McHenry County Blog

Taken from a statement from the Cary Elementary School Board:.  Considering House Speaker Mike Madigan is insistent on transferring teacher pension costs to local taxpayers and this is the last week of the legislative session before extraordinary majorities are required, I thought some might find this of interest.

Newly-elected McHenry County College Board member Chris Jenner has just finished his service on the Cary School Board.

Cary District 26

Statement of Position

Date: December 17, 2012

Topic: Possible Effects Proposed Solutions to the Illinois State Pension Crisis Could Have on
Cary District 26

Introduction: This paper lists the possible effects the Illinois State Pension crisis could have on District 26. It then defines the issue and lists potential and proposed solutions. It finishes by stating District’s 26 position and rationale.

Possible Effects on District 26: Actions taken to address the Illinois state pension crisis could affect any or all District 26 stakeholders. Due to increased pension costs, District 26 may have to:

• Reduce staffing levels resulting in increased class sizes and/or preventing the return of Specials;
•  Propose a property tax hike on Cary homes and businesses;
• Dramatically reduce benefits and/or increase employee retirement contributions for all classes of district employees, making it difficult to attract and retain employees;
• Implement a strategy of RIFing newly hired teachers prior to their obtaining tenure, resulting in a high teacher turnover rate, difficulty in attracting high quality new teachers, and a lack of continuity in classroom instruction;
• Move standard classroom instruction to a model that requires fewer teachers that the district must pay higher TRS contribution rates for, which may include delivering instruction via a virtual platform from third party providers, and which could create legal issues.

Defined: Illinois’ 5 state pension systems are in financial crisis. Illinois recently raised the state personal income tax by 67% and the state corporate income tax by 46%. State revenue is at record highs, yet General State Aid to schools continues to be cut. Illinois is on course to spend more money on the Teacher Retirement System (TRS) than on aid to schools as early as FY2016. Today’s five Illinois state pension systems were created by the 1970 Illinois Constitution. The initial basic parameters for the TRS were:

• 60% of salary at age 60
•  70% of salary at age 66
•  Annual Cost of Living Adjustment (increase), i.e. COLA, of 1.5%, not compounded
•  No sick leave accruals, Early Retirement Option (ERO), or automatic end of career raises

Also inserted into the 1970 Illinois Constitution was the “Pension Protection” clause, Article XIII, Section 5, which states, “… the benefits of [a state pension system] shall not be diminished or impaired.” Cary District 26 believes that the Teachers Retirement System established in 1970 was fair and reasonable. But that the enhanced benefits legislated since then, combined with the “Pension Protection” clause, have created a system that is not fiscally viable, and is in need of radical change. The longer it takes for that change to happen, and the less radical the change, the greater the financial disaster will be, and the worse the effect will be on TRS annuitants and taxpayers alike.

The March 2012 “Financial Condition of the Illinois State Retirement Systems” from the Illinois Commission on Government Forecasting and Accountability (http://www.ilga.gov/commission/cgfa2006/Upload/FinCondILStateRetirementSysFY%202011 Mar2012.pdf) shows that taxpayers fund approximately 74% of the money that goes into TRS.

Essentially, 95% of workers in Illinois are funding three quarters of the retirement for 5% of Illinois employees. And most of the 95% have significantly less valuable retirement benefits than the 5% they are funding.

The 1970 parameters of the TRS were noted above. By 2010, the parameters were as follows.
Retirement Age

• Age 62 with 5 years of service credit.
• Age 60 with 10 years of service credit.
• Age 55 with 20 years of service credit (discounted annuity or Early Retirement Option)
• Age 55 with 35 years of service credit.

Retirement Formula

• - Assuming career starts at age 25, and annuitant works every year till age 59, they will receive the maximum annuity of 75% of final average salary.

Annual COLA 3% compounded, up to two years credit for sick day accruals, ERO.

Factors contributing to the financial stress on the TRS include:

• - Teacher salaries, Illinois’ are 3rd highest of the 50 states,
• - Unaffordable pension costs due to increased legislated benefits,
• - Unrealistic Return on Investment (ROI) assumptions,
• - The age at which employees are allowed to retire.

