Chicago taxpayers shouldn't be forced to choose between educating our children and paying for the retirement of our teachers. But that's the position we're in today.
This week, Illinois Senate President John Cullerton, D-Chicago, will once again try to pass legislation providing some state help for Chicago's teacher pensions. Every Chicago parent, teacher, principal and taxpayer has a lot riding on the bill.
Today, Chicago takes money from its classrooms to pay for teacher pensions, while the state pays teacher pension costs for all other school districts. This places Chicago at a huge disadvantage. In fiscal year 2015, the pension "subsidy" for downstate and suburban school districts amounts to $2,066 per student, and $157 per student in Chicago. CPS is being whipsawed by the combination of increased pension payments and reduced financial support.
As a result of this decades-old disparity in pension policies, the CPS budget is in crisis, while wealthier school districts are enjoying a surplus. Even worse, Chicagoans, through their state income taxes, help pay teachers' pension costs for other school districts across Illinois.
This is unfair to Chicago taxpayers, who are being forced to pay twice. It is also unsustainable, as recent CPS budget cuts and additional borrowing demonstrate. Cullerton's bill begins to address the problem, and it deserves support. It incorporates many of the ideas proposed by Chicago Mayor Rahm Emanuel a few weeks ago.
Emanuel's "Plan A" creates a singular, uniform pension system across Illinois for teachers and taxpayers. It would treat every school district's teachers, students and taxpayers the same. For those who might argue that this plan benefits Chicago at the expense of the rest of the state, the truth is that the Chicago Teachers' Pension Fund is better funded than the Teachers'
Retirement System of the State of Illinois, known as TRS.
Because the simple and direct path too often leads to nowhere in Springfield, the mayor also offered a "Plan B." It is a comprehensive "all-in" approach that requires a shared investment from everyone with a stake in the system — state government, teachers and Chicago taxpayers. It operates on the theory that, if everyone gives something, no one will have to give too much.
Under Plan B, the state would cover the annual cost for CPS teachers' pensions. This excludes the portion of the pension debt that resulted from changing demographics, depressed investment returns during the Great Recession and the failure of the state and Chicago to make payments for roughly a decade, starting in 1995 — the so-called "legacy costs." CPS would continue to pay for those, despite the fact that the state currently pays both annual and legacy costs for every other school district in Illinois.
In turn, Plan B asks teachers to make their full individual pension contributions. Today, CPS pays nearly $700 million each year for its state-required contribution, while also paying 7 percentage points of the 9 percent of the teachers' match. Under Plan B, teachers would contribute 9 percent instead of the current 2 percent of salary they pay toward their pensions. This could be phased in, if necessary, to ease the burden.
Only when government and teachers begin doing their part can we ask Chicago taxpayers to contribute to the pension solution. Before 1995, CPS was authorized to levy a small property tax specifically to cover teacher pensions. Plan B would restore that levy, which the Chicago Teachers Union has been urging for years.
To ease the burden of this new investment, all local school districts would be required to cover their own annual pension costs. The state would continue to pick up its historic legacy costs, which represent the vast preponderance of current pension debts. Local school districts, however, would for the first time bear some responsibility for their own teacher benefits.
Plan A has the benefit of being simple. But in Springfield, where legislators can't even agree on a budget, it may be too much to expect. Plan B has more moving parts, but it offers a comprehensive solution to fix the problem of education funding once and for all.
*Op-Ed originally ran in the Chicago Tribune on August 2, 2015