Illinois School Funding Inequity: Worse Than The Worst

Mar 14, 2017

Normally when I report on Illinois school funding, the story involves some task force or legislation trying to make our system more equitable. I always mention that's because Illinois relies on property taxes to fund schools, so schools in prosperous places have every amenity while schools in areas with low property values are out of luck. Today, though, I'm reporting on something entirely different — a whole separate method Illinois uses to make school funding inequitable.

I asked Jessica Handy to help me explain. She works with an advocacy group called Stand For Children, but before that, she was a legislative aide assigned to the Senate's pensions and investments committee. We began by pretending for just two seconds that she runs a school where I’m applying to be a teacher. How would pensions figure into our employment conversation?

Handy: School districts actually have very little stake in paying teacher pensions. They pay 0.58 percent of teacher salary into the Teachers Retirement System. The actual cost of that teacher’s pension is usually around 8 percent of salary, so most of that cost is paid for by the state.

Rhodes: What about if I’m being hired as an administrator? Once you get to principal’s salaries, you’re talking some serious pension dough, right?

Handy: If you’re a certified teacher and you’re in administration, you are also in the TRS system.

Rhodes: So it’s a benefit — a gift from the state to each school district?

Handy: It’s an in-kind benefit that the state pays on behalf of school districts.

Rhodes: Okay, so let’s look at figures for some of the districts. Take Danville. How much do we pay per student in pension costs for Danville?

Handy: Danville gets about $500 per student.

Rhodes: Where does that put them on the spectrum of how much we pay for pension costs in different districts?

Handy: That’s actually about average. You’ll see that Rondout, which — it’s one of the richest districts in the whole state, and the state is giving them an in-kind benefit of $1,700 per pupil. So Danville gets about $500 per pupil; Rondout gets about $1,700 per pupil.

Rhodes: What about a really poor district, like East Aurora?

Handy: East Aurora gets about $280 per pupil.

Rhodes: You know, anyone who listens to our station has heard many times that the State of Illinois has a very inequitable funding system, because it’s based on property taxes. We talk about the amount of “general state aid” that goes to each district. In that conversation, are we talking about these pensions? Or is that a separate conversation?

Handy: It’s an entirely separate conversation. Lots of the analyses that have been done by national think tanks — people who have said Oh, Illinois, you have one of the most inequitable school funding formulas  — most of those studies don’t even count the funding that’s going into teacher pensions. So we are even more inequitable than the studies that say we’re the most inequitable.

Rhodes: You and I both sat through hours and hours of school funding reform commission meetings, where lawmakers were trying to come up with a way to change the school funding formula, and one day, Sen. Daniel Biss (D-Evanston) brought up this pension question and said Why are we spending all this time trying to change this formula and not the pension piece? The governor’s education secretary, Beth Purvis, swatted that away and said: If we try to incorporate pensions into this piece of legislation, it will be doomed. So is there any appetite to change this?

Handy: The funding formula that’s been introduced now in HB 2808, which is not really commission-sanctioned but it’s kind of based on some of those concepts — it doesn’t address this pension issue. But we’ve also seen lots of bills filed this year that would do things like, for example, there’s the 6 percent cap for end-of-career bonuses … We’ve seen some bills that would reduce that. We’ve seen some that say if you’re giving a post-retirement bonus, you can’t write that off to the state.

Rhodes: There is a big catch to this. We’ve been talking about teacher pensions for your normal, average teacher, principal, superintendent. But there’s a special class of teachers who are hired using Title I funds. There’s something different about their pensions.

Handy: Right. When districts get federal funds — so these are mostly Title I funds that are targeted toward low-income kids, there’s also some IDEA funds for kids with special needs — and Illinois is the only state in the country who looks at those federal funds and says Ooo, let’s use some of that to pay off our pension debt. So while we talked about normally districts pay less than 1 percent of teachers’ salaries into pensions, for these federally-funded teachers, the state takes 45 percent and uses it to pay unfunded liability. So you take funds that are intended for the neediest kids in the entire state, and you disproportionately siphon funding away from those kids to pay this debt – disproportionately not created by those kids — it is absolutely absurd. It is unconscionable.

Rhodes: I remember you telling me about this last session, and there was a bill that was going to address this. You called it a “no-brainer.” And it went nowhere.

Handy: Right. It did pass the Senate, but then it never made it out of the House Rules Committee. So the good news this year is that there is both a Senate bill and a House bill. They’ve both passed committee now. We are expecting to see HB 656 go to the floor possibly as early as this week.

Rhodes:  Now, this entire discussion has been only about downstate schools, because Chicago Public Schools are in a whole different situation. They are the only district that pays their own pensions, right?

Handy: That’s right. So off the top of their budget, CPS has to spend about $700 million to pay their pension debt and about $215 million of that is normal cost.

Rhodes: That $215 million is the number Chance the Rapper was throwing around when he was having talks with Gov. Rauner last week, and it’s the amount that Chicago has asked the state to pay, and last session, there were a lot of fiery speeches from the floor about not bailing out Chicago.

Handy: Right. So it’s a cost the state already pays for every district except Chicago, and so some have now characterized treating Chicago equally as a bailout, which I think is quite a stretch, especially considering that we’re paying not just the normal teacher costs for teacher pensions outside of Chicago but a massive unfunded liability. And no one's talking about picking up Chicago's unfunded liability. We're talking about $215 million.