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Report: Pension Funding Hit to Poorer Schools

School Funding | 10/07/2015

Scott McDonald
Regional Digital Strategist

Scott manages digital communications strategy and implementation for Stand Illinois and Oregon.

Today, Stand for Children Illinois released a new report that details how one element of the state pension crisis – the “TRS surcharge” – is hitting poorer schools the hardest. The “TRS Surcharge” is the special rate the State charges school districts outside of Chicago for using federal funds to pay teachers. School districts receive federal funding to support underserved students. But when a district spends that money to hire teachers, the State takes 36% of those funds to pay off the pension debt of the Teachers Retirement System (TRS).

The report, “An Education Funding No-Brainer,” describes how the problem was created, its impact on schools throughout Illinois, and suggestions for how to address it.

When school districts in Illinois pay teachers using state or local funds, they pay just 0.58% of salaries to TRS. But when school districts pay teachers with federal funds, they pay a whopping 36% of salaries to TRS. Federal funds are targeted at serving poor and special needs students. As a result, this high TRS payment for federally-funded positions hits poor school districts the hardest. School districts either take the financial hit or try to avoid the 36% TRS surcharge by making spending decisions that require complicated accounting and are not always in the best interests of students.

“Poor schools should not be the piggy bank that the state breaks open to pay off its massive pension debt. Districts should be making their spending decisions in the best interests of students, not sacrificing a third of their federal funds that are intended to help our most underserved children. In a state already notorious for school funding disparities, our neediest schools can’t afford this additional hit,” said Mimi Rodman, Executive Director of Stand for Children Illinois.

The full report can be viewed at https://stand.org/sites/default/files/Illinois/StandForChildrenIL_EducationFundingNoBrainer.pdf.

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