Broken Benefits: Higher ed, higher pensions
DeKALB – Joel Milner said he hasn’t gotten any special deals.
As a retired psychology professor at Northern Illinois University, Milner pulls in an annual pension of $253,782 a year from a system that’s underfunded by billions of dollars.
Milner said he’s followed all the rules when it comes to earning his pension, and he never got an artificial salary boost or did anything behind closed doors.
Payroll records from NIU show that in 2003, Milner was paid an annual salary of $325,736, which was funded in part by grants. In 2007 – the year before he retired – his annual salary was $287,049.
Yet he’s aware of the criticism of state employees who earn what some might consider high pensions. The Illinois Taxpayer Education Foundation said as of April, Milner had the 14th highest pension in the state.
“Do I think it’s a lot?” Milner said. “Yes.”
But that was the system he was hired into.
How NIU’s pensions work
The State Universities Retirement System, known as SURS, is one of the five largest state-funded pension systems in Illinois.
Steven Cunningham, NIU’s vice president of administration and human resources, said teachers and universities make up 60-70 percent of participants in the system. Those who participate don’t receive Social Security.
University employees have two retirement options. They can pay into a defined benefits plan that determines pensions from a formula based on income and years of service. Or they can pay into a defined contribution plan that puts a set amount of money into something similar to a private account.
Participants annually put in 8 percent of their gross salary to their pension fund; in Fiscal Year 2011, the state was supposed to kick in 10.14 percent of payroll annually to go toward pension costs for SURS members.
An analysis by the Illinois Retirement Security Initiative found the typical SURS retiree is 62, has served an Illinois university or community for 20 years and receives a monthly benefit of $2,478.50.
The Daily Chronicle sent a Freedom of Information Act request to SURS asking for the monthly pension amount for people who have worked at some point in their careers for Northern Illinois University and Kishwaukee College.
The analysis of that data found:
• Of the 1,785 on that list who received a monthly pension, 958 of them received a pension below $2,478.50; 827 received a pension higher than that.
• Ninety-seven of the 1,785 had a six-figure annual pension. Of those, 93 were employed at Northern Illinois University at some point in their careers; three worked at Kishwaukee College; and one worked at NIU and Kishwaukee College.
• NIU has 45 former employees who receive at least $10,000 a month through their pensions.
• Of the top-10 pension earners who worked at NIU at one point, six have continued to work at NIU after retirement.
SURS – similar to Illinois’ four other main state-funded pension funds – is woefully underfunded. Cunningham said Illinois assumed responsibility for paying into five of the main state pension systems in 1967. Since then, the state has made no or partial payments into the pension systems – leaving them underfunded by $85 billion.
An August news release from SURS indicated as of June 30, SURS was only 45 percent funded.
Cunningham said in Fiscal Year 2011, NIU employees contributed their 8 percent, which totaled a little more than $16.3 million. Another approximately $50 million – roughly 24 percent of payroll – was contributed by the state on behalf of NIU to SURS in the same year.
But Ted Dabrowski, vice president of the free market think tank Illinois Policy Institute, worries the state soon will pay more toward retirement benefits than for operational costs at higher education institutions. His organization is pushing for pension reform in the state.
Dabrowski noted state spending for higher education has been flat and is falling. The state can contribute only so much to higher education, he said, and whatever that amount is, it goes to operating and pension obligations.
Right now, the state provides $1.5 billion to higher education institutes, he said, and $800 million to SURS. In maybe 20 years from now, Dabrowski predicted more will go toward pensions than operating costs.
Essentially, he said, the state eventually will pay more to those who are no longer working than to educate students and pay the instructors who teach them.
“We’re going upside down,” Dabrowski said.
While the underfunded pension system is a result of the state’s lack of payments, Cunningham believes much of the pension crisis has been unfairly focused on employees. The benefits are average and salaries need to be competitive to draw quality employees in a national market, he said.
Jerry Meyer, president of the NIU Annuitants Association, said the average salary for NIU employees upon retirement is likely between $30,000-$40,000. He estimated there are two times the number of civil service workers who aren’t faculty members and have a lower pay scale who now draw from the system.
Relative to other universities in Illinois, Cunningham said he wouldn’t consider the pensions given to retired NIU employees very high, especially when compared to the pensions of retired staff members at other research-centered institutions such as the University of Illinois at Chicago.
The top-10 highest pensions in the state are former employees of the University of Illinois at Chicago, according to the Illinois Taxpayer Education Foundation. Annual pensions for the top-10 highest state pension earners range from $266,112-$414,470.
Pension amounts are based on a person’s income, years of service and contributions to the university, Cunningham said. Professors such as Milner have made significant contributions to the university, he said. Milner, for instance, has secured grant money and helped open the Center for the Study of Family Violence and Sexual Assault near campus. His level of performance and contributions to the university are reflected in his monthly pension of $21,148.58.
For Dabrowski, the lack of transparency in the state is one of the main issues with pensions at the level of someone such as Milner. To earn a $200,000 annual pension, a private-sector employee would need to save $2.5 million to $3 million, he estimated. Similarly, Andrew Biggs, the former principal deputy commissioner of the Social Security Administration, estimated that to make a pension of $10,000-$15,000 a month, a private-sector employee would need to save roughly $2.8 million during their working years.
