school boards & pension reform
Something useful in a Chicago Trib editorial:
It's completely "messed-up" for these teachers and administrators to be making exhorbitant pensions paid for by taxes on younger, less affluent Illinoisans and cuts in basic services.
So Rod and the Trib are right to want to reform the practice, but there's a reality from the perspective of the school districts too.
Since the school districts have already written these contracts they're obligated to pay for them. They've budgeted for the salaries, but they haven't budgeted for the pension sweeteners.
So, by kicking the problem back to the school districts G-Rod is creating a situation where the local boards have two choices. They can either cut services to pay for pensions or raise property taxes. And remember they have to do this in the context of having their health care costs rise significantly more than the rate of inflation.
Rod's "fix" is really just shifting the tax burden to the property tax and creating a grunch of crises at the local level.
Blagojevich wants to end the longtime practice of school districts providing whopping, end-of-career salary increases to teachers, principals and staff members, which then allows them to qualify for much higher pensions.This is an important issue for Illinois public policy wonks to understand. Local school boards write contracts with teachers and administrators that obligate the state to pay pensions that are way out-of-line with what the teachers and administrators made during most of their careers.
In many cases, schools have handed out annual raises of up to 20 percent for the years immediately before a teacher retires. Those higher salaries greatly influence the teacher's pension calculation and leave the state on the hook to pay the higher retiree benefits for years, even decades.
Blagojevich wants--and he's right on this--to restrict the end-of-career raises to 3 percent a year. Anything above that, and the school district, not the state, would have to pay for the resulting pension boost. Some schools are crying that this will cost them dearly because they've already promised those huge raises--some have even written them into multiyear contracts.
It's completely "messed-up" for these teachers and administrators to be making exhorbitant pensions paid for by taxes on younger, less affluent Illinoisans and cuts in basic services.
So Rod and the Trib are right to want to reform the practice, but there's a reality from the perspective of the school districts too.
Since the school districts have already written these contracts they're obligated to pay for them. They've budgeted for the salaries, but they haven't budgeted for the pension sweeteners.
So, by kicking the problem back to the school districts G-Rod is creating a situation where the local boards have two choices. They can either cut services to pay for pensions or raise property taxes. And remember they have to do this in the context of having their health care costs rise significantly more than the rate of inflation.
Rod's "fix" is really just shifting the tax burden to the property tax and creating a grunch of crises at the local level.
posted by Carl Nyberg at 7:21 AM
10 Comments:
And your solution is ... ?
I think the state should shoulder more of the costs of education (and thus make more of the decisions), but as long as the local districts can make these "sweet" contracts, then they should pay for them.
Part of the solution needs to be a system that prevents state government from shifting costs of governing already provided to future taxpayers.
Carl,
So, based upon your response in locussolus, you think the state (us) should go ahead and shoulder the burden for existing agreements, but they should be prohibited in the future. Hmm, you and Blago agree. Maybe these policies are not blunders after all.
By the way, TCF, Blago's plan is for ALL state pension plans, not just public school teachers.
The school districts don't have excess revenue to go after.
The state should do something to retroactively trim pensions that were bloated with sweeteners. Dan Johnson-Weinberger had a discussion of this concept.
TCF might balk at trimming teacher pensions retroactively, but that's where the money is. There's no money to squeeze out of the local school boards. And the teachers and the unions knew what they were doing was unsustainable when they did it. It's not like retroactively removing these sweeteners is gonna put retirees in poverty.
Blago's policies in these area remain blunders for a number of reasons. The overarching reason his policies remain blunders is that he's pursuing a short-term fix, not something that's sustainable.
Capitol Fax quotes James Hacking, director of the State University Retirement System, calling the Blagojevich plan "very risky".
Carl,
(a) Reducing the state's obligation for pensions for the future and (b) spending all of that money now are two different issues.
You, I, and Blago all agree with (a). (b) may be risky and, thus, a blunder.
Let's make sure we address them separately.
Hmmm.... Blagojevich wants to cut pensions (but not his own), salaries (but not his own), jobs (but not his own), and refuses to raise taxes to pay for his policies. He's a Republican, and a slimy one at that.
(a) Reducing the state's obligation for pensions for the future and (b) spending all of that money now are two different issues.
You, I, and Blago all agree with (a). (b) may be risky and, thus, a blunder.
Let's make sure we address them separately.I'm skeptical of RB.
I think his main reason for reforming the pension system is to access revenue to avoid raising taxes or drastic cuts in services.
If Blagojevich couldn't get his hands on any of the money to spend in this year's budget, would he do the political heavy lifting of reforming the pension system?
The real issue here is that this is done to compensate for 25-34 years of bad pay. Illinois is close to last in pension funding as it is.
Teachers are professionals with at least a bachelors, most have a masters degree. Yet a teacher after 30 some years of service to one school may only make $60-80,000 in their last year. What business person with a masters gets that little after 30 years of service? None. Who is more important to society, teachers, or business execs? Take away the end of career bonus and you must raise salaries for every teacher every year. To attract the best, you need to at least pay a decent wage.
Instead of paying the lady who holds the stop sign during road construciton on the highway $30 an hour, maybe we should fund education. No wonder our country is so low on educational testing vs other nations.
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