Game Of (Pension) Pick-Up In Public Schools

Many Chicago-area school systems cover pension contributions for teachers and administrators – a little known and, for taxpayers, potentially costly benefit.

State law says most public school employees in Illinois "shall make contributions" toward their future pensions – with 9.4 percent of their salaries deducted for retirement, which otherwise is substantially funded by taxpayers.

But the law has a loophole, allowing public school districts to "pick up the member contributions" if they desire.

A months-long Better Government Association review found many Chicago-area school systems are doing just that – paying the employee pension share as an additional form of compensation for top administrators and, in some cases, teachers.

The benefit can be especially lucrative for school superintendents, whose average base salary – pay minus perks – was $193,000 last year in Cook County.
Of 10 suburban public school districts surveyed by the BGA, all paid the employee pension share for superintendents, amounting to, on average, an extra $22,600 in compensation during the 2013-2014 school year.

What’s more, the BGA found this benefit was not clearly spelled out in superintendent employment contracts, which noted salaries but not dollar figures associated with pension contributions – raising transparency questions.

The BGA determined the dollar values by conducting interviews and reviewing additional school records obtained under the Illinois Freedom of Information Act. The BGA also enlisted the help of its School Databases, which include administrator and union contracts at school districts throughout the Chicago region.

The districts reviewed are: Bloom Township High School District 206, Berkeley School District 87, Evanston Township High School District 202, Leyden High School District 212, Lincolnwood School District 74, Maine Township High School District 207, Niles Township High School District 219, Oak Park and River Forest High School District 200, Schiller Park School District 81 and Thornton Fractional High School District 215.

Pension "pick-ups," as they’re often called, have been banned in Wisconsin as part of Gov. Scott Walker’s controversial 2011 bill that limited public-sector collective bargaining.

Illinois’ new governor, Bruce Rauner, has signaled his intent to restrict collective bargaining in Illinois, but his spokeswoman declined to comment about whether Rauner planned to zero in specifically on pension pick-ups.

Illinois lawmakers have discussed the topic but decided against addressing it in their pension reform efforts, said state Rep. Elaine Nekritz (D-Northbrook.)
"We had a lot of discussion on it and pretty much everybody concerned came to the conclusion that this was not a flaw in the system that we needed to correct," Nekritz said.

Nekritz hued to an argument advanced by several school districts: That covering the employee pension contributions doesn’t amount to more compensation, just a different form of compensation.

But that assertion is difficult to assess, in part because of the unique characteristics of each district, the sheer number of districts in Illinois, and the fact the public isn’t present at the bargaining table with administrators or teachers.

In Wisconsin, eliminating employee pension contributions by school districts reduced expenditures, although the move essentially led to a pay cut for government workers.

There, pension benefits were cut and salary raises were limited to the rate of inflation for nearly all public-sector employees, leading to an estimated savings of nearly $800 million for state government and about $1.5 billion for local government (including school districts) from 2011 to 2014, according to Walker’s office.

Four of the 10 Chicago-area school systems surveyed by the BGA – Districts 74, 81, 87 and 202 – covered the entire 9.4 percent pension share for their teachers, according to records and interviews. District 212 covered nearly all of that, 9 percent. The other five districts covered none of the employee share. (The pension fund covering suburban and Downstate teachers is called the Teachers’ Retirement System of Illinois.)

School officials said the arrangement for teachers was negotiated during collective bargaining in lieu of salary increases.

"When we bargain with our teachers, there’s a sum of money. If you want more in this bucket and less in this bucket, this is the dollar amount that we are going to spend," said Mary Kalou, assistant superintendent of business at District 207, which includes Des Plaines and Park Ridge. "It’s the same dollar amount. It’s just breaking them up in a different way."

Bob Shaevel of the Illinois Federation of Teachers, a union for educators, said: "Teachers have always paid their share. Even if through the structure it may not appear that way, they have. No district has ever just thrown that in and kept the salary the same."

In Chicago Public Schools, the district pays for 7 percent of the teachers’ share to the Chicago Teachers’ Pension Fund while teachers pay 2 percent – a benefit that has been in the union contract since the 1980s, according to CPS.

CPS CEO Barbara Byrd-Bennett has a similarly structured deal except with a different fund. The district picked up about $7,200 in contributions on her behalf last year, according to CPS. Her base salary was $250,000 but her pensionable income had been capped at about $110,600 because she falls under a newer category of employees with the Municipal Employees’ Annuity and Benefit Fund of Chicago.

At the 10 suburban districts the BGA surveyed, the total pay for teachers was relatively competitive, whether they included pension contributions or not.

But aside from the finances, critics say school district pension payouts raise transparency concerns as it’s not always clear in contracts or other records whether salary figures include pension contributions or not.

Michael Podgursky, a professor of economics at the University of Missouri who researches education issues, agreed, saying that any time compensation is sliced up, it can confuse the public and inhibit meaningful discussions about school spending.

"What is the total cost to hire a teacher for a year? That’s the number that should be out there, instead of this game of putting this amount in the collective bargaining agreement, then this part here and this part in the Legislature. It’s ridiculous," Podgursky said. "You can say is that too high or too low? Is this really the best way to recruit the best teachers, stacking the benefits this way? We can have that conversation but you have got to have the right numbers in front of you."


This story was written and reported by the Better Government Association’s Katie Drews, who can be reached at (312) 821-9027 or kdrews@bettergov.org.