by Ted Dabrowski
For decades, the state has subsidized the pension costs of teachers working for local school districts. The practice requires the state to pay the employer share of teacher benefits that accrue each year, even though teachers are not state employees.
That set-up has destroyed spending accountability across the state. Local school districts have been doling out end-of-career salary spikes, sick day accumulations and other pension sweeteners, only to have the state pick-up the skyrocketing pension costs. It's a formula that's been abused for years and contributes to Illinois' gaping pension shortfall.
But that's not the only problem. Illinois Policy Institute research found that the state-funded pension contributions overwhelmingly favor the wealthiest districts with the highest compensation packages. That result works at cross-purposes with the state's goal of sending state education dollars to those children most in need. We're not against higher pay, but taxpayers downstate shouldn't be on the hook for North Shore pension costs. Local districts should be accountable for the benefits of their own employees.
By making school districts responsible for the “normal” costs of their teachers' pensions, they'll be more accountable for their compensation decisions. School districts will also be more reliable in funding the teachers' pension system. That's because the funding mechanism at the local level works a whole lot better than it does at the state level.
End teacher pick-ups
Opponents of local pension accountability have warned of catastrophe if school districts are required to pay the “normal” costs of pensions. They claim that higher property taxes and cuts to the classroom are inevitable.
But here is the most relevant fact that came from the Institute's study: the proposal to have districts pay the yearly employer share will increase each district's total costs by an average of just 3.7 percent across the state. That's hardly catastrophic. That's also much lower than the inflated cost warnings released by opponents of reform.
Even more, for nearly 500 districts in the state, that cost can be totally eliminated if local school districts also end the practice of paying, as a benefit, the teachers' required contribution to pensions. Today, almost two-thirds of all school districts pay all or some of their teachers' required contribution.
For the remaining districts, there are a myriad of ways to find efficiencies for cost increases of 3 to 5 percent. Each local school board should begin by examining employee benefits: what it spends on health care, the accumulation of sick days and other generous retirement perks.
The net result of the Institute's policy proposal is increased spending accountability for teacher pensions, with school districts and teachers paying their fair share. That's how it should have been all along to make teacher pensions more secure.
Eliminate unfunded mandates
By asking local school districts to take on more responsibility for their spending decisions, they should also be less burdened with unfunded state mandates. The overuse of unfunded and partially unfunded mandates has been a fiscal drain on school districts for decades.
Gov. Quinn's own Taxpayers' Action Board recommended that "all current and future mandates contain a sunset provision. This would ensure that any mandates that move away from their original purpose or significance be automatically retired. Other mandates that need to be preserved would then have to be reinstated by the legislature."
Commission a review of the General State Aid formula
The state's pension crisis has revealed a complex web of incentives and distortions that have turned education spending upside down. The result is that funding for teacher pensions is rapidly crowding out funding for the classroom. The good news is that pension reforms are finally on the table.
Eventually, though, the state will need to return what this debate is really about – school funding for Illinois children. It's high time to rethink education spending. We need to untangle the convoluted General State Aid formula, the stale and static categorical grants, and the many gross incentives that have demolished the core concept of money following the child. As painful as it may sound, it's time for another Blue Ribbon task force.