Snowflake Schools: “Fixing” Pensions

In our last article (see “Pension Tension”), we outlined some of the issues that created the multi-billion dollar unfunded liability in the Teacher Retirement System which led to recent legislation to alter the way teachers’ pensions work.  From the state’s skipping retirement fund payments to teachers’ being granted 20% increases at the ends of their careers to boost pension income, we saw that everyone has had a hand in creating this crisis which is now in the courts.  But given the drawn-out nature of litigation, to say nothing of the animosity and unintended consequences a ruling on this important issue could have, it would really serve everyone’s interests if all parties could somehow work this out to reach a mutually agreed upon compromise.

First off, teachers and their unions will have to accept the reality that actions of the past cannot be undone.  We (and in case you didn’t know, I am a retiree who taught English for thirty-three years, twenty-five of them at Hinsdale South High School) have to get over the fact that the state didn’t make all its payments to the retirement fund for many years, which is the main reason for the underfunding—despite other contributory pension improvements over the years which we and our unions lobbied hard to get.  Yes, if all payments had been made, we wouldn’t be in this situation, but it’s pointless to keep going over that.  Unless we can find a specially designed DeLorean with a ready supply of plutonium, we can’t go back in time to right this wrong.  No, it’s not fair that current and retired teachers have to make some sacrifices because our legislators screwed up, but blasting those departed legislators and governors (several of whom have done time in other state “learning” institutions) won’t solve the problem.  We shouldn’t be in this situation, but we are, so we have to figure out the best way to solve it.  Throwing tantrums and lawsuits because we can’t entirely get our way won’t get the job done. 

Another thing teachers have to accept is that the language in the Illinois Constitution can’t protect us from necessary changes forever, so we’d better participate in making those changes as palatable as possible.  The Constitution’s Article VIII, Section 5, states that “the benefits of (pensions) shall not be diminished or impaired.”  This has led to all kinds of machinations and word games as the unfunded liability has risen, with everybody trying to explain how any changes wouldn’t “diminish or impair” current benefits.  However, almost all solutions to this problem must involve some diminishment or impairing of the way things work now.  While I stand to profit from this blanket protection, I don’t see how we retired teachers have the moral high ground to demand this article be sacrosanct. 

The pension system has been manipulated vigorously over the years to make things better for teachers—end-of-year bumps, increased unused sick days to be applied to service credit, and early retirement options, to name three—so does that mean we need constitutional language stating that not only can’t pensions be “diminished or impaired,” but they also cannot be “augmented or enhanced”?  We teachers would fight any language like that vociferously, but we have no problem accepting the current untenable clause.  Nothing can remain static in our world; so while we need to protect rightfully earned benefits, we can’t continue to work to improve those pensions (as we have) while maintaining those improvements are now permanent, forever, and nothing can change them; unless, of course, we can come up with another way to make them better, which will then become the new absolute minimum until we find another gambit to squeeze out more benefits that will then  become the new base, until…Illinois declares bankruptcy or voters institute a constitutional amendment banning pensions completely.

But—and this is a huge, pock-marked, baby-got-back BUTT—once we have figured out a compromise and determined a reasonable pension for teachers at a price the state can pay for the foreseeable future, Illinois HAS to make its payments to the fund as scheduled.  It can’t postpone them or gladly repay them next Tuesday or skip a couple billion here and there:  It must fund the Teacher Retirement System at the level it has pledged, year in and year out.  If there is a worthwhile concept to attach to the Illinois Constitution, that should be teachers’ goal, not the “We’ll only allow change that is for the better which then becomes permanent, but the state can play fast and loose with its funding” approach we have now.

So how do we reach this utopian balance between keeping our promises to teachers while being responsible to taxpayers?  Unfortunately, I don’t know.  Getting to that Solomonic compromise requires much greater accounting and math skills than I possess.  (In my last post, for example, I tried to calculate how much larger my pension was because of the four years of automatic 6% raises I received.  My 13% figure was only more than double what it actually was—6.2%.  But then again, many have suggested over the years that I have an inflated sense of my own worth.)  All I can offer are a few basic precepts upon which those with better calculators than me might begin their work, but I don’t have the resources or arithmetic talents to show how these concepts would work with real numbers.

