Fred Klonsky and Bev Johns |
According to Bev Johns, education activist and contributor to Fred Klonsky’s
blog, recent activity in Springfield approaching the Veto Session suggests that
Speaker Madigan may be considering/preparing to move on a pension cost shift to
the local level districts. This is
neither a new idea nor one particular to the Speaker. From 2012, please see the Speaker’s and the
Senate Leader Cullerton’s fascination with this strategy, and how the policy
would affect locals.
“Some Skin
in the Game” (…or...Making local school districts pay for pension costs).
"What we’ve suggested
is that local districts have a little skin in the game when they hire teachers and administrators and set their
salaries. They should be required to set
aside money into the pension system for their future retirees.” Senate Leader John Cullerton (McQueary,
Kristen. Illinois schools may chip
in… NY Times. 19 February 2012).
Idiom:
While many credit sagacious investor Warren Buffet with the phrase “to have
some skin in the game,” Mr. Buffet has strongly denied such attributions. In essence, the idiomatic phrase means being
personally, emotionally, or financially vulnerable to a possible venture and,
therefore, connected to it at all levels of possible aftermaths. According to William Safire, the Oxford
English Dictionary explains the “skin game” was a card game in which each
player has one card which he bets will not be the first to be matched by a card
drawn from the deck; so dealer or player, all have equal chances of winning or
losing
Sadly,
in the case of the public pension system, it appears to be losers all
around. The concept of shifting
responsibility for the teacher’s pension from the state of Illinois to local
school districts has become increasingly popular in the last few months.
The
president of the senate, Mr. Cullerton, sees this transfer as an opportunity to
force local districts to keep increasing costs of retirees and salary increases
in check. Costs for pensions per
district would become an essential part of union contract negotiations
(McQueary, Kristen).
For
Governor Quinn, the “rendezvous with reality” will also call for everyone’s
sacrifice, including the local districts.
Regarding
teacher retirement benefits, the state could save nearly $1.5 billion;
according to the Associated Press, Governor Quinn has given the nod to those
who would seek such a shift in responsibilities (http://www.stltoday.com/news/local/illinois/quinn-looks-to-shift-teacher-pension-funding-to-local-school/article_bed030a4-1a1d-56f9-bcd0-c2fedce38fa3.html). Such savings would allow
the state of Illinois to continue making payments to reduce the unfunded
liability, a result of years of pension holidays, to continue to provide and
improve human services, and to force
local districts to enact new procedures for dealing with public unions.
On
the other hand, many Republicans and others
- including the Illinois Association of School Boards – figure the costs
would be injurious to local taxpayers as well as the districts themselves. Such requirements might bring “an
additional $800 million in contributions
toward teacher pensions,” which coincidentally is the projected amount the
state of Illinois will owe to the pension system this year - without their
required payment to the unfunded liability (McQueary, Kristen). In short, it
may be more than coincidental that this proposal will allow the debtor (the
state) to pay simply the interest on past non-payments and not the current bill
that is due for 2012.
Meanwhile,
Republicans in the General Assembly realize what kind of pressure is being put
on the local districts and the citizens who live within those school
boundaries. They foresee an increased
burden on the local taxpayers and the school boards. “ ‘It could either be a
property tax increase or depending on how they structure the deal they’re going
to have to cut whatever those costs are within [the] school district,’ Rep. Ed
Sullivan, R – Mundelein, said. ‘So you’re either going to lose teachers or have
a massive property tax.’” ( http://www.stltoday.com/news/local/illinois/illinois-republicans-against-shifting-pension-costs-to-school-districts/article_aa4db910-5cfe-11e1-b880-001a4bcf6878.html) Such a deal might also be phased in through
several years; thus, easing the immediate pain and immediate financial impact
upon taxpayers. Regardless, financial
resources on the local district levels will become strained. Perhaps there will be cuts to staff,
increased class sizes, or loss of auxiliary programs - Theater Arts, Music,
Creative Writing, to name a few.
Some
truths are still evident. School income
– also wealth – is created by a combination of three elements:
1.
Property Wealth – This is the combined value of all the real
estate in a school district, which in turn determines just how much money the
local schools can generate from their property taxes. According to Dick Ingram, head of TRS,
Illinois is a state of financial extremes.
2.
Tax Effort – The total assessed value of real property must
be multiplied by the school district tax rate to determine the amount of
property taxes the district can receive.
Tax rates are subject to local referendums; therefore, taxpayers
themselves decide whether or not to support their local schools and by how
much.
3. State Equalization Aid –
The State of Illinois is supposed to provide equalization funds to compensate
for the differences in local property wealth, but the dollars can never meet
the vast gaps in differences. District
relying on state aid have far less than districts that can rely on wealthy
property taxes (Illinois Association of School Boards. Playing fair with the
children of Illinois. www.iasb.com) .
