Even with new pension spiking threshold,
some worry taxpayers will still pay extra
The Illinois State Capitol in Springfield, Illinois.
John Spataro | Illinois
News Network
Big end-of-career spikes can
significantly boost the annual pension payments an educator gets in retirement
and the total amount the taxpayer-supported pension system has to pay out over
the term of the benefit.
A
decades-long practice of jacking up salaries in Illinois' public education
arena has been checked by state lawmakers for the second time in 13 years, but
decreasing the threshold of allowable pension bumps may not end the costly
practice that hits taxpayers across the state.
The new
Illinois state budget addresses pension spiking, when state employees salaries
are increased significantly in the final few years of their career, leading to
an increase in their annual pension payouts upon retirement.
The
enacted budget for fiscal 2019 requires pension funds like the Teachers Retirement
System to bill a local employer, such as a local school district, if they spike
someone’s salary over 3 percent a year. That is down from a penalty on any bump
over 6 percent, where the law was before July 1 this year.
“Three
percent is obviously fairly close to inflation, plus considering when somebody
is going to make a job change as they go along, it makes perfect sense,” state
Rep. Mark Batinick said.
The
updated plan capping spiking at three percent is estimated to save $21 million
annually, “which really isn’t a lot of money when you’re talking about
splitting that over 2 million school children in this state. And that’s between
all the [state pension] systems, that’s not just [the Teacher Retirement
System]," Batinick said.
“The
way our system is set up ... has incentivized the people to do some nefarious
things,” he said.
When
spiking happens, Batinick, R-Plainfield, said “the pension is based on that
much higher amount and there hasn't been enough contributed along the way to
the make up for that.”
An
Illinois News Network investigation found school districts all over the state
having to pay millions of dollars in pension spiking penalties from when the
law had a six percent cap. Some examples from the investigation were “egregious
(and) extremely costly for taxpayers,” Batinick said.
Pension
spiking has been happening for years.
“The
career service raises have been a decades-long practice,” said state Sen. Elgie
Sims, noting the six percent limit was implemented back in 2005.
“What
the career service raises have done,” said Sims, D-Chicago, “they’ve
incentivized educators to take lower salaries to back-fill their raises on the
backend.”
But
Batinick doesn’t think the new change lowering it from six percent to three
percent in the current budget will do much.
“There’s
still end-of-career massive spiking that’s going on that’s stressing the
pension systems and people are just writing checks,” Batinick said of the
previous six-percent cap. “So obviously where the abuse is is from the six
percent and well beyond that. My guess is that if it was set to zero, we’d
still have problems."
Spiking
takes taxpayer money away from other services.
“It's
going to take away supplies, to hire other people,” Batinick said. “When police
and fire spiking happens, then it’s going to take police off the streets and so
forth. It’s money that’s taken out of society essentially.”
“That
kind of thing is going on around the state,” Taxpayer Education Foundation
President Jim Tobin said.
Tobin
cited the Chicago suburb of Harvey where more than 40 police and fire personnel
were laid off because money from the state meant for the city was diverted into
pension funds.
The
Taxpayer Education Foundation recently published a report showing 19,000 state
government retirees make more than $100,000 in pensions a year, up 15 percent
from last year. More than 100,000 retirees get $50,000 a year. The report
estimates next year that more than 21,000 state government employees will have
$100,000 annual pensions.
“Pension
benefits double every 24 years,” Tobin said, giving blame to the three percent
guaranteed annual raise in pensions for Tier I employees.
One
example Tobin noted is a teacher he said retired at the age of 57.
“His
annual pension is $321,000 this year. He’s already received $3 million. He’s a
pension millionaire,” Tobin said. “If he lives until he’s 85, he’ll get over $9
million from Illinois” taxpayers.
Tobin
said spiking should be criminal.
“The
spiking thing needs to end, not be capped. It needs to be terminated and that
is the solution,” Tobin said.
Sims
advocated for paying teachers a minimum salary of $40,000 by 2022, a bill that
sits on the governor’s desk.
“Why
don’t we pay them an adequate wage throughout their service so we’re not
worried about that,” Sims said. “Let’s pay our educators a salary that they
deserve throughout their service and I think you’ll see a drop in the
penalties.”
Tobin
responded.
“If
they’d get rid of these stupid pensions, I’d be in support of higher salaries
for government people,” Tobin said. “I think they should get paid what they’re
worth in the sector now, but these pensions are out of whack and out of
control.”
Batinick
urged people to pay attention to local elections and get out and vote.
“We
have all these units of government, if we’re going to keep them it’s our
responsibility to make sure they run properly,” Batinick said. “We have
something like 10 to 20 percent turnout in local races. They make a lot of
decisions and spend a lot of your money.”
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