TRS Surcharge Continues Taking Federal Funds from Districts to Cover Pension Debt
Today, Stand for Children Illinois released an update to its 2015 report that details how Illinois siphons federal funds earmarked for needy students away from school districts to pay pension debt. The practice of tapping federal funds through this TRS federal funds surcharge to cover pension costs hurts the poorest schools the most.
After the October 2015 report was released, SB 436 (Stadelman/Gordon-Booth) passed the Illinois Senate with overwhelming support. The House never assigned the bill to a substantive committee, so it died earlier this month when the new General Assembly was seated. Sen. Stadelman has filed SB 195, which advocates hope to advance this year.
Meanwhile, the problem has gotten even worse. The TRS surcharge is the special rate school districts outside of Chicago must pay when using federal funds to pay teachers. Those federal funds are meant to support underserved students, but when a district spends those funds to hire certified teachers, the State takes 39% of those funds to pay off the pension debt of the Teachers Retirement System (TRS). Next fiscal year, that percentage will climb to an eye-popping 45%.
Illinois, which already has the most regressive school funding system of any state, is the only state in the country to have adopted this practice. Federal funds are a lifeline for needier students and schools that are under-resourced. But the state has instead chosen to treat them like a piggy bank to raid to cover its massive pension debt.
Federal funds are supposed to be targeted to serve poor and special needs students, but Illinois law rips off our neediest students. When school districts in Illinois hire teachers using state or local funds, they pay only 0.58% of salaries to TRS. But when districts pay teachers using federal funds, they pay over 65 times that amount to TRS. As a result of this policy, the high TRS payment for federally funded positions hits the state’s poorest school districts hardest. School districts face two terrible choices: relinquish to the pension fund 39 cents of every dollar (soon to be 45 cents) of every federal dollar they receive, or spend federal funds on materials, which may not make the most impact on student learning. This is a travesty.