“That is phenomenal,” Dabrowski said. “I think, to his point, that this is something he negotiated; what we are trying to do is make the process more transparent. [Taxpayers] need to know what they are paying for and who they are paying for.”
Jim Tobin, president and founder of tax-relief organization Taxpayers United of America, said another issue is the age that public employees can retire and still receive what he believes is a high pension. He said a reasonable pension should be $25,000 a year – similar to what those on Social Security make – and people should have to work until 66 or 67 to collect it. Those who want more should get a 401(k)-style account, he said.
Retire, then return
Milner is among six from the top-10 pension-earners from NIU who continued to work at the university after retirement.
In Fiscal Year 2011, Milner earned $153,720 for his work after retirement. But Cunningham said retired professors who come back to NIU save the university money.
Milner’s salary as a visiting professor of psychology comes from grants, not the university’s budget. Retired employees whose salaries are funded by grants do not pay into the pension system, and the university does not pay them benefits, Cunningham said.
Another professor, Clyde Kimball, has worked as a visiting physics professor in retirement since 2001, according to salary information NIU provided through a FOIA request. He has the second-largest pension among retired NIU employees at $17,611.69 a month.
While rehiring employees after retirement is something Cunningham said the university does conservatively, he noted the institution gets a good deal by keeping an employee the university has invested in.
“They continue to provide a senior level of instruction. Oftentimes, senior faculty are really at the pinnacle of their career when they retire,” Cunningham said. “It’s really a win-win situation. It costs less for the university to employ them part-time than it would have been to have them working at full salary.”
When faculty members are awarded grants, they can leave the institution and take that money wherever they want, Cunningham said. It’s in NIU’s best interest to keep the faculty who bring in grant money for research projects, he said.
Milner estimated he’s brought in as much as $16 million in grants during the 25 years he’s worked for NIU, and he continues to secure grants to keep the Center for the Study of Family Violence and Sexual Assault running.
“I could go to another university and get full pay,” Milner said. “In a way, it’s giving back. ... [NIU has] made more money than I’ve cost.”
But if the grants are from public agencies, Tobin said, that’s still taxpayer money.
“I wouldn’t brag about being a taxpayer thief,” Tobin said. “It’s different if the money is from private organizations.”
A list of 14 grants received by the center on the website for the Center for the Study of Family Violence and Sexual Assault indicates 11 were from a public source, two were from a private organization or association and one included funding from a public and private source. Milner was associated with eight of the grants.
Cunningham noted that if Milner decided to go to a different institution, NIU would lose out on that grant money benefiting the school. The same goes for Kimball. He retired as a physics professor with a salary of $218,000. He was rehired as a visiting physics professor the next year at a much lower salary funded by grants. In Fiscal Year 2011, he made $30,000.
Kimball said he, too, has brought in millions of dollars worth of grants – by some estimates, as much as $60 million since he started working at NIU in the 1960s. His contributions include a close partnership with Argonne National Laboratory, which helped build a $450 million instrument used to study nature.
“Out of that came training and access to instruments which Northern couldn’t afford and exposure to a whole new world,” Kimball said.
Kimball also works closely with other departments at the university to fuse physics with other subjects. He secured grants to install a graphic processing unit that can be of use to almost any field of study.
Kimball said he could have done his work at another university, but he stayed at NIU because the partnerships he could build would allow work beyond what a higher-learning institution typically can afford.
“It was very difficult to find facilities and scientists with whom to collaborate and to compete with what we did at Argonne,” Kimball said.
Milner said he’s gotten unsolicited offers to go to other universities for higher-paying jobs, but he decided he could do the same work at NIU that he could do at any other institution. For him, his work comes down to finding the answers to important questions about family violence and finding ways to solve the problem.
“[The center] is here because kids are being physically and sexually abused,” Milner said. “If it doesn’t get grants, it closes. Grants are very hard to get. I’m very fortunate that I have good people working with me.”
Running on empty
The state’s underfunded pension system has caused concern among university workers, some of whom are retiring earlier than planned because they fear their benefits and pensions will be in jeopardy by the time they typically would retire. Meyer said worries have caused a huge influx in the number of people seeking retirement, which also strains the pension system.
“Fewer people are paying into the system and more are drawing out of it,” he said.
As they’ve gone through their careers, Cunningham said state employees have made financial decisions based on the pension structure they were hired into.
“Employees who retire who have worked 20-40 years can’t go back and relive that time,” Cunningham said. “It’s been invested in the employer, which has to maintain the promises that have been made.”
As a retiree group, the NIU Annuitants Association has watched legislators closely as they try to dig Illinois out of its billions of dollars in debt. Meyer said one plan that might affect current retirees would be if the state decides to tax a certain portion of the pensions because pensions are not currently taxed. He said he would support a graduated tax system so people at the lower end of the pay scale are not overly burdened.
“We’re all going to, at some point, have to share the pain of helping the state get out of its mess,” Meyer said.
• Daily Chronicle news editor Kate Schott and reporter Jeff Engelhardt contributed to this report.