Potential and Proposed Solutions: The TRS provided its summary of proposed solutions and their requirements for meaningful pension reform on its website in mid-2012 (http://trs.illinois.gov/subsections/press/PensionReformProposals.htm). Independent researchers have also proposed solutions and suggested requirements of successful reforms. Proposed solutions and proposed requirements for reform are summarized below.

• Annuitants can have either a COLA, or the health insurance benefit of the Teachers’ Retirement Insurance Program, but not both.
• COLA does not begin until 5 years after retirement.
• Individual asset tracking.
• Force the state to pay its obligation into TRS via court order.
• Phase in shifting the state’s funding responsibility to local districts.
• Have local districts pay all additional costs due to any salary increase, not just increases above 6%.
• Increase employee contributions.
• Reduce or eliminate the COLA, or tie it to the CPI, the Social Security COLA, or a cap.
• Pension income over a certain amount, e.g. $50,000 becomes taxable.
• Subject Illinois TRS pension payments to annuitants living out of state to Illinois income tax.
• Increase annuitant contributions to health insurance costs.
• Start new employees on, and migrate existing employees to, a retirement plan in which benefits are based on contributions instead of a defined benefit plan.

District 26 Position: The Pension Protection Clause of the Illinois Constitution and subsequent legislated pension enhancements have created a situation in which the majority of money in circulation will be required to pay for state employees’ retirement benefits, of which TRS is the vast majority. District 26 believes it is patently unfair for Illinois taxpayers to foot the majority of the cost of a retirement system that for most, is better than their own retirement plan. District 26 also believes it is wrong for government and courts to hold the Pension Protection Clause much stronger than the promise to fund public services such as education.

Based on the current situation, any meaningful reform of state pensions will not align with the Pension Protection Clause. The courts have routinely upheld challenges to the Pension Protection Clause. A constitutional amendment or revision of the constitution at a constitutional convention would be required to soften or repeal the Pension Protection Clause.

District 26 holds that the solution to the pension crisis must include the following, and that no option is
considered “off the table”.
- Teacher retirement benefits should align with retirement benefits of comparable workers in the
private sector.
- While District 26 doesn’t oppose taxpayer contribution to teacher retirement benefits, TRS
annuitant benefits should be based primarily on employee contribution, and not be predefined.
- The solution must be fair to both beneficiaries and taxpayers.
District 26 will therefore advocate for:

• Elimination of the current pension system.
• Distribution (or allocation by accounting) of all existing TRS assets to individual participants, based on individual participant contributions.
• Replacement retirement plans left to local district control.
• Control of the TRS and appointment of the TRS Board by local districts, should TRS be left in place and the pension cost burden be shifted to suburban and downstate districts.
• Creation of a task force of retirement planners with proven track records from private industry to develop retirement plan options that local districts will have the option of implementing.
• Movement to a plan in which retirement benefits are based on contributions made to the plan.

District 26 will also adopt the following budget assumptions:

• Until significant pension reform occurs, District 26 will base its budgets and financial plans on the district contribution to TRS increasing by 1% per year.
• District 26 will consider implementing and budgeting for a staffing strategy which attempts to mitigate the negative financial impact of any pension cost shift.

Erik Sivertsen

I’ve been remiss on looking at school board election results…probably because I don’t know as much about them as about the races about which I written.

Today I looked at McHenry Grade School District 15′s results and discovered that School Board President Ted Pillow lost by 164 votes. (This number might change a bit as absentee ballots received after the election are counted.)

I haven’t written much about the McHenry Elementary District other than when Home School Dad John O’Neill won in 2007.

O’Neill ran unopposed for a two-year term this year.

Erik Sivertsen is the man who beat the School Board President 3,208 to 3,044. The other winners were

• Kimberly Qualls with 3,686
• Amanda Geyer with 3,605
• Patrick Miller with 3,601

When last mentioned, Sivertsen had won a court case along with Cary District 26 Grade School Board member Chris Jenner to remain on the ballot for both the grade school board race and for McHenry County College.  Sivertsen placed fourth with four to be elected in the District 15 race and eighth our of nine for the MCC Board.  Jenner placed second in the race for three openings on the college board.  He withdrew his name from the District 26 contest before the court hearing.

