Our State legislators left Springfield this spring without having enacted meaningful pension reform. Instead, some legislators want to shift teacher pension costs to local districts, claiming it amounts to reform because it makes districts “accountable.”
Evanston Districts 65 and 202 support the broad concept of pension reform but not a pension shift, which would harm students directly and do nothing to resolve the Illinois pension crisis. Pension liability in excess of $85 billion will continue to erode the financial credibility of our State with or without the shift.
Our Illinois Constitution guarantees a “free” and “high quality” public education, and the “State has the primary responsibility for financing the system of public education.” Our Districts receive less than 2 percent of their budgets from General State Aid (GSA), and total State aid comprises less than 5 percent of the Districts’ total budgets.
For nearly three years State monies due our Districts have been late, including monies owed for our most needy students. Moreover, the new budget further reduces GSA.
In Evanston, we have been fortunate to be able to rely upon property tax revenues to fund an overwhelming majority of the cost for educating our students, but we cannot ask more of residents who already shoulder a significant property tax burden. If the State shifts pension costs to districts, we will contribute more dollars to pension costs than we receive from the State in annual GSA.
In contrast, Chicago Public Schools (CPS) take a significantly higher proportion of State money per pupil – a full 25 percent of its budget – paid for by all Illinois taxpayers, including citizens of Evanston.
This five-fold disparity between what the State pays to educate Evanston students and CPS students more than makes up for the fact that as an historical matter, CPS has borne the cost of its teachers’ pensions.
In fact, both District 65 and 202 have been submitting required pension payments that the State has used for purposes other than funding pensions. In a perfect world, school funding would be as equitable as our Constitution originally envisaged, but short of that, the pension shift would not move us any closer to that reality.
Because personnel costs represent approximately three quarters of our Districts’ budgets, necessary cuts from the proposed shift would come from staff reductions, primarily teachers, directly impacting the classroom experience of our students.
Our teachers have already made sacrifices. With a pension shift, teachers could ultimately bear increased costs in the form of reduced pay or workforce reduction. Both Districts have made significant budgetary changes to address the ongoing fiscal constraints of this economy; we have reduced positions, have fewer administrators, and in District 202 there are more students per class than five years ago.
Reserves cannot be used to fund the cost of pensions going forward, as proponents of the shift have argued. Reserves are not a recurring source of revenue and would not be adequate to cover the cost of a shift, especially over time. State law requires adequate reserves, and in years past, those reserves have been used to pay bills and meet payroll when property tax collections in Cook County are late, and to cover the State’s delinquencies on money it owes so that District budgets remain in balance. With aging buildings, reserves are also needed for unplanned emergency repairs in both Districts.
Despite economic pressures, ETHS has a AAA bond rating from Moody’s for the fourth year in a row, and District 65 recently had its rating increased to AA1.
In sharp contrast, the State faces the threat of another downgrade from its bond rating. Moody’s credited District 202 with its good fiscal sense even in the face of a difficult state situation by saying the District has “stable financial operations evidenced by satisfactory reserves and prudent management policies.”
Moody’s recognized District 65 for a “continued trend of conservatively budgeting state and local aid revenues.” The State’s financial rating system for school districts requires significant levels of cash on hand (at least 25 percent of expenditures) to receive a good rating.
The proposed pension shift would severely jeopardize the Districts’ bond ratings, causing higher borrowing costs and even greater budget strain. Moody’s specifically notes that reduced reserves could result in a lowered bond rating.
Tax caps prevent our Districts from covering the unexpected cost of a pension shift by simply asking more of our taxpayers. Even with a phased-in approach, the pension shift amounts to nothing more than a tax increase directly attributable to State legislators and failings of our State government, not our Districts, and certainly not our students. Even more troubling, the proposed shift does not move the State closer to resolving the pension crisis.
The State is in no position to demand that Evanston taxpayers pay again for the State’s fiscal irresponsibility by shifting a liability directly to them in a way that harms students without tackling the broader problem of pension reform.
Our Districts have demonstrated fiscal accountability by taking appropriate, and often difficult, steps to manage their budgets in the face of the State’s ongoing shortcomings, including deliberately underfunding pensions. The State has not addressed its prior mismanagement and until it does so, it is in no position to tell well-managed districts like ours how to be “accountable.” The State should begin with meaningful pension reform before shifting its liabilities and sidestepping the tough issues we elected our legislators to confront.
— Katie Bailey is president of
the District 65 School Board, and
Mark Metz is president of
the District 202 School Board