Illinois Leaders Meet on Pension Reform


The clock is ticking while a pension reform deal is fading. We have the latest on Chicago Tonight at 7:00 pm.

On Thursday, the Quinn administration released an extensive study of every school district in Illinois and how the so-called “Cost Shift” would impact them.

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To give viewers an idea of what the study found, we selected a few schools.

Pleasant Valley is a small district in Peoria that has about 31 teachers in the system and currently doesn’t pay pension costs. If a plan to phase in the shift over the next five years goes through, Pleasant Valley would pay $16,000 in 2014. Fast forward to 2031, the bill would be $137,000; and then in 2045, it would go down to $68,000. This is because of expected savings under the new pension system.

Lake Forest District 115 is a large school district with 166 teachers in the retirement system. They pay nothing now, but would pay $200,000 in 2014, $1.7 million in 2031, and 841,000 by 2045.

The study concludes that 95 percent of Illinois districts can afford this phased in shift without a property tax hike. Visit the Excel spreadsheet below to see the full School Pension Cost Table.

FACT SHEET
Normal Cost Alignment
Illinois School District Employers

Introduction: Aligning Normal Cost with employers is a sound policy that connects compensation decisions with the responsibility to pay for them.

Key Takeaways:

  • 95% of school districts have more than the minimum standards of recommended reserves: Of 864 Illinois school districts, 822 have more than 60 days of reserves in place, which is the minimum standard of GFOA.
  • Only 24 school districts have fewer reserves than the GFOA (Government Finance Officers Association) minimum standard.
  • School districts currently have cumulative reserves of over $9 billion.
  • Small normal cost relative to total budget: The average district normal cost payment in the first year of a 1% of payroll per year shift will be 0.5% ($113,000/$25.8M) of an average district’s operating budget.
  • Employer Responsibility will NOT result in a property tax increase. Here’s why:
    1. Adequate time for planning: Under all scenarios being discussed, there is sufficient time in the phase in schedule to absorb cost in budget.
     - Under the phase-in, districts will absorb full normal cost within 6 to 9 years.
    2. Small Annual Impact: Under any scenario being discussed, a fraction of a percent of payroll –which is a fraction of the overall budget-- would be added each year.
    3. Districts will make different compensation decisions in the future: Districts will have skin in the game and be responsible for their decisions.
     - The average active teacher salary increase has been 7.0% per year.
    4. Districts have excess reserves: Districts have sufficient fund balances ($7.2 billion in excess reserves) to help in the transition.
    Source: Gov. Pat Quinn's office

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