Instead of tax hikes, eliminate the sick-day perk driving up pension costs

Eric Kohn

Eric Kohn is marketing manager at the Illinois Policy Institute.

Eric Kohn
January 30, 2017

Instead of tax hikes, eliminate the sick-day perk driving up pension costs

Illinois state senators are considering a budget with massive tax hikes, but is short on critical pension reforms, which would save taxpayers billions.

Teachers in Illinois can roll two years worth of sick days into their total tenure of service to the state. This additional two years of service tacked in to end of their career allows them to retire with an even bigger pension.

More than 73,000 teachers have taken advantage of this sick-leave perk as of 2015.

That will cost taxpayers $3.39 billion over the next 30 years.

Perks like this drive up spending and are a burden to taxpayers – and they’re ripe for reform. But instead of tackling spending reform, Illinois state senators are considering a budget proposal with multibillion-dollar tax hikes.

This plan is short on needed reforms to two of the biggest cost drivers in state government: school districts and public sector pensions.

Even though Illinois’ public sector employees already enjoy overgenerous salaries and benefits, this imprudent perk that allows school teachers to inflate their pensions with accumulated sick-leave days remains.

Reforming sick-day rollover is a $3.4 billion no brainer

The average age of retirement in the Teachers Retirement System pension fund is 59-years old, and the average total pension payout is an astounding $2.2 million. Utilizing the full two years of the sick-leave perk can mean the retiree will receive $165,000 more on average in pension benefits.

The state enables this problem by significantly subsidizing Illinois’ plethora of school districts, shielding those districts from the costs of their profligate spending decisions like doling out high salaries, extravagant benefits and excessive perks.

The 859 local school districts eat up a significant portion of state revenue. Almost two-thirds of state property tax revenue goes to school districts, and they also account for more than half of the cost of subsidies paid out to local units of government.

What’s more, the state of Illinois pays the employer contribution to teacher pensions with Illinois taxpayer dollars. By agreeing to cover these costs for local school districts, the state of Illinois is using taxpayers to shield local school districts from the full consequences of their contractual agreements with teachers.

Because school districts are leaning on others for the full cost of teachers’ retirements, they are more likely to offer perks like utilizing accumulated sick leave time to enhance pensions.

Illinois state government should stop incentivizing a lack of accountability from local school districts. Instead of increasing taxes even more on already overtaxed Illinoisans, legislators should make structural reforms to our state’s pension systems to end the state’s $130 billion unfunded pension liability heaped on working Illinoisans and end irresponsible perks like the sick leave pension benefit.

Want more? Get stories like this delivered straight to your inbox.

Thank you, we'll keep you informed!