$1 Million Payout to Two Teachers Proves Schools Should Pay for Pensions, Not the State

Why does Quinn want to raise taxes to make teachers millionaires?

If we needed any more evidence that the Illinois public school system is of the teachers, by the teachers and for the teachers these financial transactions should provide the final proof.

The school district in question is Stevenson District 125 in Lincolnshire. In 2010 they provided ERO (Early Retirement Option) and “Excess Salary Cost” payments to the state to allow two teachers to retire early.

What are ERO and “Excess Salary Cost”?

ERO was passed by the legislature in 1979 and since then has been enhanced several times. Basically ERO allows teachers who are too young or have too few years work to qualify for undiscounted pensions. The local school district pays the ERO out of local property taxes and sends it to the state in the year the teacher retires. These payments can exceed $300,000 as in the case of Dist. 125’s Robert Lyons, a History teacher.

Keep in mind teachers can already retire on full pension at age 54 so ERO is earlier than early.

“Excess Salary Cost” is a charge to the local schools by the TRS for handing out huge pay raises (anything in excess of 6%) in the last 4 years of a teacher’s employment. There is no reason to hand out huge salary increases except to raise the level of the pension earned by the teacher. In the case of William Mitz, Physical Education teacher, this “Excess Salary Cost” paid for by the local property taxpayers added up to more than $102,000 for the $68,000 or 55% worth of salary increases he earned in the last 3 years of his employment.

Mitz Salaries 2007-2010:

How does that 55% increase compare to your salary increase since 2007?

How much does this add up to for two teachers?

So when you add the extra retirement payments to the outrageous 9-month salaries from the generous taxpayers of District 125 you get the following:

So that’s $944,000. But as they say on the TV ads “That’s not all folks!” They also receive family health insurance worth $19,000 each and as we know 30% of the salary ($102,000) is paid into the state pension system for each teacher. Add in 15 sick days and 3 personal days per year and you have well over $1 million in total compensation for two teachers.

It’s not just District 125. Here are some more examples:

Let’s cut the income tax rate in half and move the pensions to the local school districts.

As we mentioned before it is obvious these districts can pay their own pension cost. After all those allowing these outrageous salaries should pay the pensions incurred by those salaries. Why should people who don’t live in the district and who do not have a say in the salary schedule have to pay the six-figure pensions that result from these excessive salaries?

Cutting the income tax to 1.5% from 3% would save the taxpayers about $4.2 billion just about the exact amount of the pension payment for 2011. The schools would then be liable for the salaries and the pensions and rightfully so. Maybe if they have to pay the pensions they will pay more attention to the salaries and early retirement payments they grant to their employees.

In addition cancel the 3% pension COLA and initiate the state income tax on pensions over $20,000 (currently pensions are not taxed). This would raise about $250 million, which could be used as tax credits for low-income homeowners.

What the next governor should do.

The next governor needs to begin the process of placing pension cost on those who control the salaries. It makes no sense to have those who pay the pension cost i.e. the state, have no control over the salaries that determine those pension costs. As we have seen before you cannot control pensions unless you control salaries.

Although K-12 is the most obvious example, state departments, especially universities, should also be charged with expensing pension costs. Their annual budgets would include pension costs and if they exceed it cuts would have to be made. They cannot raise salaries willy-nilly and expect others to fund the pension costs. The salaries and the pensions must be the responsibility of the same party.

Teachers who make $191,000/yr and retire with a pension of $113,000 after working 31 nine-month years, needs to become a thing of the past. While Illinois taxpayers struggle to make ends meet teachers’ work in a privileged environment of high-paying guaranteed jobs, 3 months a year off, short work-days, and early retirement on top of early retirement, all at an extremely high cost to the hardworking taxpayers of Illinois. Schoolteachers and all public employees need to live and work in the same employment environment as the taxpayer does. No guarantees, no short work years, no short workdays and retirement at 65 just like the rest of us. The days of special deals for teachers must end.

Bill Zettler is a free-lance writer and consultant specializing in public sector compensation. He can be contacted at this email address.