger point. Voters voted for politicians that passed this legislation.


  7. - Retiree - Tuesday, Jun 18, 19 @ 9:36 am:

    This reaction is silly and demonstrates a lack of understanding. Should no teacher be compensated for taking on additional responsibilities–coaching, theater, etc? Should no teacher be eligible for administrative positions in the same district? There must be a reasonable way of dealing with real pension spiking– perhaps a prohibition regarding contracts that specify salary increases for announcing retirement years prior to actual retirement.


  8. - BC - Tuesday, Jun 18, 19 @ 9:37 am:

    Interesting that the editorial boards express outrage that the return to 6 percent was “snuck” into the BIMP “at the last minute” without debate because it allegedly wouldn’t pass on its own. Funny, I don’t remember them making the same argument about the lack of transparency last year when the exact same method was used to move the threshold to 3 percent.

    The BIMP giveth and and the BIMP taketh away.


  9. - Steve - Tuesday, Jun 18, 19 @ 9:39 am:

    Debate or no debate : people knew this was possible with the make up of the legislature.


  10. - Donnie Elgin - Tuesday, Jun 18, 19 @ 9:44 am:

    First fix this and then the 6% cap will not make heads explode …”TRS, like many other pension systems throughout the United States, carries an “unfunded liability,” which at the end of fiscal year 2018 was $75.3 billion. Because of this unfunded liability, TRS currently has less than 40 cents in the bank for every dollar owed”

    https://www.trsil.org/news-and-events/pension-issues/unfunded-liabilities


  11. - Moby - Tuesday, Jun 18, 19 @ 9:44 am:

    == Please explain and verify your comment. Also, are you saying that Chicago and Suburban teaching districts are not doing this and that it is only downstate? ==

    Not at all. I’m conceding that the Chicago area is a largely Democrat part of the state, but this is probably happening downstate as well I would assume.


  12. - Morty - Tuesday, Jun 18, 19 @ 9:44 am:

    Lost in all this is the discussion of why districts began spiking end of career contracts in the first place.

    Not one news organizations has brought up the concept of longevity in teacher salary schedules and how that effects teachers.


  13. - notsosure - Tuesday, Jun 18, 19 @ 9:48 am:

    The conversations around this frequently miss the point. There was no prohibition against raises above 3%– school districts just had to pay for part of the pensions of their retirees if that happened.


  14. - Rich Miller - Tuesday, Jun 18, 19 @ 9:48 am:

    ===TRS currently has less than 40 cents in the bank for every dollar owed===

    You left out this part…

    The TRS unfunded liability is a long-term concern — think decades — and should not be confused with the annual obligations of the System. It would be like confusing a family’s “mortgage” with the “mortgage payment.” TRS has carried an unfunded liability since 1939 and has never missed a pension payment to any member because of the unfunded liability.

    If all of TRS obligations for current retirees and active teachers were called due today, the System could not meet 60 percent of those outstanding pensions and benefits. But that can never happen because not all teachers will retire at the same time. By law, active teachers cannot collect retirement benefits, so TRS must pay out only what is owed to benefit recipients in that year. In fiscal year 2018, TRS paid out $6.5 billion in benefits and collected $9.2 billion in total revenue.

    The unfunded liability is a concern for state officials because the higher the unfunded liability gets the more money the state must contribute each year to TRS and the other public pension funds. High contributions drain money away from other state services. For FY 2018, 74.8 percent of the state’s $4.09 billion contribution to TRS was dedicated to paying off a portion of the unfunded liability, and only 25.2 percent dedicated to the year’s pension obligation


  15. - Rich Miller - Tuesday, Jun 18, 19 @ 10:09 am:

    Also, some of you only apparently read the first part of this post and not the second half.


  16. - AnonymousOne - Tuesday, Jun 18, 19 @ 10:14 am:

    Thank you Rich. The idea that the debt will doom us on any one given day when all is due is used to pension bash. Opportunistic facts (fallacies, actually)

    Also, since there is a very high turnover rate amongst teachers–many leave before vesting–only career teachers make pensions worth talking about. And then there’s the question about that turnover. If it’s such a lucrative, attractive job, why do so many leave? Must not be for the extravagant lifestyle it affords. Just sayin’


  17. - Jibba - Tuesday, Jun 18, 19 @ 10:24 am:

    ===because the pensions have to be paid===

    So says the IL Supreme Court, too. You know that the pensions will be paid no matter the party in power, right?


  18. - Sue - Tuesday, Jun 18, 19 @ 10:25 am:

    Given that the new cap will be used by TRS actuaries to determine the required State funding Levels Pritzker along with the Dem majorities just created higher annual immediate contributions and therefore spent even more of the proposed tax increases on pensions as opposed to other equally pressing needs. But no need to worry since the IEA and IFT along with the other public sector unions are the only entities that count down in Springfield


  19. - Huh? - Tuesday, Jun 18, 19 @ 10:27 am:

    dougchicago - are you implying that public school teachers are not entitled to a fair wage and retirement?


