Senate Week in Review: March 11-15

Springfield, Ill. – In response to suggestions that the state’s contribution toward teacher retirement benefits constitutes a “free lunch” for downstate and suburban schools, State Sen. Sue Rezin (R-Morris) said the Senate Republican Caucus recently did some “homework” of their own–undertaking a thorough review of data provided by the Illinois State Board of Education to learn more about the state’s distribution of education resources.  

Republican Senators found that though the Chicago Public School (CPS) system may bear a slightly higher financial burden for the cost of their teacher pension payments, those obligations are offset many times over by other components of school funding.

In other news this week, the Senate Executive Committee advanced two public employee pension reform measures, while a follow-up bill to the state’s 2011 “Smart Grid” electric grid modernization legislation was approved by the Illinois Senate.

Review of state education funding formulas reveal significant disparity
For months now, downstate and suburban legislators have heard that the state’s contribution toward teacher retirement benefits constitutes a “free lunch” for school districts outside of Chicago.

The rationale for this claim was that Chicago schools pay much more toward their pension system than do downstate school districts. It was a term coined by the House Speaker, and perpetuated to rationalize support for a plan that would reduce state pension costs by shifting the responsibility for pension payments onto cash-strapped local school districts.

In response to these claims, the Senate Republican Caucus recently undertook an in-depth look at the issue to see if the claims of a “free lunch” were legitimate. Their report found that the pension payments provided by the state to downstate school districts tell only a small part of the story. In fact, when reviewing overall school funding in Illinois, the inescapable conclusion is that CPS receives far more state support through special considerations and grant lines.

Read the Full Senate Republican Analysis

Senator Rezin stressed the Senate Republicans’ are not trying to ignite a regional war or to strip Chicago schools of their funding. Their initial intent was to put to rest a distracting and misleading argument that threatens to derail the already difficult challenge of finding a solution to the state’s massive underfunding of our teacher retirement system.

However, when looking at the facts the Caucus uncovered a number of disturbing trends that all Illinois taxpayers should be aware of. A thorough review of the data showed that even though Chicago Public Schools (CPS) account for roughly 18% of Illinois’ public schoolchildren, CPS receives $722 million more than it would under a fair distribution of state funding. In contrast, the downstate and suburban schools that educate 82 percent of Illinois’ students receive substantially less – a subsidy valued at about $104 million.

View Detailed Charts on Illinois School Funding

Senator Rezin emphasized that there has never been any public debate over this shift in priorities. It has occurred without public oversight, and without input or approval by policy makers. Instead, bureaucratic decision makers who do not answer to the legislature or the public have quietly made changes in how state funding is allocated.

The net result is a significant budget disparity that treats Illinois’ schoolchildren different simply based on where they happen to live.

The Senate Republican Caucus sought to provide a balanced picture of where funding equity stands today. The Caucus report can be found online: “School Funding in Illinois: An Examination.”

Pension reform measures advance to full Senate
This week two pension reform measures were advanced by the Senate Executive Committee, including Senate Bill 1 sponsored by Senate President John Cullerton.

Cullerton’s measure incorporates two choices for pension reform. The first option (Part “A”) is similar to Senate Bill 35 and a bipartisan measure co-sponsored in the Illinois House by House Republican Leader Tom Cross and Democrat Rep. Elaine Nekritz.

The second component of the bill is an alternative that would go into effect if the first option is declared unconstitutional.

Part “A” includes unilateral benefit cuts, including a freeze on cost of living adjustments (COLA) on retirees’ benefits and higher employee contributions. It also strengthens the state funding formula for the pension systems, but does not include a cost shift to pass pension responsibilities onto local school districts.  

Part “B” of Senate Bill 1 takes effect only if part “A’ is ruled unconstitutional.  This plan offers employees and retirees a choice between reduced COLAs and keeping retiree health insurance, or keeping a full COLA and losing health insurance. This component would also strengthen the state funding formula for the pension systems, but does not include a cost shift.

The other pension bill, Senate Bill 35 is identical to reform legislation that is moving through the House of Representatives that would create new “Tier 3” pension recipients, establishing a hybrid of a defined benefit and defined contribution plan for new teachers and college staff. Tier 3 does include a cost shift, and would apply to employees hired after January 1, 2014. Those now in “Tier 2” (hired after January 1, 2011) may switch to Tier 3 benefits.

