One of the stumbling blocks to pension reform is the cost shift that worries many legislators.
In the current system, the state pays the pensions of educators in the state’s school districts. The exception is in Chicago, where districts handle ongoing pension payments.
A modified form of the cost shift is included in a recent, bipartisan House bill. Those who oppose the cost shift say it will increase property taxes, which is already occurring in many districts.
But having the state responsible for pension payments can lead to situations that may be advantageous to local school districts but not the state’s taxpayers.
Take the case of recently elected state Rep. Sue Scherer, D-Decatur. Her pension situation, originally reported in The State Journal-Register, Springfield, does not involve anyone doing anything wrong. Everyone involved played within the rules.
Scherer retired from Maroa-Forsyth School District at the end of the 2011-12 school year. During her final 7 years as a teacher, her salary increased by 41 percent; it increased by 19 percent in the last 3 years.
Maroa-Forsyth, like many districts, allows teachers automatic 6 percent pay increases in their final 4 years once they’ve given irrevocable notice of their retirement.
Between the 2008-09 and 2011-12 school years, Scherer’s pay increased from $72,538 a year to $89,270. Those were the Great Recession years, when many private sector employees were happy to receive any pay raise.
The difference will cost taxpayers thousands of dollars a year for as long as Scherer draws her pension. The cost is even greater when you figure that state pensioners receive an automatic 3 percent cost-of-living increase each year on the entire amount of their pension.
It should be noted that Scherer retired at age 56. She would have had to teach 2 more years, or receive a reduced pension, except the district’s contract and state law allow her to apply 340 days of accumulated sick leave to enhance her pension.
Accumulated sick leave is practically unheard of in the private sector. Sick days are to be used when you’re sick, not to sweeten your pension. Early retirement is also a benefit, one that supporters of the current pension system often fail to mention.
School districts benefit from cases like Scherer’s because they can entice a highly-paid veteran teacher to retire and then replace her with a lower-paid teacher. It’s worth the end-of-career salary bump to the district, primarily because the district isn’t on the hook for the increased pension payments.
The teacher benefits because he can retire at a relatively young age with a comfortable pension and enjoy life or seek another career.
Scherer, to her credit, has declined to be a part of the legislative retirement system.
But guess who gets stuck with the bill for the pay bumps and the overly generous sick leave accumulation policies? The taxpayers.
Multiply the Scherer example by thousands of Illinois teachers, and it’s no wonder the pension system is in deep trouble. To be clear, employees pay into the pension system and so do employers, but when sweeteners are added, it’s the taxpayers who pick up the majority of the bill.
If local districts were responsible for pension costs, they would undoubtedly take a different approach. The end-of-career pay raises would end, as would liberal sick leave policies. The dreaded cost shift to districts could be somewhat mitigated by districts bargaining more reasonable contracts with teachers’ unions.
The shift, although potentially painful at first, would actually lead to better management of pension costs.