 School districts across Illinois might be eager for more state funding in any
budget deal. But taxpayers should know these subsidies encourage bad practices,
such as pension pickups – which cost taxpayers approximately $380 million per
year.
Under state law, teachers are obligated to pay 9.4 percent of their salary into
the state retirement system. But for decades, school districts have “picked up”
all or part of that obligation, which state subsidies have encouraged. It’s a
financially unsustainable practice, yet widespread throughout the state.
Nearly two-thirds of all school districts – and by extension, taxpayers – pick
up some or all of each teacher’s required contribution. In Chicago, which has
its own teachers’ pension fund, pension pickups cost taxpayers $134 million in
fiscal year 2015.
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 Pension pickups are just one part of the burden teachers’
pensions impose on taxpayers. Teachers’ Retirement System, or TRS,
the pension system for teachers outside of Chicago Public Schools,
has admitted it can’t meet the lofty investment return targets it
previously had set for itself, leaving taxpayers with the tab for
the shortfall. TRS’s investment return failures combined with
pension pickups mean taxpayers are getting hit by pension costs on
three sides. First, taxpayers pay the state’s employer pension
contribution through income taxes. Second, many pick up their
teachers’ required contributions through local property taxes. And
finally, taxpayers have been solely responsible for bailing out the
billions in pension fund failures.
Illinois lawmakers should end pension pickups. Asking teachers to
pay their fair share – a simple standard across both public and
private industries – would save taxpayers hundreds of millions of
dollars per year. The Senate’s budget proposal fails to address this
or any similar reform, and dramatically increases the burden on
Illinois taxpayers.
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