Need
an example?
In
south suburban Ford Heights, where the median annual household income is about
$16,000 and the average home is worth $42,000, the local taxpayers give up
property tax rates of 21.7 percent. On
the other hand, in Winnetka, where the average home is worth $1 million, and
the annual household income is $207,955, the property tax rate is about 6%,
according to statistics compiled by the Cook County clerk (Kadner, Phil. Pols
pull bait and switch on teacher pensions, taxes. Chicago Sun-Times. 12 February 2012).
Here’s
a real rendezvous with reality.
Shifting
the costs of the state’s pension problems to local taxpayers would break the
poor but only slightly distress the wealthy.
(Personally, while I can live with the latter, I find it unconscionable
to do the former.)
Augmenting
that most unacceptable fact, Illinois (in 2006!) had the most inequitable
education funding system in the country, with per pupil spending ranging from a
high of almost $23,700 to a low of less than $4,500 (Center for Tax and Budget
Accountability. The current status of
public education funding in Illinois. 2006).
And, today, while taxpayers in Schaumburg pay a composite tax of nearly
7.7%, those who struggle in poverty-ridden Robbins will pay property taxes
ranging from 9 to 10.3%, with an income average at least one third that of
Schaumburg.
In
the case of House Speaker Madigan, “skin in the game” means, basically, if you
are a public employee, it’s your skin.
“The question is how to do that (solve the pension problem) within the
confines of the state constitution, which says public employee pension benefits
cannot be reduced once they are given.
Madigan outlined a potential trade-off.
‘The question is for a person on a public job today, can we say to them
“Everything you’ve earned up to today you keep, no change?” But…can we say to
that person, “Starting tomorrow, it’s going to be a different deal. It won’t be as rich. The benefit level will not be as high, but we
will save the stability and integrity of your pension system.’” (http://www.pennlive.com/newsflash/index.ssf/story/quinn-asks-lawmakers-to-put-some-skin/80c6ffd8eea873ac52a4b9427d90ce9e)
So,
either the public employees sacrifice or the local taxpayers sacrifice. Meanwhile, companies in Illinois carry on
calmly claiming their rights to tax loopholes and rebates. While the governor nods to the idea of locals
paying more, remember that big-box Illinois retailers receive back 1.75% of the
sales tax revenue they collect from consumers on behalf of the state (Sachdev,
Ameet & Cancino, Alejandra. Tax
giveaways under a microscope. Chicago Tribune.
4 March 2012). And that’s just
one small sampling.
Re: Pension Cost Shift
ReplyDeleteAugust 1, 2012
If Illinois policymakers pass a bill to shift its responsibility of paying the “normal costs” to local school districts, many school districts would not be able to afford to pay these costs, even if they are “phased in for a few years.”
“A shift would create a new and large financial requirement for school districts, which would be difficult for many to meet. Moreover, Illinois ranks last in terms of state spending on K-12 education, and school districts are already relying heavily on local property taxes. Shifting the state’s normal cost obligation onto school districts would only mean that an even higher proportion of school districts’ revenue would come from property taxes.
“[Furthermore,] property tax bases would not be sufficient to absorb any shift in the employer normal cost for teacher pensions… School districts are demographically and financially varied, and it would be difficult to impose a uniform normal cost shift on them… Illinois ranks last in terms of state spending on K-12 education, and school districts are already relying heavily on local property taxes… While shifting the state’s normal cost obligations onto school districts may provide some relief to the state’s budget, it will not mitigate these financial obligations and will instead push them onto school districts that, on average, already derive the majority of their revenue from local sources” (The Center for Tax and Budget Accountability, March 2012).
What would be other probable effects? In cash-strapped school districts, of which there are many, teachers would not receive increases in their salaries; many teachers would lose their jobs; student programs would be reduced or eliminated; class sizes would increase; it would be more difficult to recruit, as well as retain and attract, the best teaching candidates… (Education Sector Policy Briefs).
The public school system in Illinois would be jeopardized; the public school teacher’s dignity and guaranteed retirement security would be imperiled, and their students’ right to be taught by the very best teachers available in Illinois would be at risk.
Approximately one-third of the total pension payment is the normal costs; the other two-thirds of the payment is the interest owed on the debt that the state created for not fully funding the pension system for almost six decades. To transfer the normal costs of the teachers’ retirement system to the school districts is to diminish the state’s role in providing income retirement security to its public employees.
Read commentary on Madigan's notion of “Responsibility”; copy and paste: http://teacherpoetmusicianglenbrown.blogspot.com/2012/05/responsibility.html
I rest your case, Mr. Brown, and thank you. Speaker Madigan is always ahead of most in political method, so we shall see what progresses.
ReplyDeleteJD