Precept #1:  We need to differentiate between teachers who have done extremely well under collective bargaining agreements, from those working in much less wealthy districts. The retirement package that was in place for teachers before the most recent legislation was excellent if you worked in a high-paying suburban district. To retire after thirty-three years of teaching at age 55 with 75% of the average of your four highest consecutive years is a superior deal when you were employed in a wealthy suburban high school district like Hinsdale District #86 (or Niles or New Trier or Highland Park).  But in poorer districts, that package is barely reasonable compensation for teachers who have been underpaid their entire working lives.  The current average teacher pension in Illinois is $45,000, which is not an outlandish payout for people who worked decades in one of the more important professions for our country’s future.  But a fifty-five-year-old’s retiring with a pension over $100,000 per year with 3% cost-of-living increases every year (my situation at retirement) seems exceedingly generous to everybody but those of us getting that arrangement.  Somehow we need to target the bigger pensions without hurting those in the lower realms. 

Precept #2:  Cost of living figures should be based on inflation, not flat amounts.  For some time now, teacher pensions have risen an automatic 3% per year as a “cost of living” increase.  However, that rate has outstripped inflation for 16 of the last 20 years.  (1997, 2001, 2006, and 2008 are the exceptions since 1994—see www.multpl.com/inflation/table for year-by-year rates.)  I don’t know how much would have been saved had pensions mirrored the lower inflation rates, but it doesn’t make sense to increase pensions by a greater amount than inflation.  Like Precept #1, we should also differentiate between those for whom that 3% increase really impacts how people live (those whose pensions are $50,000 or less, for example) and those who were fortunate enough to work in districts where teacher compensation led to much higher pension bases and don’t need an extra 3% every year.

Precept #3:  With some exceptions, we don’t want senior citizens in the classroom.  Times change too rapidly for those over 60 to keep up (generally), and interacting with young people to get them to do things they don’t really want to do creates more stress than many jobs.  While I wouldn’t put teaching in the same category as air-traffic controllers (who currently retire at 50), it is a job that requires youthfulness and stamina similar to other public service jobs like police and firefighters.  Think about the seventy-year olds you know.  Are most of them capable of running a kindergarten classroom or conducting a chemistry lab?  Obviously, some are, and we shouldn’t force people out of the classroom before they’re ready.  But putting pressure on teachers to keep teaching until they are 67 isn’t in the best interests of our kids.  It might be a leap of faith for those of you outside education to accept this precept, but you have to trust me that any pension deal should funnel most teachers into retirement by the time they are sixty.

Precept #4:  We shouldn’t grant full pensions to people still working.  Currently, some teachers retire at full benefits and then immediately find part-time work that allows them to earn more than they would have had they kept teaching full time.  This is a great deal for teachers and administrators, but not for taxpayers.  For example, at Hinsdale Central High School, for the 2009-10 and 2013-14 school years, two retired administrators have acted as joint principals.  This year, their full pensions are $129,406 and $143,868, plus they are each getting $80,000 ($800 a day for 100 days) to act as temporary principals at Hinsdale Central.  (You also have to remember the salary increases they got right before they retired.  One was an assistant superintendent in Naperville who saw his salary go from $145,764 in 2005 to $226,209 when he retired in 2007.  With his pension and part-time work, he will make $223,868 this school year.  The other had his salary as a St. Charles high school principal go from $140,527 in 2004 to $173,914 at retirement in 2005.  This year, he will pull down $209,406 in pension along with 100 days of work.  All past salary and current pension numbers can be found at http://www.familytaxpayers.org/salary.php and http://www.webploration.com/Pensions/.)  Most would consider $80,000 a pretty good wage for a full-time job, so scaling back their pensions while they are still working in public schools would seem reasonable.  You probably wouldn’t do it on a dollar-for-dollar ratio since nobody would work for the same amount they could receive for NOT working, but to collect a full pension with a sizable part-time income should not be as common as it is. (Remember, this pair replicated this scenario in 2009-10, not to mention other part-time retired administrators District #86 has hired recently when most of its previous administrators left the district abruptly.)  My suggestion would be to decrease retired educators’ pensions 50₵ for each $1.00 earned in another job.  Retired teachers could still profit from other work, if they so desired, but they wouldn’t be able to collect full benefits until they retired.

Precept #5:  I believe the Early Retirement Option (ERO) which has been in place for many years and allows teachers to retire at the age of 55 should continue, but we need a way to encourage veteran teachers to stay an extra five years until they are 60, rather than forcing them to keep teaching.  Since this somewhat contradicts Precept #3, I’ll have a more detailed explanation of this idea next time.

There are other ways to fix teacher pensions if we’re serious about resolving this problem once and for all:  A graduated state income tax, teachers contributing more to their retirement funds, local districts assuming a greater share of pension costs, and getting all teachers in the same group (by eliminating the current Tier II for teachers hired after January 1, 2011) would be four other possibilities.  Any solution, however, will require traits in rare supply these days, like compromise, sacrifice, and reason.  Clearly it is more likely that the courts will have the final say at this point, but that shouldn’t stop us from trying to ensure that discourse and logic will rule the day.