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Confused About Teacher Pension Funding?

Current Events & News, Legislation, School Funding, Teachers & Principals, TRS Surcharge | 12/09/2016

Jessica Handy
Government Affairs Director

Jessica works with parents, legislators, and other stakeholders to push for policy that puts children first.

There are about 860 school districts in Illinois and just one of them is responsible for paying the employer costs of their teachers’ pensions: Chicago Public Schools. The State covers the cost for the rest. Neither the State nor CPS has been a model financial steward for this responsibility—both the State and CPS now have to pay every year to cover the current costs (which we call “normal cost”) and debt from past years of skipping payments.

The “normal cost” for Chicago teachers’ pensions is $215 million this year. This has become especially relevant at this moment because the General Assembly passed (on a bipartisan vote) an appropriation bill to cover that full amount this year, which the Governor agreed to sign only if there was significant pension reform enacted first. Keep in mind the $215 million doesn’t even touch the pension debt that has also amassed; CPS will need to kick in a total of $721 million. The Governor vetoed that bill last week and the Senate overrode the veto. The House has 15 days from then to also override the veto if it is to become law, but assembling the super-majority vote needed to override would be exceedingly difficult and the House is not scheduled to be back in session until January 9.

But let’s compare: this year, the State of Illinois will spend about $4 billion for teacher pensions outside of Chicago. By far, most of that is debt. It’s about $250 million more than the State of Illinois paid for teacher pensions last year. It is subject to a “continuing appropriation,” which means that it gets paid no matter what. No budget? That $4 billion contribution to TRS still gets paid. Here’s how state payments to teacher pension systems have gone over the years:

That FY17 $215 million is about 5% of the amount the state will contribute this year to teacher pensions outside of Chicago. It is also the bill that has been termed a “Chicago bailout.” But when you consider the normal cost payment in context, it seems pretty clear that this is just one step closer to pension funding parity.

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