  20. - Oswego Willy - Tuesday, Jun 18, 19 @ 10:40 am:

    First thing I thought about?

    Boy I miss “Arthur Andersen” about now. Talk about wheelhouse…

    To the Post,

    To attack the pensions, if you ignore the state funding percentages while doing so… not the best way to go about that business.

    Property taxes - Pensions - State funding levels.

    Also, you ain’t gonna tell wealthier districts to stop enticing teachers to stay or come to teach there. One mechanism is salaries, the other is the pensions that can be there at the end too.


  21. - City Zen - Tuesday, Jun 18, 19 @ 10:43 am:

    The intent of the law was to limit the raises for anyone nearing “traditional” retirement, namely anyone vested for 25 years or more. The teacher unions had zero intention of fixing the law to reflect this. If Manar bothered to exit the unions’ sleeping quarters for just a second, he could’ve revised the law himself to reflect this.

    The teacher who leaves after 10 years has never been, nor ever will be, a burden on the pension system. The pension system feeds off these folks who keep their tiny pensions stagnant while they wait decades to withdraw. Hiding behind them is a bit disingenuous. And as someone else already noted, districts have been and always will be free to give as big a raise as they want.

    The unions’ response in all this is just so corporate sleaze.


  22. - Rich Miller - Tuesday, Jun 18, 19 @ 10:45 am:

    ===The intent===

    Hence the title of the post.


  23. - Demoralized - Tuesday, Jun 18, 19 @ 10:47 am:

    ==But no need to worry since the IEA and IFT along with the other public sector unions are the only entities that count down in Springfield==

    Stop being such a victim. It’s pathetic


  24. - Nonbeliever - Tuesday, Jun 18, 19 @ 10:50 am:

    Does anyone know???

    What would be the SS unfunded liability if the same actuarial standards were applied to it as they are to the Illinois pension systems.

    Never have seen this analyzed.


  25. - Bruce( no not him) - Tuesday, Jun 18, 19 @ 10:56 am:

    - Rich Miller - Tuesday, Jun 18, 19 @ 10:09 am:

    Also, some of you only apparently read the first part of this post and not the second half.

    Read the post? I’m just here for the comments.


  26. - oh? - Tuesday, Jun 18, 19 @ 11:03 am:

    Nonbeliever you have something there. Going further, what is the federal unfunded liability for military pensions and veteran benefits?


  27. - City Zen - Tuesday, Jun 18, 19 @ 11:03 am:

    ==What would be the SS unfunded liability if the same actuarial standards were applied to it as they are to the Illinois pension systems.==

    Wrong.


  28. - Pot calling kettle - Tuesday, Jun 18, 19 @ 11:11 am:

    I’m not sure why this was included in the BIMP. SB 1952 does the same thing and passed both chambers with wide, bi-partisan majorities (as well as bipartisan sponsorship).

    In addition to this change being supported by the teachers’ unions, it was also supported by the Illinois Statewide School Management Alliance which includes everyone on the management side, including school boards.

    Changes in assignment (additional duties, additional classes, promotions) which can change a salary dramatically from one year to the next triggered the penalty. Salary increases associated with completing additional education triggered the penalty. The increases mandated by the new minimum wage for teachers would have triggered the penalty.

    On top of all that, it imposed a liability which was incalculable. Schools had no way of knowing which years would be used to determine the penalty, so they had no way to know how much money to set aside.

    The 3% cap was unworkable. Management and labor both requested this change. It was discussed all term (and had been discussed last year). It had bi-partisan support.


  29. - Rich Miller - Tuesday, Jun 18, 19 @ 11:13 am:

    ===SB 1952 does the same thing and passed both chambers===

    Nope. House amendment removed the 3 percent thingy.


  30. - Nonbeliever - Tuesday, Jun 18, 19 @ 11:17 am:

    - City Zen - Tuesday, Jun 18, 19 @ 11:03 am:

    ==What would be the SS unfunded liability if the same actuarial standards were applied to it as they are to the Illinois pension systems.==

    Wrong.

    Ummmm. Please explain your response of ‘Wrong.’


  31. - Pot calling kettle - Tuesday, Jun 18, 19 @ 11:21 am:

    ==Nope. House amendment removed the 3 percent thingy. ==

    My bad.

    The rest of my post stands. The original Senate vote (51-5), the bi-partisan sponsorship in both chambers, and the support from management and labor all pre-date the addition of the House amendment.