Grade school board members will be sworn in by May 7th after the election canvass, which is taking place this week.

Both O’Neill and Sivertsen are Republican Precinct Committeemen.

Cary Junior High School

Scott Epstein, who is running on slate with Jen Crick and Bruce Ritter for the Cary District 26 Grade School Board, came out in favor pf higher taxes in his Daily Herald Questionnaire:

“I do think the district is long over due for a limiting rate tax increase but given the recent EAV numbers I don’t think now is the right time, but possibly in the not so distant future. I feel that T. Ferrier has done a great job with her projections over the past few years.” (Emphasis added.)

As did the Northwest Herald’s Kevin Lyons

State Rep. Tom Morrison questioned panelists.

At last night Illinois Policy Institute forum on teacher pensions, one question from Northwest Herald News Editor Kevin Lyons had to do with House Minority Leader Tom Cross’ having characterized a shift in tax burden from the state taxpayer to the local property taxpayer.

Laying out the problems Policy Institute Spokeswoman Diane Rickert.

She explained that there was a $203 billion problem when promised health insurance was included. That’s $41,000 per household,” she said.

Diane Rickert

She pointed out that disconnecting the setting of pension levels from the payment for pensions was “an anomaly,” that most units of local government set pensions [by setting salaries] and, then, had to come up with the money to pay them.

She pointed specifically to the Illinois Municipal Retirement Fund (IMRF), to which most government workers who are not teachers, fire or police officers belong. [Police and fire pensions are also financed by real estate taxes.]

Several times during the meeting, Rickert argued that McHenry County taxpayers would continue to be subsidizing North Shore school districts that pay their teachers much more than teachers get paid in McHenry County, if the State taxpayer were forced to continue paying for teacher pensions. The argument seemed to have almost a class envy tinge. She said the Policy Institute favors an immediate shift of incidence.

“Doing it all at once would take 3 1/2 percent of the whole budget,” she estimated. She also gave two examples of a ten-year phase in:

• Cary Grade School District 26 with a $34.5 million budget – $150,000 in year one
• Woodstock Unit District 200 with a $98 million budget – $274,000 in the first year

“I’m pretty such some school superintendents get paid more than that,” she added.

Jeff Mason

District 47 Board President Jeff Mason answered in a manner that led me to believe that he thought a transfer of financial responsibility was inevitable. He referred to the

• “The test you didn’t want to study for
• “The leak in the roof you didn’t take care of”

Earlier, Mason had said, “We understand this expense is going to be shifted to the school district at some point. “Thirty years sounds reasonable,” he said with a chuckle. Then, five to seven years would give us a chance to ease the shock value to go forward.”

The Crystal Lake School Board President complained that there were “too many cooks–State and local.”

Mike Sayre

It the financing goes back to local schools, Mason said he thought “that’s where the rules should be set.”

“We need a permanent solution, not a Band-Aid solution.

“Just taking the accountability away from the State will not solve the problem,” Illinois Education Association Spokesman Mike Sayre, a Crystal Lake High School District teacher, added.

The IEA representative made the

• “school boards would have to cut programs to kids,”
• “doing things to affect kids”

argument several times, much to the vocal distaste of the man sitting next to me in the front row.

Don Bond opposed shifting the tax burden from the State to the local taxpayer.

There were two taxpayer questioners under the only two questions will be allowed policy, one from a teacher or retired teacher and one for everybody else at the forum.

Former School Superintendent Don Bond of Huntley grabbed the “teacher” spot.

He complained his tax bill had gone from $4,000 to $8,000 over the last twenty years.

He had a question, but his point was “Springfield made the mess. Don’t send it to the [property taxpayers]!”

“If you want to keep the problem in Springfield, expect that tax bill to climb and climb and climb,” Rickert replied after pointing out that the income tax had already been hiked 67%.

She pointed to the Huntley School Districts $82 million budget.

