Is the Pending Illinois Legislation Education Reform or Educator Pension Reform?

Educators and involved parents in Illinois will be closely monitoring the development of the pending Illinois legislation, introduced by State Senator Kimberly Lightford (D-Maywood). According to news sources, the bill appears to have widespread support, fueled by the momentum of similar measures taken in Wisconsin, Indiana and Ohio, passed 59-0 in the State Senate. The bill also appears to have the support of major teachers unions as well, the Illinois Federation of Teachers, the Illinois Education Association, and the Chicago Teachers Union. Senate Bill 7 purports to do several things: tie tenure to performance; ease the process of dismissing a tenured teacher; allow school reductions in force (commonly called RIFs) to look to a teacher’s performance reviews over the previous two years as a measure of pecking order, with seniority acting as a tie breaker; and require teachers and administration to seek arbitration before any strike.

This bill is largely lauded as putting children first and ensuring the best teachers stay in the classroom. But is that what this bill is really about? The elephant in the room–amidst the State’s financial crisis and pension underfunding–is that the most major effect of, and apparent intention behind, this law is slashing the cost of funding the pension plans. The State has consistently reneged on its obligation to contribute to teachers pension funds. The Illinois Teachers Retirement System only attained a funding level of 63.8% in 2007, compared to over 100% on average for private single-employer defined benefit pension plans, as described in an earlier post. In 2010, however, that funding ratio for the TRS dropped to less than 50%. That means if the plan terminated today, it would only have enough money to pay half the accrued benefits.

The State appears to curb the continued employment of more senior educators. Why? The more senior teachers earn high salaries, but the annual payroll is a greater concern to school district administrators than the State. The State, on the other hand, is very concerned about its annual obligations for contributions to the pension plan.

The annual accruals of benefit liabilities for participants ramp up dramatically in the later years of service as both compensation and the Final Average Earnings upon which the promised benefit is based increases. Each year a participant gets more senior and earns a high salary, the greater annual accrual of benefits, but also the greater make-up accrual for past service years where the accrual was based on that year’s compensation.