  32. - The Original Name/Nickname/Anon - Tuesday, Jun 18, 19 @ 12:26 pm:

    This pension giveaway to Dorothy Brown’s staff passed as a stand alone, hb2071:

    http://www.ilga.gov/legislation/billstatus.asp?DocNum=2071&GAID=15&GA=101&DocTypeID=HB&LegID=117641&SessionID=108


  33. - City Zen - Tuesday, Jun 18, 19 @ 1:01 pm:

    Nonbeliever - Is SS invested in the stock market? Are the current actuarial standards really standard? Not sure comparing SS sourced by a level of government that prints money with a state pension system is the best comparison to make.


  34. - Nonbeliever - Tuesday, Jun 18, 19 @ 1:21 pm:

    - City Zen

    Just asked a legitimate question.

    Seems to bother you. That’s your choice.


  35. - Still Waiting - Tuesday, Jun 18, 19 @ 1:58 pm:

    The only reason your list of school districts is so short is that only districts whose contracts expired in the last year had to negotiate a new one under the 3% rule. I can absolutely promise that if you asked for districts who were planning on a 3% hard cap for all employees in their next scheduled negotiations, your list would be much, much longer.


  36. - Odysseus - Tuesday, Jun 18, 19 @ 2:40 pm:

    “Is SS invested in the stock market?”

    No, and there is no reason for it to be and many good reasons for it not to be. Despite the letter of the law that says that payroll taxes “pay for” the Social Security Trust fund, macroeconomics says differently.

    As explained by Modern Monetary Theory, SS is funded by a continuing Congressional Appropriation. In a nation with a fiat currency, Congressional Appropriations create money. So as a federally funded program, Social Security can never “go broke”. The money can always be created to pay benefits.

    Fearmongering about Social Security benefits is rank ignorance of the worst kind.

    Provincial governments are not currency issuers, and so Illinois operates under both a constitutional mandate for a balanced budget and a macroeconomic mandate for a balanced budget. The only macroeconomic escape hatch that Illinois has is to lobby for a Federal pension bailout.

    This may or may not be a good argument towards simply ending state pensions entirely and forcing every new state worker into the Social Security system.


  37. - Anonanonsir - Tuesday, Jun 18, 19 @ 2:44 pm:

    ==the school board or community college board in some way suggested limiting raises to 3% across the board==

    What is relevant is the list of boards that actually limited raises to 3%, which is probably a lot shorter.

    ==This giveaway to teachers unions is the strongest sign yet that the Democrats who control both houses of the General Assembly as well as the Governor’s Mansion work for them and no one else.==

    Why single out Dems? The votes were huge bipartisan majorities including Yes from both Durkin and Brady.


  38. - Responsa - Tuesday, Jun 18, 19 @ 3:08 pm:

    ==Debate or no debate : people knew this was possible with the make up of the legislature.==

    That assumption about what “people” (voters) knew may be a stretch. :)


  39. - Morty - Tuesday, Jun 18, 19 @ 4:13 pm:

    The only reason your list of school districts is so short is that only districts whose contracts expired in the last year had to negotiate a new one under the 3% rule. I can absolutely promise that if you asked for districts who were planning on a 3% hard cap for all employees in their next scheduled negotiations, your list would be much, much longer.“

    This.

    Furthermore, when you add in longevity lanes in contracts you are looking at 10 or so years of teachers recieving FAR less than cost of living increases.

    Longevity in salary schedules mean that teachers after 15-20 years no longer recieve step increases, but instead recieve a set $ amount increase.

    Think $500- $1200, which is generally far less than cost of living.

    The trade-off was retirement benefits (spiking) that once again typically exceeded cost of living (6%).

    In return the districts could allow limit any lane movement at the end of the career (potentially triggering the +6% penalties), give an incentive for older teachers to retire (to be replaced by lower cost teachers), and maintain longer periods of longevity.

    Now I’m not saying the salary schedule system that exists is great, but as Rich alluded to, the unintended consequences of undermining different aspects of the system.

    Knock out one piece and the others are changed also.

    The correlation being accelerating the teacher shortage problem.


  40. - Pot calling kettle - Tuesday, Jun 18, 19 @ 4:21 pm:

    What made the 3% cap unworkable was its breadth. It impacted everyone; not just those on the cusp of retirement.


  41. - Morty - Tuesday, Jun 18, 19 @ 6:31 pm:

    -Think $500- $1200, which is generally far less than cost of living.

    I forgot to mention there are others who are frozen


  42. - Tim - Tuesday, Jun 18, 19 @ 6:36 pm:

    Can’t wait til these funds start running out of money. When that happens, live anywhere but in Illinois. You don’t want to be the last one without a chair when the music stops.


  43. - Anonymous - Wednesday, Jun 19, 19 @ 9:12 am:

    You’ll be waiting a while Tim.


  44. - Rick Sanchez - Thursday, Jun 20, 19 @ 9:56 am:

    School districts use the provision of hiking raises to the limit allowed by law to encourage the older, more expensive teachers to retire earlier. They can then replace the retirees with younger, much less expensive teachers. They save money this way. Win/Win.


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