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Tuesday, September 2, 2014

GENEROUS TEACHER PENSIONS CONTINUE AS ILLINOIS’ FINANCIAL CRISIS WORSENS

Pat Quinn has an ad out saying he has more work to do. He is not done  yet. Elect me. Illinois is still in the tank and this Clown wants re elected....to do what? More of the Same!

This article was written by Kelly Riddell and featured in the Washington Times on September 1, 2014.
If the Illinois Teachers Retirement Service (TRS) had to pay out all of its pensions today, it could only afford to give its members 40 cents on the dollar.
Yet the number of six-figure pensions TRS has been doling out has increased 24 percent this year compared to last, with about 6,000 retired educators collecting more than $100,000 annually, according to records obtained by Open the Books, an online aggregator of local spending that tracks educator salaries, pensions and vendor spending.
The group’s Labor Day report found more than 100,000 retired Illinois educators had been paid back what they invested into the system just 20 months after leaving work, a financial burden linked to union collective bargaining, which can cost taxpayers $2 million or more per teacher over the course of retirement.
“For most school districts pension payments are one of the top five annual expenses,” said Adam Andrzejewski, founder of Open the Books. “Are we going to educate children or provide lavish lifetime benefits for administrators and teachers? There’s not enough taxpayer money to do both.”
Without reform, TRS’s pension plan could go bust by 2029, the fund’s executive director Dick Ingram told The State Journal-Register back in 2012.
Even though Illinois Gov. Pat Quinn and the state legislature pushed through legislation aimed at overhauling the pension fund last year, a court challenge brought by organized labor threatens to stymie that progress. In May the court decided to issue a temporary injunction against the new law — leaving the fund’s solvency in limbo.
Meanwhile, the Illinois financial situation is only worsening. Creditors have found the state and its largest city, Chicago, to be on the same path as Detroit. In March Moody’s cut Chicago’s credit rating to Baa1 from A3, giving it the lowest credit rating of any major U.S. city other than Detroit. Illinois has the worst credit rating of any state in the nation.
TRS is Illinois’s biggest retirement reserve, making up half the state’s pension funds. For years the state legislature allowed the pension to go underfunded so it could spend money on other things. State educators and union executives used the borrowed cash to hire more teachers, boost salaries and improve local facilities.
As a result, the pension is about $54 billion underfunded, according to Ted Dabrowski, vice president of policy at the Illinois Policy Institute, a nonprofit think tank. Compare that number to the state’s annual budget of $35 billion and the situation looks even more desperate.
“You’d have to close down the entire state government for more than a year to just pay TRS out,” Mr. Dabrowski said. “This situation is obviously extremely unhealthy.”
More than half of Illinois state educators retire at age 59 or younger and receive $2 million in benefits after their career ends, the institute estimates. Because of a guaranteed cost of living adjustment of 3 percent annually after 25 years in retirement, many of these individuals are earning more than double what they were making at the height of their career, the institute found.
Unions unapologetically defend the system and its pay increases.
“It should be remembered that Illinois TRS members are not in Social Security,” said Charlie McBarron, a spokesman for the Illinois Education Association, a union representing more than 130,000 Illinois education professionals. “Their pensions are, for most, their life savings.”
After the court issued its injunction on pension reform — which was led by the unions because it included modifying benefits for current retirees — the Chicago Teachers Union exclaimed, “The law in Illinois is now crystal clear: Politicians cannot break the promises made to Chicago teachers and other city employees. Recently passed laws to cut promised retirement benefits are clearly unconstitutional.”
Whatever the outcome of the case, pension benefits for Illinois teachers trump what they would receive in the private sector, experts say.
The teacher pension’s 3 percent annual increases aren’t tied to inflation — meaning they cannot fluctuate up or down depending on the economy or budget pressures. Also, while Social Security cost-of-living adjustments (COLA) are capped at $456 annually, there’s no such limit on TRS’s plan.
Illinois public sector workers will receive, on average, a $1,906 annual cost of living adjustment this year — nine times more than the average Social Security beneficiary, according to calculations done by the Illinois Policy Institute.
“The 3 percent compounded increase is far more generous than any Social Security benefit would provide. It’s very expensive and needs to be paid out regardless of inflation and regardless of the state’s ability to pay,” said Laurence Msall, president of The Civic Federation, a nonpartisan research organization. “It’s one of the biggest drivers of the pension cost.”
Illinois union officials deferred all questions on the pension’s solvency and potential reforms to TRS.
If the state continues to make its legal contribution to the fund on time, it will never go broke, said David Urbanek, a spokesman for TRS. Part of the reform passed last December included a strict payment plan.
“If the state cannot sustain the legally required payments, then an estimate can be made for insolvency,” wrote Mr. Urbanek in an email to The Washington Times. He declined to speculate when that would be and deferred all calls for pension reform to the Illinois General Assembly.
