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Teacher pension funding unfair to Chicago?

Gov. Pat Quinn and Mayor Rahm Emanuel say it’s unfair for Chicago property owners to pay, not only city teacher pensions, but also pay teacher retirement benefits of suburban and downstate educators.

Rising pension costs and underfunded pensions, the result of decades of unrealistic politicians’ promises, coupled with underfunding – this year funding only 60% of the TRS - threaten to reduce state and city budgets for almost every other expenditure.

Some suggested solutions to reform teacher pensions, as Christie has done in New Jersey, would stop cost of living adjustments for future retirees, raise the age of retirement, or as requested by Emanual and Quinn, transfer the current state payment for teacher’s pensions - to the school districts.

Quinn said he doesn’t think it’s fair that only the city of Chicago directly pays its teacher retirement costs. Local school districts are the employers, he said, and “they should have a stake in the retirement of their own employees.”

RSD205 already pays the entire teacher’s retirement contribution and would now be forced to also pay the state’s portion of the TRS.

The state, which has failed in its responsibilities to fully fund the pension costs, despite the recent 67% increase in state income taxes, will now shift an additional $700 million in taxes to local property owners.

However, Illinois Senate Majority leader, John Cullerton, stated in Chuck Sweeney’s recent column,

Excerpt:

“In 36 states and the city of Chicago, the school district pays the employer portion of the pension contribution. In Illinois outside of Chicago, the state pays the employer portion. There’s a small amount school districts pay,” Cullerton said.

“So we are saying to school districts, you’re not responsible for the underfunding we’ve accumulated over the years, but going forward, when you negotiate a contract like you did in Rockford, you should be responsible for the amount of money you would have to put into a pension fund when you hire a teacher so you have some money in the system when they retire.”

Cullerton said this change should be phased in, “and it does not need to result in higher property taxes.”

Who is Cullerton trying to kid? Cedric Lewis, Chief Financial Officer for the Rockford School District, stated it would cost local property taxpayers $36 million a year to fund its pension obligations. Believe me, it would eventually result in an increase in local property taxes.

However, let’s be fair to Chicago, considering that it is Chicago politicians who have controlled the state for decades and are primarily responsible for our current financial crisis.

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19 Comments

  1. Concerned 2

    Ted: I was in my 20′s when Johnson’s Great Society began. Not being politically astute, I still questioned,” Why would the Federal Government give money to people that did not work if they were physically able?” The local community helped out the poor, not Washington DC. I followed the rules and paid off my small house. One fifth of my SS goes to property tax(frozen). I voted in almost every election, even when I was sent overseas. Could it be 50 years working for nothing, if my property taxes increase? I should have quit working in the 60′s and held my hand out.

  2. As long as we have union-connected lawmakers and ex-teachers or spouses on the School Boards, it will never change. I never heard, are the 205 teachers contributing anything towards their own pensions now? I just can’t get over the fact they get their early retirement, plus pensions all for free.

    • Ted Biondo

      Juice – RSD205 teachers still do not contribute anything toward their 9.4% state pension. However, I believe that the contract would make the REA members pay for anything the state would off load on the school districts. This state is in deep trouble financially and yet we keep electing the same people from Chicago, regardless of party and they don’t give a damn about Rockford or any downstate municipality.

  3. gowader

    Ted, Do you really feel sorry for Chicago home owners? We have all been subjected to their whims for years. Everyone knows Chicago has been sucking off the rest of us because of their voting power. Bay back is a Which I was told.

    • Ted Biondo

      gowader, you got to be kidding, right? read my previous comments concerning Chicago. Reread my last sentence, the first sentence of the last paragraph, of course, being tongue in cheek.

  4. Unbelievable. Sounds like our School Board doesn’t give a damn either if they conceded that easily. And this Superintendent wants a contract too? HIT THE ROAD! All of you of the Board need to go!

  5. Rockford Citizen

    Can someone fill me in on the Conservative vision for government? What SHOULD the government do, and how SHOULD it be funded… I hear a lot of griping about what the current system is doing wrong, and the only solutions presented are to “vote the bastards out” or to stop doing whatever it is that’s not right.

    So, I guess, just so I can understand, and I genuinely want to know, what IS the conservative vision for government? What would a perfect scenario look like? I know, I know, perfect isn’t possible, but can someone give me an idea?

