Fox Valley school districts consider the impacts of pension reform plan
By Emily McFarlan Miller and Susan Frick Carlman email@example.com firstname.lastname@example.org December 23, 2012 3:24PM
Retired teacher and Oswego resident Mary Sanders (left), a teacher for 34 years, walks with a group of teachers protesting changes to pensions outside the office of Rep. Tom Cross Wednesday, May 23, 2012, at 24047 W. Lockport St. in Plainfield. | Matthew Grotto~Sun-Times Media
Updated: January 25, 2013 6:08AM
Nobody is hugely worked up about the latest pension reform plan to come out of Springfield, House Bill 6258. Not yet. Not in Kane and DuPage county school districts, anyway.
That’s because “things change so much in Springfield, and it’s been going on for two years — this discussion about pension reform,” said Jay Strang, assistant superintendent of business for Indian Prairie School District 204 in Naperville and Aurora. “It’s hard to get excited about anything that comes out of there, because it keeps changing.,” he added.
Each time a new idea comes out of the state capital, Strang said, the District 204 Board of Education devises “a variety of assumptions” based on the proposal. But board members haven’t taken a position on HB 6258; they’re waiting to see what happens, he said.
So is Elgin School District U46, the second-largest school district in Illinois.
“We are currently monitoring the legislation in Springfield to determine the potential financial impact of HB 6258 on our district and staff. We will continue to review this and other proposals as they advance in the legislature,” said Patrick Mogge, director of school and community relations in U46.
Without those details, Strang couldn’t speculate on whether his district comfortably could absorb the extra expense that would come from the legislation, which would be phased in over a period of nearly two decades.
“If it’s phased in, how long it’s phased in and how much we have to take on each year is relevant,” Strang said.
If the school district had to chip in .5 percent, Strang said, HB 6258 would impact the school system to the tune of $800,000 yearly. It would need to dip into fund balances to cover the expense, which is unlikely, or make cuts.
“Eight hundred thousand would be a challenge, because we’ve cut $37.9 million out of our budget over the past four years,” he said.
In Naperville School District 203, that would cost $600,000 annually, coming to $14 million to $15 million over the next 16 to 18 years, spokeswoman Susan Rice said.
“Even with a phasing in of the cost shift, the district would have to adjust programs and services so that we balance our costs with our revenue,” she said in an email.
“Phasing would make the transition easier to manage, but would still have a significant financial impact.”
Community Unit School District 300 CFO Susan Harkin also has shared some preliminary projections with the school board in the Carpentersville-area district.
Harkin has looked at the possibility of a .65 percent shift in pension costs to the district in year one, increasing on an annual basis, she said. That would shift $500,000 in extra costs to the district in that first year and could double every year after that, she said.
“We understand the current economic environment we’re all living in, so we did try to consider that in our projections in our long-range planning and start considering that could be a possibility and figure out how we can be a part of solving what’s going on out there,” she said.
Adding to the uncertainty and its potential for concern is discussion now by the Illinois State Board of Education about changing the school funding formula, according to District 204.
And unknowns that lie over the looming “fiscal cliff” at the federal level also insert question marks.
“It’s not just the pension (issue). There are variety of things out there, and our funding stream is causing us to react,” Strang said.
Throughout the contract negotiations that led to a one-day teachers strike earlier this month in District 300, district officials had pointed to its precarious financial position.
That’s partly because, like other districts, District 300 is unsure what state legislators might decide and what pension costs it might absorb in the next few years, it has said. The district already has cut more than $14 million from its budget over the past two years, Harkin said.
The school board and teachers union approved a three-year, $13 million contract last week, something the CFO confirmed, along with pension reform, had been a “moving piece” the district had built into its long-range planning.
“We understand the pension shift problem needs to be resolved, and certainly we’ve got to be a partner in the process to figure out how to resolve it. There’s no extra money out there from the taxpayers. There’s no extra money out there from the state,” she said.
“Do we like it? No. But at the end of the day, we all have to be in this together to figure out how to bring this to resolution.”
Dave Zager, District 203 CFO and associate superintendent for finance, takes issue with the suggestion from supporters of the reform proposal that interest earned by the district on fund balances would cover the new costs.
Zager said the earnings on the $23 million the district holds in reserve fall far short of what would be needed; its cash balance would need to be closer to $600 million to meet the expense using interest income alone.
But spokeswoman Rice said the board and administration in the Naperville district have yet to take a position on the newest proposal.
Representatives from the Northern Illinois Jobs with Justice Coalition are pushing for other remedies to address the state’s $95 billion pension shortfall, which officials say is increasing by $17 million every day.
Coalition co-chairman John Laesch said they’re looking for a sponsor in the General Assembly to pitch legislation establishing a speculative sales tax on investment transactions in Illinois. Already, he said, representatives have met with HB 6258 sponsor Rep. Linda Chapa LaVia (D-Aurora).
The $1 surcharge for each contract wouldn’t hurt the markets, Laesch said. “It’s just a small drop on a $200,000 contract — a dollar — but there are a great number of trades every day, so this would be a significant amount of revenue,” he said.
He estimated the statewide revenue potential at $6 billion annually.
“In 2010 alone, the Merc made $1 billion in profits, so they don’t need it,” he said.
The group also is looking to closing loopholes that keep many Illinois corporations from paying taxes, he said, and looking at a graduated income tax as a more long-term fix.
Meantime, Laesch said, here is plenty of blame to be placed on state lawmakers. “It’s like they’ve avoided paying the bill for the past 40 years, and they’re trying to say, ‘Oh we’re just going to absolve ourselves of that responsibility and make the school districts and the taxpayers pay for it,’” he said.