The defined benefit plan will require contributions of 4% of salary from Tier 3 employees, and those employees will earn benefits each year based on 1.1% of final salary. The age of retirement would be increased to 67.  Tier 3 also includes a defined contribution plan that requires employees to contribute 5% of salary, with schools and colleges contributing at least 3% and as much as 10%.  

Senate Bill 35 also makes changes to “Tier 1” benefits for all Illinois retirement systems, except the judges’ retirement system. It reduces and would delay COLAs. Cost of living adjustments would be paid only on the first $25,000 of benefits for those without Social Security, or the first $20,000 for those with Social Security. Retirees would receive no COLA at all until age 67 or 5 years after retirement, whichever comes first. The retirement age would also be increased to 5 years longer than current law, and phased in over time. The proposal also phases in a 2% of salary increased contribution from all Tier 1 employees over 2 years, caps pensionable salary at the Social Security base (now $113,700), and strengthens the state’s funding formula.

Smart Grid follow-up legislation passed by Senate
The Illinois Senate advanced Senate Bill 9 on March 14, which would further clarify the state’s 2011 “Smart Grid” law, legislation that allowed for Commonwealth Edison (ComEd) to hike consumer rates by more than $2 billion over the next decade in order to digitize and repair the state’s aging electrical grid.

The utility company argued the modernization would save consumers more money in the long run through increased efficiency, and by giving consumers more control over their electric usage. However, Senate Bill 9 was introduced in response to an ongoing disagreement between ComEd and the Illinois Commerce Commission (ICC) on implementation of the law, which ComEd said would substantially increase costs for the utility company by approximately $100 million annually.

Senate Bill 9 addresses three of the points of contention between the ICC and ComEd, including: whether pensions will be considered an asset or a liability; the interest rate that will be used to bring the utility’s actually costs into line with the theoretical costs; and what returns will be based on—the equipment in the ground at the end of the year, or the average amount of equipment that is put into the ground throughout the year. And though ComEd pushed back its deployment schedule to install “smart” meters, the measure would require the utility to begin installing their in-home smart meters in 2013.

Rezin welcomes Dimmick Superintendent and Principal to Springfield
Senator Rezin welcomed Dimmick CCSD 175 Superintendent and Principal Ryan Linnig to Springfield March 12 to testify in the Senate Education Committee with her.  

Dimmick CCSD 175 in LaSalle County had requested a mandate waiver from the State Board of Education to allow the members of the school board to evaluate Mr. Linnig in his combined role as superintendent and principal.  The district also requested that board members not be required to hold the Type 75 administrative certificate or educator license that is required by current law in order to participate in the evaluation.  The State Board of Education recommended that the request be denied.  

Sen. Rezin said in committee that she feels the State Board of Education has incorrectly assessed the situation regarding this mandate waiver request and testified, along with Mr. Linnig, for the waiver to be approved.  

“Dimmick CCSD 175 has performed well above the state average on assessments and have proven to be fiscally responsible,” she said.  “The choice to have Mr. Linnig serve as both their Superintendent and principal shows their financial awareness and commitment to fiscal responsibility.   The reasons for Dimmick’s waiver request are simple.  They want to remain fiscally responsible and operate sensibly.”

Sen. Rezin said that it seems impractical and even wasteful to require the school district to spend money unnecessarily to hire an individual with a Type 75 license to evaluate Mr. Linnig when that individual would have no practical experience with the school district and has never interacted with, or even observed, Mr. Linnig as the principal and the Superintendent.  Furthermore, she said the amount of mandates that the state requires the schools to follow is burying them.  

“The smaller school districts, such as Dimmick, are barely able to keep up and they requested this waiver in order to continue their fiscal responsibility and superior performance.  Punishing Dimmick for requesting one area of greater flexibility when they are performing well above the state average on assessments and are keeping their district finances in check is unfair.  What they are doing in their community must be working.  If it is not, then the locally elected board of education can make the changes in administration that they see fit, but we should not be mandating them to do something that they feel will not work in their district.”

The Senate Education committee heard testimony only on Senate Resolution 25.  It is scheduled to be heard again next week.  

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