  6. OK, Rockford Citizen. I can sum it up real easily. I shouldn’t have to pay higher taxes to pay for teachers that pay ZERO for their retirement. If i have to pay for my own bills, retirement, healthcare, etc. I should be able to “opt out” of paying for others. That is a double hit on me and ZERO for them. And also, stop these exemptions for unions and other groups for Obamacare and then charge me more on my premiums by taxing my employer to pay for the new people. We have our own system, leave us alone. There again is a double hit. I don’t mind paying for my own stuff, but double hits are not right while people pay ZERO as well as the certain hand-picked democrat unions and groups are exempt. It is not right. Form your own pools of unemployed or poor for healthcare. Let me and my employer keep our own and be happy, like Obama once promised. The burden is not shared fairly now.

  7. Rockford Citizen

    Juice,
    You didn’t answer my question. You gave me more of the same… “don’t do this” “stop doing that”… I mean, seriously, lay out a plan for what it is that you DO want.

  8. JRM_CommonSense

    @Rockford Citizen: I am a moderate conservative and the following are things that need to be done at the Federal and State levels:

    1) All public employee pensions system’s fund balances (federal and state) should be converted to a social security and annuity plan solution. All public service employees should begin paying to social security and given a 3% match for their 401K plans. This approach would eliminate the massive costs for the servicing and management of these pension funds. Those saving could be used for a few years to eliminate any funding shortfalls so that the appropriate social security buy in and annuity purchases would be made for each beneficiary.

    2) Insure that the mandatory 10% across-the-board spending cuts based on the SuperCommittee failure to complete the task takes effect without revision.

    3) Completely change the federal income tax system to a combined flat percent tax and a sales tax system. That way everyone pays a percentage of their income with out loopholes or exceptions, and they also pay a sales tax on their purchases with the exception of food, medical costs, and education costs. Think of the savings to the taxpayers with the drastic reduction in the IRS.

    4) Eliminate the automatic 8% increase in the federal budgeting process. While this would not have an immediate impact on the current 15+ trillion deficit number, it would certainly get rid of the % of the annual deficit increase it drives.

    5) Create a shared-services and civilian process for the justification and approval of weapons systems. Costs, funding and jobs creation must be part of the approval process, not just the services want another neat weapon approach. Must include a pay-to-play concept and significant penalties to the contactors for cost overruns and/or late delivery.

    6) Create a transportation department and civilian process to define the upgrade and maintenance of the federal highway system, bridges, dams, and railways. This process must tie funding and job creation together and include a tolling concept (not like the Illinois nepotism and family employment) which would allow using a funding process like the current zero-coupon municipal bond process with payback being included in the tolling strategy. Build on the pay-to-play concept and include significant penalties to the contractors for cost overruns or late delivery.

    7) Change the mandate that forces healthcare professionals and organizations to provide services to everyone whether they have insurance or not. That approach needs to be in the pay to play category. If you do not have insurance, cash, credit card, or signature on a promise to pay agreement is needed at time of service. It you chose to not have insurance because you want to use your money elsewhere, you are still responsible for your healthcare costs. That is not saying that all medicaid goes away, but it says that you have to have healthcare coverage of some sort, or guarantee payment at time of service.

    8) Real efforts to fix medicare start with vigorous enforcement of the rules and pursuit and elimination of fraud as well as the elimination of some types of payments. Changing from a pay first, validate later approach to a “validate first” and pay when validated (like insurance companies do) is more logical and effective. I am against the need for Medicare to pay for someone to have their toenails cut. That is not a medical procedure, and can be done at a nail salon for a very reasonable cost. Things like that drive me nuts. We should not expect that it should cover many things that are not medical situations.

    9) Ethanol needs to come off that list that subsidizes it. Its manufacturing cost per gallon in terms of dollars and other natural resource consumption should make that decision a no-brainer, but it doesn’t. Fracking scares me because of the impact it can have on under ground structures and the resulting geological disruption is only beginning to show up. Pipelines that move products through our country but may not impact the cost of those products in our country and may have an environmental impact need to be well researched and proven to be highly safe, as well as generate some revenue before slam-dunked approved.

    10) Farm subsidies also need reform. I know farmers from my Arizona days that planted one year of crops out in the desert, and then have received 10, 15, and 20 years of farm subsidies to not grow those crops again. Something is not right there. And then there is the opposite extreme of paying farmers to grow crops even in times of high prices at the market for those crops. The high prices should be enough to incent farmers.