“Reforms are the responsibility of the General Assembly, not TRS,” Mr. Urbanek said. “As the fiduciary entity that is legally responsible for administering teacher pensions in Illinois outside of the city of Chicago, TRS cannot propose or enact reforms or solutions to the financial problems faced by the system.”
Along with the annual cost-of-living adjustment, teacher salary spikes are also putting pressure on the pension system, watchdog groups warn.
In the final four years of her career as Butler School District Superintendent, Sandra Renner saw her salary spike 31 percent to $288,240 — giving her a starting pension of $210,480, upon retirement, according to Open the Books data.
Because of that spike, Ms. Renner’s pension is higher than her salary for all but five of the years she spent working as a professional, the group reported.
Ms. Renner didn’t respond to calls for comment.
Two years ago school administrator Mohsin Dada also received a nice pay boost. His income jumped 137 percent from $156,160 to $358,750 in his final year before retirement — giving him a pension of $254,700.
However, Mr. Dada decided retirement wasn’t for him, because that same year he was appointed as chief financial officer of the North Shore School System — collecting a $239,895.95 salary, according to Open the Books. Between his pension and salary, Mr. Dada is clearing near a half-million dollars annually.
North Shore Superintendent Michael Bregy didn’t respond to requests for comment.
“Under state law, it is legal for Mr. Dada to collect his TRS pension and be employed in a school district in a position that is not covered by TRS,” said Mr. Urbanek. “Since this situation is legal, TRS has no authority to investigate Mr. Dada’s situation or to seek changes in his pension.”
Salary increases haven’t gone unnoticed in the Hinsdale school district. The school board put a “stop pension spiking” referendum on this year’s November ballot. On average, its teachers were receiving a 24 percent salary lift in the final four years of their careers, according to Open the Books data.
In addition to salary spiking, Hinsdale teachers are also nicely paid. Although their union has been threatening a strike if they don’t get a salary boost, the teacher income in that district has outpaced inflation by 76 percent since 2001, according to Open the Books.
With an average salary of $111,000, the teachers at Hinsdale out-earn the average professor at the University of Illinois by more than $10,000, according to Open the Books.
Because local school systems are only on the hook to pay an increased salary for a few years, there’s a big disconnect when it comes to who really is footing the bill and the impact it is having on the pension system, Mr. Dabrowski said.
Many unions try to make these spikes part of the teachers’ salary negotiations, and the school systems oblige, knowing they will only be responsible for four years of higher salary. Then the burden shifts to the state pension system, where it will be responsible for footing the higher salary for the entirety of the retirees’ lifetime — plus the 3 percent annual increase.
Many times, school districts agree to pay these higher wages because it actually costs local taxpayers less than what it would if the teacher opted to take an early retirement, said Ben Schwarm, deputy executive director of the Illinois Association of School Boards.
When the Illinois General Assembly allowed teachers the option of an early retirement, it required local school districts to put 20 percent of the teacher’s salary into the retirement fund for each of the next five years if the teacher took that option.
Often, the board found it cheaper to get the teachers to stay longer and then give them 20 percent raises in the final two years of their term, Mr. Schwarm explained.
All pension reforms, enhancements and modifications need to go through the state legislature. Local schools and districts need to deal with the hand they’re dealt and haven’t been able to exert much influence over the process, he said.
“Local school boards didn’t create this — in most part we’ve opposed all pension enhancements. But we get rolled over in the general assembly because they’re trying to make the teachers and the unions happy,” Mr. Schwarm said.
As a way to solve the pension crisis, the Illinois Association of School Boards’ main concern is that the state legislature will try to shift the pension costs from the state to the local level, which “would be devastating to the local school districts,” because the districts have no revenue streams to pay for the additional costs, Mr. Schwarm said.
Two-thirds of local school funding is being paid through property taxes, and those rates have been consistently climbing in recent years. Right now everyone is crossing their fingers that pension reform will be declared constitutional by the courts, Mr. Schwarm said. The reforms include salary capping, an increased retirement age and a COLA tied to inflation.
Yet higher taxes will be the answer if the court rules against the bill and compromises can’t be made politically, Mr. Dabrowski said.
“The stage has been set for a big political battle between the unions, government workers, taxpayers and the poor and disadvantaged, who will see some of their benefits cut as pension costs climb,” he said.
“The state is on the verge of economic collapse, and the alternatives are massive tax increases or massive cuts in services that the state can’t support,” Mr. Dabrowski said. “It’s unfair to ask taxpayers to pay more if you still have workers who can retire in their 50s on $2 million pensions without trying to reform those things first.”
http://www.illinoispolicy.org/news/generous-teacher-pensions-continue-as-illinois-financial-crisis-worsens/


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