Kadner: Cullerton defends state teacher pension shift idea

• Reprints

John Cullerton

Updated: March 17, 2012 10:21AM

Illinois Senate President John Cullerton telephoned to explain why he feels it’s necessary to shift the cost of teacher pensions off the state budget and onto local school districts.

I have been critical of this idea, which has been publicly discussed by Cullerton, Gov. Pat Quinn and Illinois House Speaker Michael Madigan.

“First, the current system is unfair to Chicago,” said Cullerton, a Chicago Democrat. “Chicago finances its own teachers pension fund with no, or minimal state support. But Chicago taxpayers also contribute to the state Teachers’ Retirement System, which funds pensions for suburban and downstate teachers.

“That’s simply unfair on its face.

“Second, the state has an
$85 billion unfunded pension liability which we are going to have to pay for. We’re not going to shift that onto the downstate and suburban school districts.

“But the teachers in this pension system are not state employees. They are employed by local school districts, and in the future we’re saying these school districts have to take ownership of the teacher pensions.

“We’re not going to shift the entire cost onto them in one year. We’re talking about doing this gradually, over a period of years, perhaps tying the beginning of the shift to the year that a teachers’ contract comes due in a district so local districts can plan for this when they negotiate with their teachers’ unions.

“The districts don’t have to pick up the cost, it can be negotiated with teachers in a new contract so that they contribute more to their own pensions than they have in the past.

“So this doesn’t mean that local property taxes have to go up,” Cullerton said, noting that I had made that assertion in a previous column.

I suggested to Cullerton that if teachers were forced to pay more into their pension fund without an equal increase in wages, they would likely consider that a pay cut and strikes could result.

“We are talking with the teachers unions in Springfield about that,” Cullerton said. “Unlike elected officials in Wisconsin and Indiana, we work with the unions in Illinois.

“Teachers wouldn’t be taking a pay cut,” Cullerton contended, “but would merely be shifting some of their earnings from payroll into a pension fund. It’s still their money.”

I noted the disparity in school funding between Southland school districts and the rest of Cook County due to the fact that the cost of public education is primarily paid for by the property tax.

Southland districts, with a much smaller commercial property tax base, often have property tax rates double those of north and west suburban school districts where home values and incomes are much higher.

Chicago’s property tax rate is about 5 percent, less than half of the tax rate in Chicago Heights.

That means it’s more difficult for middle- and low-income suburban communities to come up with new money to pay for pensions and salary increases for teachers.

“That’s why the state has a general state-aid formula to help out the poorer districts and level the playing field somewhat,” Cullerton said.

“With the money the state saves by shifting the pension burden, we will be able to increase the state aid to those school districts.”

According to a pie chart on the iLearn website sponsored by the Illinois State Board of Education, in 2010 the property tax paid for 65 percent of the cost of public education statewide, the state paid for 23 percent, and the federal government supplied about 12 percent.

Illinois has long lagged near the bottom of the nation in state support for public education.

Cullerton acknowledged as much and said part of the problem is that the Illinois income tax, a flat tax, doesn’t generate as much revenue as most state income taxes.

He also said the Illinois sales tax does not tax many service providers, compared to other states.

He implied the Legislature would be looking at those areas, as well as other pension reform alternatives, in order to reduce its long-range debt.

But changing the income tax system would require a constitutional amendment and attempts to broaden the sales tax base in the past have met with formidable resistance from the business community.

It seems to me that Cullerton is saying taxpayers have to trust the government to do the right thing here, but the Legislature has underfunded public education for decades, has underfunded its pension systems for more than 20 years and is largely responsible for the state’s economic crisis.

Cullerton and Madigan, both Chicago politicians, talk about fairness for the big city.

But they have never demonstrated equal concern for the suburbs, particularly Southland school districts.

I think the Southland will get the shaft if there’s a pension shift.