Illinois diverts federal funds for teachers to pensions
By Cynthia Wolf
For Illinois News Network
Illinois’ most impoverished school districts have lost millions of dollars to a scheme intended to shore up the state’s monumentally underfunded teacher pension reserve.
And it’s about to get worse.
Unlike their counterparts in other states, Illinois school districts pay a steep premium to the Teachers’ Retirement System, or TRS, if they use Title I federal money to hire teachers.
Districts are assessed 36.06 percent of salaries paid with federal Title I funds, and that is set to increase to 38.54 percent for the 2016-2017 school year. By comparison, the rate for a district not using Title I money is and will remain 0.58 percent.
So a district using Title I money to hire a teacher at $50,000 a year would fork over $19,270 to TRS, but the tab for a district paying a teacher the same salary out of state and local funds would be $290.
To paraphrase U.S. Rep. Robert Dold, taxpayers from across the nation are pouring vast sums into Illinois’ teacher pension debt quagmire. And the biggest losers? The very ones the Title I money is intended to aid – low-income students.
“There’s no question we need to get the fiscal house in order in the state of Illinois,” said Dold, R-Ill. “But to try to do this by taking federal dollars meant to shore up some of the neediest school districts is the wrong approach.”
According to Dold’s website, Illinois collects about $74.5 million a year through this practice and puts about $59 million toward paying down past years’ multibillion-dollar pension debt.
In 2015, Dold sponsored an education bill amendment to halt the practice. The measure passed unanimously in the House, but was taken out of the Senate’s version of the bill.
“We wrote [the amendment] in essence to take care of the situation in Illinois,” Dold said. “There is no other state in the country that I know of that does this.”
Dold sponsored a separate bill that would achieve the same result; it rests in the U.S. House Education and the Workforce Committee.
Superintendent Ehren Jarrett of Rockford School District 205 is among those wishing Dold and other like-minded lawmakers success. District 205 operates 47 schools serving about 29,000 students. Roughly 80 percent are low-income.
“It’s a huge impact on our district,” Jarrett said. “Over $1.6 million last year went toward the 36 percent rate that we had to pay … it’s an additional 20 full-time staff members we could hire with our own Title I dollars were it not for the penalty.”
The penalty does not apply when districts use Title I money for educational materials, equipment or noncertified staff. However, Jarrett and others said forcing districts to shuttle the federal dollars to areas of lesser need is counterproductive. And for the districts struggling the most – where fewer local dollars are available for salaries – the penalty strikes hardest.
“Like every other district, we try to minimize the effect” by spending as much local money as possible toward teacher salaries, Jarrett said. “But frankly, so much of what our students need is more time with certified staff.”
Stalled in Springfield
That message is not lost on state Rep. Joe Sosnowski, R-Rockford, who referred to Illinois’ practice as theft.
“We’re really robbing those federal funds in order to shore up our pension system,” he said.
“Wide bipartisan support exists to cap the state tax rate of Title I money to represent the employer’s normal cost, which would exclude the unfunded liability that the state created,” Sosnowski said.
However, a bill passed in the Senate this spring has yet to be assigned to a House committee.
“That falls in the speaker’s lap,” Sosnowski said, referring to House Speaker Michael Madigan, D-Chicago. “I’m not sure of the rationale for not assigning it, but we weren’t able to get any movement.”
Even those in charge of TRS see the present situation as wrong-headed.
“The TRS board voted in 2013 to reduce the amount of money school districts needed to pay to cover the retirement costs of teachers hired with federal funds,” TRS spokesman David Urbanek said in an email. “The board at the time was unanimous that school districts should only have to pay for the actual cost of teachers’ pensions and no more.”
The General Assembly overrode the TRS board’s unanimous decision, Urbanek said. Furthermore, it removed the board’s power to set the rate.
“School districts should not have to use limited federal funds meant for teaching to pay for a problem that they did not create, namely an unfunded liability built up by decades of inadequate funding by state government,” Urbanek said.
Joe Bascio, Springfield District 186 business manager, said his district sent hundreds of thousands of its 2015-2016 Title I dollars to TRS.
The district has 35 buildings and enrolls 15,062 students, of which 8,836, or 58.7 percent, are low-income, he said. The district’s Title I budget for the 2015-2016 school year was $6.65 million. Officials spent $2.1 million of it on teacher salaries. That meant the district paid $755,000 toward the TRS requirement.
“That $755,000 could be going to student needs,” Bascio said. “It is a big issue.”
With the rate rising ever closer to 40 percent, District 186 is budgeting differently for the coming school year to avoid the penalty, he added. Title I money will be allocated primarily toward needs other than teacher salaries, which will avoid having to pay about $900,000 in TRS penalties.
In Quincy School District 172, about 64 percent of the district’s 6,500 students qualify for the free or reduced-price lunch program, a harbinger for Title I dollars.
“Do I like paying 38 percent into TRS? No,” said Quincy Business Manager Joel Murphy. “It forces us to make some judgments as to what salaries we wind up paying out of Title I dollars and what we don’t because we’re trying to maximize the dollars that we have.”
Murphy said he is concerned, however, about the ramifications of eliminating the practice. “There are a lot of things happening in Springfield,” he said. “They’re talking about shifting some of those [pension-debt obligation] costs back to us. … I’m not sure how that benefits students, either.”
Dold noted that the $700,000 that Waukegan schools in his 10th Congressional District paid to TRS made the difference between having and not having all-day kindergarten.
“That’s a big deal in a community where you have single parents who are working or both parents working,” he said. “We’ll continue to highlight this issue and continue to work on it.”