Maybe it’s time to bring back Squeezy the Python.
Squeezy was a short-lived cartoon character dreamed up in 2012 to illustrate how Illinois’ underfunded pensions crowd out spending for other important state responsibilities.
People made fun of Squeezy because that was easier than behaving like a grownup when it came to managing the state’s finances. But once Squeezy was gone, so was the sense of urgency he created.
The latest lapse in Illinois’ pension responsibility, buried in a 1,000-plus-page “implementation” document that accompanied the 2019 Fiscal Year budget just signed by Gov. J.B. Pritzker, will make it easier for suburban and Downstate school districts to “spike” pension payments by giving teachers hefty raises in their last four years of service. The last-second budgetary addition, tucked away where many lawmakers would be sure to miss it, will boost teachers’ pensions — and the cost to taxpayers.
Pension spiking is an irresistible temptation when one unit of government — in this case, a local school district — gets to hand out the benefits, while another unit of government — the state — has to pay for them. For local school districts, it also helps them encourage higher-paid teachers to leave so they can be replaced with lower-cost teachers just out of college.
Making pension spiking easier doesn’t make sense when the state is being crushed under the weight of $133.5 billion in unfunded pension liabilities — $75.3 billion of that due to shortfalls in the teachers pension fund — with no easy path to getting back on firm fiscal footing. It’s just another of the many unpaid-for pension “sweeteners,” early retirement programs and pension holidays that got us into this mess in the first place.
Under a mild reform pushed through the Legislature in 2005, local school districts were required to pay for the increased pension costs any time they raised a salary by more than 6% a year in the end-of-career four-year period that is heavily weighted in pension calculations. Then, as part of the 2018 state budget, that threshold was lowered to 3%. School districts were still free to give big end-of-career raises; they just couldn’t send the additional pension costs to Springfield.
But in the last-minute move on June 1, probably in response to a “Repeal the 3%” campaign by the state teachers’ union, the governor and Legislature bumped the cap back up to 6%. The increase, which was nixed by the House earlier this spring when it was stand-alone legislation, doesn’t affect Chicago, which has its own teacher pension fund.
This latest pension sweetener will allow local school districts to raise teacher’s pay by 24%-plus in their final four years — without having to pay the correspondingly higher pensions. The cost to Illinois reportedly is projected to be $20 million in the first year, rising rapidly to $60 million a year.
The teachers’ union complained that the 2018 reform discouraged school districts from giving adequate cost-of-living raises or from paying more for the additional duties teachers take on or certifications they obtain. Also, the union pointed out, teachers don’t get Social Security for their years in the classroom.
But a 12%-plus raise over four years — four years of 3% increases — coupled with a lifetime pension that includes locked-in yearly increases, is a deal most workers can only dream about. As it is, the average annual pension for all Illinois teachers in fiscal year 2018 was $55,796, with a compounded annual increase of 3% a year. And that average includes people who spent only part of their careers as teachers. The starting average pensions are significantly higher for teachers who retired in the past year after the full 35 years of service.
A joke among teachers is the sight of colleagues scrambling in their last four years to take on extra duties they long ignored — coaching the softball team or teaching summer school, for example — just to boost their pensions.
A state that is shackled by unfunded pension debt has no business adding to it unless it simultaneously comes up with new revenue to pay for the increased benefits. So far, we haven’t heard where that money is supposed to come from.
“There is no policy justification for the state taking on additional liabilities without a plan to pay for them or without some benefit to the taxpayers,” Laurence Msall, president of the Civic Federation, said on Wednesday.
The irony is that higher pension costs take money out of the classroom, forcing the state to borrow more at high interest rates. Moreover, taxpayers in economically distressed school districts wind up subsidizing the pension spiking in wealthier districts, which is where teachers are paid the most.
In the long run, pension spiking undoubtedly will encourage state legislators to dust off plans to reverse the playing field and send the responsibility for paying the pensions to local school districts. And then get ready for soaring property taxes.
Let us recall Squeezy’s words of wisdom: The cost of every teacher pension sweetener falls not just on a school district — but on all of us.
Chicago Sun-Times/SOURCE: Commission on Government Forecasting and Accountability
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