    11) Finally, I am against this continuation of the 2% reduction in the social security taxes. First of all, it impacts an already “in trouble” system, and it is one of those things that retired people get no benefit from.

    How is that for a start?

  9. Rockford Citizen

    @JRM

    1) What about all the money that public employees have already invested in the retirement accounts? Otherwise, I like the idea.
    2) where do you propose to cut 10%? Any specifics?
    3) Flat tax, huh? what % would it be and why? Does the flat tax include taxing income on capital gains? Does the flat tax include taxing retirement income?
    4)automatic 8% increase… interesting
    5)Isn’t that called Congress?
    6) What do you mean by “pay-to-play”? What do you mean “Dept. of Transportation & Civilian process”? I mean, you already have input into the DoT process. All you have to do is show up…
    7)So… only the wealthy get healthcare? Cause… well, I don’t know how much I like watching people die in the streets.
    8) Why not eliminate the pay-for-service idea entirely?
    9) so… how do you propose to meet the massive energy demands of Americans?
    10) Sounds good to me…
    11) okay…
    For a start, it’s okay. But it still doesn’t answer the fundamental question of “How little government is just enough government”? I’m looking for a guiding concept here.

  10. JRM_CommonSense

    @Rockford Citizen…

    1) What about all the money that public employees have already invested in the retirement accounts? Otherwise, I like the idea. (Answer: As was implied in my original post, the fund balances (federal and state) for each public employee would be used to “buy” the appropriate number social security quarters for them with the remainder used to acquire the annuities to make sure they get what they have earned.)

    2) where do you propose to cut 10%? Any specifics? (Answer: The areas to be cut and the percentages of those cuts are clearly defined in the charter that created and the Supercommittee as the penalties for not completing the charter. Please reference that rather than making me restate them here.)

    3) Flat tax, huh? what % would it be and why? Does the flat tax include taxing income on capital gains? Does the flat tax include taxing retirement income? (Answer: All of the questions you posed are a part of the deliberation and design process that must take place for the replacement of the current tax system. If you want me to do all that work now, you will have to find someone to pay my consulting fee.)

    4) automatic 8% increase… interesting (Comment: I hope you realize that the 8% automatic budget increase I am talking about is present today and I am suggesting that it be discontinued.)

    5) Isn’t that called Congress? (Answer: It is the duty of the federal government to do this, but we know that what we have gotten from them in the past doesn’t do the job. E.g., $400 hammers and toilet seats; multiple engine programs for fighter planes; earmarks for bicycle paths; an aircraft carrier and submarine a year even while the types of wars and the venues being fought require different approaches, and on, and on, and on.)

    6) What do you mean by “pay-to-play”? What do you mean “Dept. of Transportation & Civilian process”? I mean, you already have input into the DoT process. All you have to do is show up… (Answer: My version of “pay-to-play” refers to making users pay for these items; e.g tolls, and user fees. That way, they can be financed via municipal bonds that are not paid back with taxpayer dollars, but with the fees. By “civilian processes”, I mean actual participatory and voting structure. It is too easy for politician to just shake their heads and do what they want.

    7) So… only the wealthy get healthcare? Cause… well, I don’t know how much I like watching people die in the streets. (Answer: Not what I said or what I meant, or what would happen if the Patient Protection and Affordable Care Plan “mandate” is in place. Without it, you will have exactly what you have today – a system that does not work and is to expensive.)

    8) Why not eliminate the pay-for-service idea entirely? (Answer: I think there has to be some portion of payment for service that the patient assumes. Other wise there is no incentive to manage their healthcare and question their doctors about what is happening and why. Without shared responsibility, these programs are not sustainable.)

    9) so… how do you propose to meet the massive energy demands of Americans? (Answer: There are many ways to improve the availability of current fossil fuels, reduce their harm on the environment, use alternate forms of energy, and improve the efficiency of things that run on all sources of energy.)

    For a start, it’s okay. But it still doesn’t answer the fundamental question of “How little government is just enough government”? I’m looking for a guiding concept here. (Answer: you and loads of other people. Until we return to a bipartisan approach to operating within the federal government, we will never be able to have the candid discussions that will yield those answers.)

