Kadner: Shifting teacher pensions to our property tax bills

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Madigan

Updated: March 3, 2012 11:36AM

Political leaders in Illinois are making noises about dramatic pension reform, but that could well mean higher property taxes for homeowners.

House Speaker Michael Madigan (D-Chicago) recently said he doesn’t understand why the state is paying pensions for people who are not state employees.

He was talking about schoolteachers, primarily suburban schoolteachers. Chicago pays for the pensions of teachers in its school system.

Soon after Madigan made his comments, Gov. Pat Quinn’s budget office released a statement that said the practice of state government paying for the retirement of downstate and suburban teachers “requires careful examination and reform” because “employers need to have a stake in funding their own employees’ pension costs.”

Good-government groups, organizations representing business and Republicans all are demanding pension reform in Illinois.

There’s little doubt at this point that Illinois can’t meet its long-term pension obligations unless the state makes some big changes in the system.

But if the state drops its commitment of about $800 million a year to the Teachers’ Retirement System, will local school districts have to pick up that money?

Charles McBarron, a spokesman for the Illinois Education Association, the state’s largest teachers union, said, “I don’t know.”

My understanding is that some school districts have contracts with unions that would limit their obligation if the state bails out on its commitment to pension contributions. Other districts have contracts that could be interpreted as pledging to fulfill their pension obligation if the state no longer fully funds the system.

You can be sure that union locals will demand that school districts pick up the cost, in whole or in part, of the state’s pension contribution if Madigan fulfills his threat.

And I have a feeling he just might.

That’s because the state has repeatedly failed in its obligation to finance public education, putting the burden on the backs of property owners.

The Illinois Constitution says, “The State has the primary responsibility for financing the system of public education” and that “a fundamental goal of the People of the State is the educational development of all persons to the limits of their capacities.”

In fact, funding public education is the only constitutionally mandated fiduciary responsibility of the state.

Yet, the state government typically covers about a third of the cost of a public education in Illinois and actually has dropped below 30 percent in recent years.

The property tax, on average, picks up 67 percent of the cost of local schools.

The Center on Tax and Budget Accountability states that the property tax provided more tax revenue in Illinois in 2010 (before the state income tax increase) than income and sales taxes combined.

The property tax is considered regressive becomes it’s not a tax on actual wealth.

Homeowners in recent years have complained to me constantly about their property tax bills increasing as their property value declined. It makes no sense, they say.

And it does seem counterintuitive.

But the property tax is based on the tax levy, the actual amount of money that a local government seeks to raise via the tax. And the costs of local government, particular school districts, keep going up.

It’s ironic that Illinois’ political leaders, who failed to adequately fund public education for more than two decades, now want to save money by bailing out of the teachers’ pension system.

The pension systems are in trouble primarily because the state has failed to adequately fund them for 50 years.

The government simply failed to make pension payments in a timely manner. If it had, there really wouldn’t be a problem.

And this seems like a good time to remind you that the state failed to meet its responsibility to be the primary source of school funding — even after it launched the state lottery and designated those funds for public education.

Politicians in Illinois have campaigned on the backs of schoolchildren for years, saying that, if elected, they would make things better. Instead, they just made things worse.

And now they imply they’re going to solve the state’s financial problems by putting the obligation for teacher pensions back on the people who employ them, the school districts.

Well, that’s you and me.

Once more, this state’s elected leaders are trying to buy votes by selling schoolchildren and homeowners down the river.