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 Seventy-three retirees from Belleville area school districts
have collected more than $1 million since retiring, seven of whom have
accumulated more than $2 million.
The 73 education pension millionaires contributed an average of $123,009 to
Illinois’ Teachers’ Retirement System, or TRS, during their careers. Tax dollars
and investment returns covered the rest.
The average pension millionaire from Belleville’s high school district and 10
elementary feeder districts retired at age 57, and receives an annual payout of
$114,439. Those benefits eclipse Belleville’s median household income of
$42,406. Two-thirds of the pension millionaires were formerly employed by
Belleville High School District 201.
The highest-earning retiree is former Belleville high school superintendent K.
Lane Miller, who has accumulated over $2.5 million in pension benefits since
retiring at age 56. Among all 73 pension millionaires, Miller’s retirement
benefits-to-contributions ratio is the most disproportionate. He contributed
just $64,900 to TRS during his career – the fourth-lowest in the group.
Government retirees themselves do not deserve blame for TRS’
deficiencies – state lawmakers created the system. But equally important are the
billions in tax dollars raised for state education spending during the past 20
years that have flowed disproportionately to pensions, rather than the
classroom. More than a third of the state’s contribution to education funding is
consumed by pensions, compared with just over 8 percent in the 1996 school year.
Increasingly, pensions are elbowing the classroom out of the budget.
Among the state’s six largest pension systems, TRS pays the highest number of
annual six-figure payouts, with nearly 12,000 former school district employees
collecting more than $100,000 in benefits each year. The next closest is the
State University Retirement System, which delivers six-figure payouts to nearly
4,300 pensioners each year.
Trapped in TRS
This system may work well for older TRS retirees who’ve collected millions in
benefits, but younger teachers are already suffering. Since January 2011, new
teachers have been forced to sacrifice a massive chunk of their paychecks under
the “Tier 2” plan lawmakers introduced in an effort to bail out the indebted
pension system.
TRS’ $73 billion debt accounts for the largest portion of the state’s combined
$130 billion in pension debt. In October, TRS said it would need $400 million
more from taxpayers in next year’s state budget than last. That would bring the
total taxpayer contribution to $4.8 billion.
The cost of shoring up TRS at the expense of teacher and student needs is
causing some to call for tax hikes, despite Illinois’ already high tax burden.
In St. Clair County, where Belleville is located, property taxes have nearly
doubled during the past 20 years – surpassing home values by more than 200
percent – with pensions being the main driver. To be clear, property tax dollars
don’t flow directly to TRS. Rather, local school districts hike property tax
levies to make up for the share of state education funding captured by teacher
pensions.
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Unsustainable growth
What causes expensive pension benefits? Expensive employee salaries,
for one. In just the six school districts that cover the city of
Belleville, more than 230 school district employees earn more than
$100,000 a year. Because the state picks up the cost of local
pensions, school districts are immune from the financial
consequences of pensions. As a result, many administrators raise
salaries dramatically for employees nearing retirement, an abusive
practice known as “pension spiking.”
A 2005 law discouraged pension spiking by capping end-of-career
salary increases to 6 percent for TRS participants. Employers could
still increase salaries by more than that amount, but they pay a
penalty to cover the cost of the amount spiked above the cap.
Unfortunately, this 6 percent limit encouraged many school districts
to spike salaries right up to the cap. Others simply choose to pay
the penalty: An Illinois News Network investigation in July found
that Belleville school districts collectively paid about $67,800 in
penalties for pension spiking, while the total for districts in St.
Clair and Madison counties was $527,845.
A path to pension reform
One of the few bright spots of Illinois’ most recent budget was a
provision reducing the pension spiking cap from 6 percent to 3
percent.
Local schools could also trim inflated pension costs by
consolidating some of the 10 elementary districts that feed students
into Belleville high schools. Only the high school district and
Belleville elementary district have enrollments greater than the
state average: Signal Hill serves only 348 students. Trimming the
number of costly administrative salaries in the 11 school districts
would reduce the number of overly generous retirement packages.
But Illinois remains in desperate need of reforms that address the
inherent flaws of the state’s defined-benefit pension system.
Springfield has a moral obligation to government workers and
Illinois taxpayers alike to amend the state constitution. An ideal
constitutional amendment would protect already-earned pension
benefits for government workers, while allowing for sensible
adjustments to the growth in unearned benefits. Further, all
government workers should have the option to participate in a
401(k)-style personal retirement account. More than 20,000 state
university employees already choose that option.
Without meaningful reform, Illinois’ unsustainable pension system
risks jeopardizing the retirement security of future government
retirees, and threatens Illinoisans with endless tax hikes.
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