Do schools in wealthy towns such as Lake Forest benefit more from the Illinois Teachers Retirement System? A conservative think tank says they do. The system disagrees.
The Chicago-based Illinois Policy Institute asserts that state pension spending per student is usually higher in richer school districts. According to its 2010 figures, that trend holds statewide, including Lake County.
Two years ago, the group crunched numbers for the the state’s more than 800 districts. In the Lake Forest Community High School District, Lake County’s richest, the property wealth amounted to nearly $1.5 million per student in 2010. At the same time, the district received $888 in state pension spending per student, the second highest in Lake County, according to the institute’s figures.
The Round Lake Area School District, by contrast, had one of the lowest amounts of property wealth per student at $68,148. And it also was near the bottom in the county for state pension spending per student at $397.
The Gavin School District near Fox Lake, another relatively poor district property-wise, pulled in $370 per student, while wealthy Rondout, with its nearly $1.3 million in property wealth per student, pulled in $1,123 in pension spending per student, the highest in Lake County.
Report: State works at cross-purposes
In its report, the institute notes that the state gives more money to poorer school districts – known as general state aid – in an attempt to offset the advantage of wealthier ones in a state where schools are heavily dependent on local property taxes.
“[A] bird’s-eye view of Illinois education spending reveals that the state’s intention of sending dollars to poor districts is blunted by the state’s obligation to pay local teachers’ pensions,” the report says.
In the Teachers Retirement System, pensions are based largely on the highest 4 consecutive years of a member’s last 10 years of service. School boards routinely grant 6 percent annual pay raises for teachers, administrators and superintendents in their final 4 years before retirement.
While the districts pay for those raises, they don’t have to worry about the long-term effects. That’s because outside of Chicago, schools don’t pay the employer portion of pensions; the state does.
So teachers in wealthier districts, who are typically paid more, collect more in retirement, meaning more money from the state.
“These are state income taxes that make these contributions,” said Ted Dabrowski, the institute’s vice president of policy. “These taxes aren’t distributed based on need. We should be distributing those dollars based on need.”
Institute’s report called ‘wrong’
Dave Urbanek, spokesman for the Teachers Retirement System, said the institute’s report tells nothing.
“It’s not based on any measurement that anyone else recognizes. To say a wealthier district benefits is wrong,” he said. “They don’t get the money; it’s the teachers who benefit from it. They’re putting in 9.4 percent.”
The institute expects the state pension contributions to increase in coming decades to cover normal costs and repay years of underfunding. As the payments increase, they will start to crowd out general sate aid, according to the institute.
In 2017, state contributions to the Teachers Retirement System will start exceeding general state aid spending, the group predicts.
The solution, the institute says, is transferring responsibility for employer’s payments from the state to the local districts, making them accountable for their decisions on salaries.
“When the state pays the normal cost of teachers’ pensions, it is letting school districts off the hook for spending decisions they made,” the report says. “Because districts do not fully pay for their decisions, there is no incentive for the school districts to exercise fiscal restraint.”
That, the institute says, would end a system that favors wealthy districts.
But Urbanek of the pension system said his agency doesn’t see a problem. The state’s pension payments, he said, are not “driven by the district. They’re driven by what people earn.”
Dabrowski said Urbanek is wrong. He said taxpayers statewide are suffering the consequences when a wealthy district, for instance, pays a gym teacher $150,000 in his final years.
“The district will pay three or four years, but it won’t have the cost for the next 30 years,” he said. “The state will.”
State Rep. Sam Yingling, D-Grayslake, opposes transferring the employer’s payments to local school districts.
“I’m not for shifting part of the pension costs to the local entity,” he said. “Lake County has the 15th highest property taxes in the country. We can’t go back to the taxpayers and ask them to pay more.