Equitable Pension Funding
Public pensions have been a hot topic in Illinois for over a decade as the state’s pension debt has exploded; the five state retirement systems are just 38% funded overall. Yet attempts at pension reform have failed primarily because of the Illinois constitutional requirement that pension benefits “not be diminished or impaired.”
Stand for Children sees a pathway to begin addressing pension reform that would not require a constitutional amendment and would address the other major structural inequity in Illinois education funding: the way the state handles employer costs for teacher pensions.
Whether a district is better off with greater local property wealth and higher teacher salaries – or less well-off and trying to stay afloat – the state pays the overwhelming majority of their teachers’ pension costs. This creates a startling equity gap: districts funded over 100% of adequacy receive $328 per pupil more than districts funded below 80% of adequacy.
When Springfield embarked on the journey that culminated in the 2017 passage of a new school formula, its primary objective was to make sure that new state funding equitably reached the neediest school districts first. To that end, several different grant programs working at cross-purposes with one another were combined into one funding stream: evidence-based funding (EBF). One grant program -- normal costs for teacher pensions -- didn’t make that list despite being one of the most inequitable ways Illinois supports its schools.
Stand proposes a solution to dismantling the inequity of education pension funding called an “equity boost.” This proposal builds upon EBF and has the flexibility to accommodate different perspectives of other advocates. The equity boost provides predictability and stability for school districts that have been fearing a sudden pension cost shift.
It protects teacher pensions and directs more State dollars to the neediest districts. Illinois will reach the point sooner where all school districts are fully funded. And as pension normal costs go down, the amounts added to the hold harmless funding for pensions will stretch further.
Learn more about the equity boost in Stand’s report, “Accelerating Equity: Integrating Teacher Pension Funding into Fair School Funding.”