Two suburban school districts paid hefty sums in pension penalties for awarding more than 6 percent pay raises to some educators in their last years of retirement during the 2013-2014 school year.
Algonquin-based Community Unit District 300 and East Aurora District 131 paid more than $100,000 each in penalties to the Teachers' Retirement System, according to a Daily Herald analysis.
State law caps end-of-career pay raises for teachers and administrators nearing retirement to prevent huge increases driving up pension costs.
District 300 paid $194,171 in penalties for the last school year -- up from about $104,000 and $110,000 in the previous two years, respectively, TRS records show. The district likely will incur more penalties this year and the next, though exactly how much is unclear.
"We won't know until after August what the actual impact will be for this year," District 300 Superintendent Fred Heid said.
East Aurora District 131 incurred $177,000 in penalties.
Most suburban districts that have tallied big penalties in the past for giving pay raises of more than 6 percent have dodged big bills for last school year, including Elgin Area School District U-46. Gov. Bruce Rauner proposes doing away with the 6 percent threshold and tying penalties to any raises above the Consumer Price Index.
District 300 officials attribute the penalties to overload pay on top of raises guaranteed in a previous teachers contract, and an unusually large number of retirees -- roughly 35 retirees, 20 for whom the district incurred penalties.
"This is a group of individuals who are sunsetting," Heid said. "Our previous contract had a retirement option that allowed teachers to receive an additional 6 percent on top of their annual salary during each year for the four years before they retired. We also have a negotiated class size, so if the class goes above a certain allowance, we pay an overload charge -- $175,000 of the $194,000 in penalties was a result of the overload pay."
That's because the teacher either taught an extra class or received an incentive for teaching a larger class size than what was negotiated in the contract.
Only two teachers received extra duty pay of $4,600, most likely linked to coaching, Heid said.
In some cases, teachers receiving overload pay may be teaching the only section of an Advanced Placement or honors class.
"Financially and instructionally, it makes more sense to pay the teacher an overload fee," Heid said.
Chief Financial Officer Susan Harkin said the state's penalties are inherently unfair because "every dollar you go over 6 percent, the penalty is $13."
District 300 actually paid out only $15,000 above the 6 percent cap for end-of-career salaries.
"That is very reasonable considering the types of services we got," Heid said. "We're paying $194,000 in penalties for a total of 20 people who only earned $15,000 total. It's a defunct system that is now going to be our responsibility anyway because the state is looking at shifting pension costs to districts."
District 300 was among the first suburban school districts to phase out end-of-career bonuses, officials said. The district's current teachers contract expiring June 30 addresses the problem by implementing hard classroom caps, preventing high overload pay costs.
"The schools have been ramping up and training and cross-training their existing staff, so we may not see the volume of overload that we saw this year," Heid said. "We've put checks and balances in place, and we negotiated a much fairer contract to prevent these types of issues in our current contract, and we expect that to continue in the next contract."