Illinois Issues: Pension Penalty Amendment Stripped From ESSA

Feb 25, 2016

The Every Student Succeeds Act (ESSA) was signed into law by President Barack Obama a few months ago.

The new law replaces the No Child Left Behind (NCLB) Act, which went into effect in 2002. Some aspects of NCLB were widely criticized, and plans to get a replacement passed have been in the works for years. Like any sweeping federal reform package, some concepts didn’t survive to make it into the final act.

U.S. Rep. Robert Dold (R-Lincolnshire)

This is a sidebar to an in-depth report on how ESSA could affect Illinois. Click here to read the main story.

One item that got cut from ESSA was an amendment written specifically for Illinois. U.S. Rep. Robert Dold, a Republican from Lincolnshire, had hoped to use ESSA to put a stop to what he calls a “tax” on teachers hired to work in low-income schools.

“It passed in the House unanimously, not only in the amendment phase but as part of the student success act,” Dold says. “When it came to the Senate, it was actually stripped out of the bill.”

Here’s the issue: Schools that serve a significant number of low-income children often receive federal Title 1 funds, meant to underwrite initiatives to help bridge the achievement gap. If a school uses those funds for iPads or books, they get to spend every penny of every dollar. However, if the school is in Illinois, and uses those federal dollars to hire teachers — a reading or math specialist, for example — the school has to contribute 36 percent of that teacher’s salary to the Teacher Retirement System. 

If the school hires that same teacher without using those federal funds, the amount the school contributes to the teacher’s pension is less than 1 percent. That’s because the state puts in an amount equal to about 8 percent of a teachers salary to cover the employer share of pension costs for teachers outside of Chicago. Readers may notice that one plus eight does not equal 36. Dold and others argue that Illinois is using the extra money to help pay off its mammoth unfunded pension liability. And as far as they can tell, Illinois is the only state doing this.

Dold says that one school district he represents paid an extra $700,000 for their Title 1 teachers: “That’s the difference between having all-day kindergarten and not having kindergarten at all.”

The TRS Board attempted two years ago to limit the rate assessed to reflect only the actual cost of pensions earned in a year by staff paid with federal funds. However, this effort was overturned by the General Assembly.

 

The amendment failed in the Senate, he says, because some lawmakers erroneously believed it would prevent federal funds from being used to pay into retirement systems — period  — instead of only putting a ban on using them to pay down old pension liabilities.

“We were trying to end the practice of a 36 percent tax. In essence, [it’s] exactly what’s going on in the state of Illinois,” Dold says. “We made a very clear distinction that we were talking about past pension obligations. We fully understand that if you’re hiring a teacher, you have to pay the pension obligation.”

He hasn’t given up on the effort and says he may re-file it as a stand-alone bill.