Faced with a steadily growing, almost $140 billion in unfunded pension obligations, Illinois lawmakers last month astoundingly decided the only sane course of action was to make things worse.
In May, the Illinois Education Association begged lawmakers to lift a recently imposed 3% cap on pay raises for teachers in the final four years of their careers, with union President Kathi Griffin going so far as to say killing the cap was needed “to help save the teaching profession.” The ploy worked, as the General Assembly voted to restore the 6% limit that had been in effect since 2005.
It was only last year when lawmakers lowered the limit on end-of-career pay raises from 6% to 3%. The cap was instituted to keep pension-inflating pay raises for teachers in check. Their pension is determined based on an average of their highest four consecutive years of salary in the 10 years before retirement.
The 2018 change wasn’t even absolute – lawmakers granted local school boards the power to award raises greater than 3% as long as the district agreed to assume responsibility for the increased pension liability. Board members who choose to spend resources that way at least would have to answer to local voters.
By rolling back the cap statewide, we’ve returned to the status quo, where a district that can afford the increased salary at the end of a teacher’s career doesn’t have to worry about that raise’s effect on pension payouts because part of the expense is spread across the broader Teachers’ Retirement System. In years past, it had become customary for teachers to be removed from the salary scale and awarded 6% raises in the years before their retirement; it’s almost certain that practice will resume.
In December, the General Assembly’s Commission on Government Forecasting and Accountability said the unfunded pension liability climbed from $129 billion in fiscal 2017 to $133.5 billion at the end of 2018, and projected the number would hit $136.8 billion at the end of fiscal 2019 on
June 30, then $139 billion in fiscal 2020. In other words, Illinois is in no position to increase its pension obligations, but that’s exactly what lawmakers did in giving a concession to the teachers unions. Reversing this one attempt at pension reform so quickly means not a single lawmaker, taxpayer or school board member received a real idea of whether it would have the intended positive effect. Nor did we have a chance to actually observe any unintended consequences and react accordingly.
In the same legislative session, lawmakers established a statewide minimum wage scale for teachers, establishing a $32,076 minimum in the 2020-21 school year, increasing to $40,000 over the subsequent three years. That on its own was not enough to save the teaching profession.
It’s blatantly unfair, given the property tax burden and the state’s unfunded pension obligations, for school districts to be expected to award their most senior, highest-paid employees outsized pay raises.
Opponents of the reform said the raise cap kept teachers from doing things that would push their salaries too high – and if that’s the case, a revised bill should be introduced next year to address that problem.
But this small attempt at pension reform should not be scrapped for good simply because a few soon-to-retire teachers weren’t able to teach overflow classes or be football coaches.