  11. Rockford Citizen

    @JRM
    1) In case you’re not really up to date… If everything each employee has paid into the system was then paid out… there wouldn’t be enough to cover it. See, the system is underfunded…
    3) What do you think about a consumption tax instead: http://www.nytimes.com/2012/04/11/business/economy/a-tax-code-of-politics-not-practicality.html?smid=tw-nytimes&seid=auto
    5) So you’re suggesting we add another layer of government? I don’t understand…
    8 ) is there any model in existence that you think could work here?
    10) That sounds like you’re dodging the essential question. Perhaps if I reframe it: What do you see as the essential roles of government? How should those roles be funded?

  12. JRM_CommonSense

    1. Obviously, you do not understand what annuities do and why I suggest they have to be a part of the equation. You also seem to forget that all of the money that would be spent on managing the current pension systems would be used to raise the level of funding for those it affects.
    2. In my mind, a sales tax is a consumption tax; it taxes what people are spending without loopholes for avoidance.
    3. No I am not suggesting another layer of government. I am suggesting that we add required citizen input and voting power and a committment to making exisiting processes work by have all participants and users having a stake in the game.
    8. I think the PPACA is a good start but it needs changes that further improve service and reduce costs. This playing political football with as serious an issue as peoples health to try to prove who has the bigger balls is detrimental to achieving the need to improving healthcare in this country. And, healthcare is not the only important issue that this is happening to.
    10. I am not dodging the issue. The arguments about how big the federal government should be has been going on since the day the Constitution was signed and will continue for a long time to come. Trying to force political ideology down the “oppositions” throat will never help us reach an answer. There are some basic roles of the federal governement outlined in the Constitution. However, since we find some of those in the amendments, it is obvious that they were not all know initially and there may nver be a complete answer. Talking and discussing rather than dictating are the only ways to get there.

  13. Ted- I have a question.

    I was under the same understanding that the teachers are not paying anything towards the 9.4% retirement fund. However, when I was voicing my opinion to an area teacher friend of mine, she told me I was dead wrong as there is huge misconception on the taxpayer’s part–and this is why, she says:

    “It is funded by us [the teachers]. On our salary schedule it says we make 9.4% more than what our W2 says at the end of the year.”

    Have I misspoken?

  14. 1. I’d also eliminate public sector unions, since no less of a Democrat than FDR thought they were a bad idea, causing an incestuous relationship between the unions and the politicians.
    2. There are items that need to be cut more than 10%, but at least it is a start.
    3. You might want to put caps on both the income and sales taxes, or some future Congress will jack up BOTH rates. A super-majority of both houses should be required to change the caps.
    4. It would also eliminate the Democrats’ ability to lie about Republicans making “drastic cuts”, when, in reality, they were reductions in the increases.
    5. That IS the job of Congress, to appropriate funds. Wouldn’t that require Constitutional changes to implement?
    6. See #5.
    7. Other than emergency services, I’d agree. Healthcare isn’t a right, and neither is food, or shelter. BTW, are you also including undocumented Democrats (illegal aliens) in this?
    ;-). Nail care isn’t that simple for those who are handicapped, or bedridden. It also allows for detailed foot examinations, which is important for older patients, and those who are diabetic. Amputations aren’t cheap, compared to pedicures.
    9. Ethanol should be made from switch-grass, rather from corn. The subsidies should be removed. Fracking is normally done at depths well below any aquifers. The Keystone pipeline has been studied for over three years. How much is enough?
    10. Subsidies need to be reviewed. Also, the Feds shouldn’t cut off irrigation to thousands of farmers, just to possibly help a fish.
    11. I agree.
    One other thought. Why are we giving foreign aid, as cash, to other countries? We should limit aid to U.S.-made foodstuffs, medicines, machinery, and supplies. That would make it more difficult for the kleptocrats to line their pockets, while creating more American jobs.

  15. JRM-commonsense and Rockford citizen: Most state employees DO pay into social security and cannot live completely off of their meager pensions. They have worked for 35+ years, paying into the system, working with a public who makes it known they hate them (until they need them, of course). Conservative groups are constantly bringing up the extremes in the pension system, mostly retired school administrators who have a much better pension formula and who never actually paid into the system. I truly hope and wish people would get their facts straight.

  16. Rockford Citizen

    okay, the whole 9.4% retirement thing…. Let’s consider what we’re talking about here. The District pays out $X,XXX for each employee, correct? Okay, Now, out of that $X,XXX, 9.4% of it goes directly to the TRS system instead of to the employee. If the district didn’t pay that 9.4% to TRS, they would pay it, in gross salary to the employee who would then be legally obligated to pay 9.4% of the same salary to the TRS system.

    That is the fact of the matter. Just to be clear.

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