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Illinois tamps down 'pension spiking' for teachers; educators fear disincentive for hiring

St. Louis Post Dispatch

Tuesday, June 5, 2018  |  Commentary  |  By Kevin McDermott

Budget--State (8) , Education--Educators/Administrators , Education--Elementary and Secondary (36)

Illinois’ leaders say they are taking a dramatic step in cooling the state’s long-simmering teacher pension crisis.

But others say they’re putting years of political mismanagement on the backs of the teachers themselves, in a way that will make it harder to attract the best to Illinois classrooms in the future.

Currently, the often notoriously low pay of Illinois teachers is offset by an end-of-career perk: In the teachers’ final years of employment, school districts routinely hike their salaries to boost their post-retirement pensions, which are paid mostly by the state. Under current law, districts can offer up to 6 percent per year in raises for the final four years of a teacher’s career without incurring extra pension costs for the district.

The $38.5 billion budget that Gov. Bruce Rauner signed into law Monday lowers that 6 percent limit on the end-of-career raises to 3 percent. Anything higher, and the school district has to pay a penalty to offset the higher pension costs.

In the real world, experts say, most cash-strapped districts will respond by keeping those raises at or below 3 percent, effectively lowering the ceiling on teacher pensions.

“I know that folks will be upset, especially if someone was counting on this in 10 or 12 years,” said Kelton Davis, superintendent for the Monroe-Randolph Regional Office of Education. “It just feels like a continuing attack on teachers.”

Critics of the current system call it “pension spiking” and have long viewed it as a costly loophole that allows school districts to lavish inflated pensions on retiring teachers while letting the state pick up the tab.

“Those 6 percent-plus salary increases cost local taxpayers more than $38 million over the past decade in payments to the Teachers’ Retirement System alone,” reported the conservative lobbying group Illinois Policy recently.

“That policy ... means a career worker with an average salary of $73,000 will earn approximately $250,000 more during the course of her retirement” over what it would have been without the boost.

But teachers unions and others say the new system will not only force down pension rates — depriving districts of a big selling point in attracting new teachers who might not be enticed by the modest salaries alone — but also could have an impact on things such as extracurricular activities.

For example, they say, districts might be hesitant to let teachers coach school teams or take substantial promotions near the ends of their careers, because it could put the district on the hook for pension penalties if the extra pay equals more than 3 percent of the original salary.

“The upside is, the state is working to control pension costs. The downside is, within the districts, it really does limit promotion or additional duties” such as coaching, said Superintendent Susan Sarfaty of the St. Clair Regional Office of Education. “I think it’s a concern” for teachers.

Jim Reed of the Illinois Education Association, which represents teachers, said the provision creates a “disincentive” to teach in Illinois “at a time when we have a significant teacher shortage.”

Reed said the education lobby next session may push for changes such as taking pay for extracurricular activities out from under the 3 percent cap.