Suburban school districts pay penalties for giving raises over 6 percent
Taxpayers in 58 suburban school districts spent a combined $820,980 last year to cover state penalties for dozens of teachers and administrators whose annual pay raises exceeded 6 percent.
Those penalties are only expected to rise after Gov. Bruce Rauner signed legislation a week ago that lowers the threshold to 3 percent and makes school districts responsible for any increase in pension costs triggered by pay raises higher than that. The lower limit goes into effect for new teacher and administrator contracts.
School districts throughout the state have paid millions in penalties since the original law was passed 13 years ago as a step toward curtailing Illinois' growing public pension costs.
Many teacher and administrator contracts call for higher-than-usual pay increases for employees in the final three years before retirement, though some suburban school districts are doing away with the practice.
From 2015 through 2017, 86 suburban school districts combined to pay more than $2.7 million in penalties to the Illinois Teachers' Retirement System to cover pension obligations created by raises above 6 percent given to school employees. That's according to a Daily Herald analysis of TRS records acquired through a public records request that also show taxpayers statewide covered $11.2 million in penalties over those three years.
Elgin Area School District U-46 paid the most among the suburban school districts -- $436,542 -- during those three years as a result of raises topping 6 percent a year for nearly 100 employees, according to the analysis. Algonquin-based Community Unit District 300 paid $312,949, Aurora East Unit District 131 paid $303,151, Stevenson High School District 125 in Lincolnshire paid $133,178, Bensenville-based Fenton High School District paid $117,152, and Indian Prairie Unit District 204 in Naperville and Aurora paid $107,055.
"We see absorbing these penalties as fiscally responsible because we know we'll recoup savings on the other side in pretty quick order by replacing those positions with younger individuals earning smaller salaries," Stevenson spokesman Jim Conrey said.
U-46 officials said they stopped offering higher raises as a retirement incentive in 2014, but 2017 would have been the last year anyone who participated in that program would have benefited.
District 300 officials said they have made a concerted effort to reduce penalty payments in recent years.
District 300 paid $194,171 in penalties in 2014 after two previous years of six-figure payments. In 2015, the district paid $189,203 in penalties, then dipped to $94,362 in 2016, but only had $29,384 in penalties in 2017, according to the analysis.
|THERE'S MORE TO THIS STORY: Click here to learn how much your distict had to pay in pension obligation penalties for raises given to educators.|
Spokesman Anthony McGinn said stipends for coaching or other extracurricular activities often pushed the pay raises above 6 percent.
"The decreasing amount is an intended strategy and part of our negotiation process," McGinn said. "The district has taken steps to significantly reduce overload pay through contract negotiations."
The penalties essentially shift some of the pension burden back to the schools that created it, proponents said.
But others argue such a shift has little effect on decreasing the pension fund's debt, which is about $73 billion, according to TRS officials.
"Go ahead and do it, it's not bad government, but it's not going to solve the real problem," said Ralph Martire, executive director of the Center for Tax and Budget Accountability, a bipartisan government finance think tank based in Chicago.
"It's a debt problem; it's never been a benefit problem."
TRS is funded annually by a set percentage of the employees' salaries, investment earnings and a state contribution. However, for years the state did not pay the full contribution, leading to a shortfall that has left it only 41 percent funded.
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