In Illinois, New Budget Caps Raises and Limits Pensions for Teachers
Illinois' new budget, which Republican Governor Bruce Rauner signed into law this week, features the state's latest attempt to tackle the growing debt in its teacher pension fund.
The Teachers' Retirement System is the largest pension system in the state, and it also carries the most debt—it's underfunded by $71 billion, according to the 2017 report from the Illinois Department of Insurance.
Under the current pension system, districts can raise teachers' salaries by 6 percent annually in the last four years of their careers, which increases the income they receive from their pensions. The new law lowers this yearly increase to 3 percent. Districts could still offer more, but they would be required to supplement pension costs.
This modification to the retirement system, and other changes to state pensions in the new budget, have put "balance in reach" for the state budget, said Rauner in a statement.
But the Illinois Education Association, a teachers' union in the state, asserts that the move devalues experienced educators and discourages new teachers from entering the profession. A lower cap on raises could dissuade veteran teachers from furthering their education if they know their salary would not raise commensurately, the IEA argued.
"At a time when Illinois is facing a teacher shortage, this is a short-sighted and disrespectful move," said Kathi Griffin, the association's president, in a statement.
The new budget decision is the latest in a series of attempts to revive the state's underfunded pension system. In 2011, the state attempted to address the already-growing gap by placing new teachers on a "Tier II" pension plan with a longer vesting schedule and a higher retirement age.
This new plan offered beginning teachers less security than their colleagues who had started working in the state before 2011. Almost 25 percent of teachers on the Tier II plan will never fully vest in the state's teacher pension fund, and more than three quarters of these teachers won't even receive as much in pension payments as they have contributed into the system, according to a 2016 analysis from Bellwether Education Partners.
Illinois is far from the only state tackling the challenge of underfunded teacher pensions: Nationally, teacher pension debt totals more than $516 billion, according to the National Council on Teacher Quality.
Kentucky's underfunded pension system was a major driver of teacher walkouts in the state. It was a pension reform bill that galvanized the walkouts, spurring teachers in more than 20 school districts to protest at the Capitol building. The state legislature had proposed reducing yearly cost-of-living increases for retired teachers and moving new teachers to a hybrid pension plan.
The factors contributing to the national pension debt—including longstanding financial mismanagement and a surge of Baby Boomer retirements—are long-term challenges, and experts say pension funding issues will likely continue to cause problems for states.
Photo: Illinois Governor Bruce Rauner displays the signed Illinois state budget for fiscal year 2019 during a ceremony on June 4 in Chicago. —Tyler LaRiviere/Sun Times via AP