State Rep. Michael Zalewski (D-Riverside) knew what he was in for last month when he appeared before the Riverside-Brookfield High School District 208 Board of Education.

The state representative makes quarterly reports to the school board about developments in Springfield, and on Dec. 11 he was going to tell the board about a bill he is co-sponsoring that seeks to solve Illinois’ pension problem. Outgoing Rep. Chris Nybo (R-Elmhurst) is one of two Republican co-sponsors of the bill. Elaine Nekritz (D-Northbrook) and Daniel Biss (D-Evanston) are the primary sponsors of the legislation.

The bill, which could be voted upon in the first eight days in January during the lame-duck session of the legislature, makes a number of changes to the pensions for Illinois state employees, employees of Illinois public colleges and universities and public school teachers outside of Chicago.

The change that most concerns local school boards is that the bill would gradually shift the employer portion of pension costs for suburban and downstate public school teachers from the state to the local school districts which employ the teachers.

Pensions for Chicago Public Schools teachers are funded by Chicago taxpayers, leading Chicagoans, including Chicago Mayor Rahm Emanuel, to wonder why Chicago taxpayers have to pay state taxes to fund pensions for suburban and downstate teachers and also pay city taxes to fund the pensions of Chicago teachers.

Zalewski knew he was facing a skeptical audience when trying to sell the bill to school board members at the school board’s December meeting.

“I expect a lot of gnashing of teeth and tough questions,” Zalewski said at the opening of his remarks.

He was right.

House Bill 6258 would gradually shift the employer contribution to the Illinois Teacher Retirement System (TRS) to local school districts at the rate of one-half of 1 percent a year. It would take eight to 12 years for local districts to assume the full share of the employer contribution to teachers’ pensions.

The bill would also limit the cost-of-living increases to state pension recipients, including teachers, to just the first $25,000 of a pension. The bill would increase the amount of their own salaries teachers contribute to the TRS by 2 percentage points over two years, going from the current 9.4 percent of salary to 11.4 percent in 2014.

It would also raise the retirement age for state employees and teachers under the age of 45. Those from age 40 to 45 would have to work another year while those under 40 would have to work another five years before becoming eligible for pensions.

Zalewski said limiting annual cost-of-living increases to the first $25,000 of a pension will have a huge impact over the long term to control costs.

“Compound interest on public pensions is the major cost driver of what we’re dealing with in Springfield,” Zalewski said.

The bill would also create a new cash balance system to determine pension benefits, which would guarantee only a 4-percent return to employees. Any additional return would be based on the performance of the financial markets.

Zalewski told the school board that the state cannot afford to fund pensions any longer without major changes.

“Simply put, our pension payment in Springfield is crowding out our ability to fund core state services like education, the Department of Corrections, keeping bad guys in jail, transportation, and social services,” Zalewski said. “It’s sad and unfortunate that’s it come down to this, but we have to address it.”

Illinois’ ballooning pension costs and years of underfunding of pensions by the state has caused the state legislature to already make painful cuts, Zalewski said.

“We cut $200 million out of the state budget for education for fiscal year [20]12,” Zalewski said.

General state aid to school districts is down 9 percent. RBHS gets only 4 percent of its revenues from the general state aid and 7 percent in total from the state of Illinois. Federal aid amounts to just 0.7 percent of the District 208’s revenues.

As Zalewski expected school board members didn’t think much of the bill.

Board member Tim Walsh noted that the Chicago Public Schools, which fund the pensions for their teachers receive far more state aid than do districts like District 208. Walsh said that the Chicago Public Schools get 53 percent of their revenues from federal and state aid.

“We are funding the Chicago Public Schools, because you take the money from us and give it to them,” Walsh said. “You want to give us 53 percent, we’ll stop asking [the state] to cover the pension, because we could cover it easily. Shift some money to the suburban [school districts]. Our taxpayers pay enough taxes.”

Walsh and board member Garry Gryczan told Zalewski that if the state shifts to burden of financing teacher pensions to local school districts, then the local districts should have to right to determine what kind of retirement plan to offer its employees.

“We have no right or authority to make any kind of changes to the pensions because the state sets the standards for it,” Walsh said. “We can’t go in the next union negotiations and say we’re going to change to defined contribution [plan]. The law doesn’t allow it.”

Gryczan made the same point.

“We’re taking on the burden, but we have no control over the burden,” Gryczan said. “You need to tie the reform of the pension, including a defined contribution system, so that we can have flexibility in what we can offer to our employees. If you want us to manage the dollars now, then let us manage the benefits we offer our employees.”

Board member Laura Hruska was particularly upset over the proposal and said that Illinois shirks its responsibility to fund education.

“We are aware that Illinois funds education 50th out of 50 states,” Hruska told Zalewski. “It is insulting when you have these discussions in Springfield to think that we would assume any of this responsibility when the state has already abdicated its responsibility to fund public education.”

Zalewski said that he hopes the bill will come to a vote in the lame duck session of the legislature before newly elected members are sworn in on Jan. 9.

“I’m optimistic we can do it in January,” Zalewski said. “There’s been a little bit of momentum we’ve built about this bill. We have to. Our budget situation is teetering on the verge of real catastrophe if we don’t address pensions.

“We can’t afford to delay any more.”

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