Over a ten-year period it would cost $735,000, she said. [I assume that is for the ten years, but my notes are unclear.]

Cary Grade School Board member asked if the State would end unfunded mandates if it pushed pension costs onto real estate taxpayers.

The non-teacher question was asked by Cary Grade School Board member Chris Jenner.

He asked if the legislature would going to shift new costs to school districts, would they take away

• unfunded mandates,
• the prevailing wage requirement that makes building cost 20-30% than for non-government projects
• ineffective life safety code requirements

“The Illinois Education Association has no position,” Sayer answered.

“The onus should be on the politicians in Springfield to remove the onerous requirements,” the Illinois Policy Institute Spokeswoman said.

Mason argued that teachers should be provided with the opportunity to make decisions about their retirement.

The IEA’s Sayer entered the fray again explaining, “When I think of Cary District 26, I know a lot of teachers who have been forced to to teach music and physical education and that’s not what they trained for.

“All things we do for the Illinois Education Association is for the students first.”

The McHenry County College meeting was well-attended, as you can see from the photo below of the dispersing crowd.

The crowd after the one-hour meeting was over.

With two State Representatives in attendance, people took the opportunity to bend their ears.

Crystal Lake’s State Rep. Mike Tryon talked with local residents.

Palatine State Rep. Tom Morrison answered questions after the forum.

Also in attendance were two District 6 candidates for McHenry County Board,Democrat Jay Kadakia and Republican Mary McCann.

Jay Kadakia, former Huntley Village Trustee, gave Republican McHenry County Board opponent Mary McCann of rural Woodstock a piece of his campaign literature after the meeting.

Then I went home to write my first article on this event, which is entitled,

“IEA Spokesman Too Young To Know His Union’s Role in the Pension Crisis.”

 You can read it here.

The Cary Grade School Board will meet at the Junior High School on Crystal Lake Road tonight to discuss studying the advantiages and disadvantages of merging with the Fox River Grove School District.

That’s what seems to be behind this innocuous looking agenda item on the Cary District 26′s School Board Agenda tonight:

10. Topics for Discussion

10.2 Consolidation Feasibility Study

We have it on our agenda as “to discuss discussing about merging of districts,” Fox River Grove Districts 3 Superintendent Tim Mahaffy told me today.

Specifically, the Agenda says, “Consider Invitation for Involvement in an Exploration of Merging with D26.”

Interesting how Fox River Grove’s Board Agenda reveals more than does that of Cary.

Fox River Grove’s School Board is meeting tonight, too.

Most children from both elementary school districts attend Cary-Grove High School.

Could there be a second attempt to created a Unit School District in the area’s future?

Here’s the press release about the teachers’ contract which the Cary School Board ratified last night:

Cary Junior High and elementary school students will get a shorted school day after Thanksgiving.

District 26 Board Ratifies Teacher Contract
November 1, 2011

The Board of Education of Cary Community Consolidated School District 26 announced today that they have ratified a tentative agreement with the Cary Education Association (CEA) addressing all issues related to a new collective bargaining agreement.

The new three-year agreement calls for:

• Reduction in teacher compensation by 3% in the 2011-2012 school year and a pay freeze in the 2012-2013 and 2013-2014 school years.  Teachers will be permitted to change lanes and “move horizontally” on the salary schedule by taking additional course work during the contract but will not receive automatic “step” or longevity increases.
• A change in the employee insurance program. Previously, the Board paid 100% of single coverage and between 20% and 50% of family coverage depending on a teacher’s years of service in the district. Under the new agreement, the Board will pay 50% of single coverage, and between 10% and 40% of family coverage depending upon a teacher’s experience in the district.
• The school day for students has been lengthened from 5 hours and 45 minutes last year to 6 hours and 15 minutes under this new agreement. Student instructional time will be increased by 30 minutes a day over last year’s amounts. The parties expect to transition to a new daily schedule corresponding to the change in the school day after the Thanksgiving holiday.
• The tuition reimbursement program under the previous collective bargaining agreement has been eliminated from the new contract.
• The retirement program under previous contract has been eliminated. Under previous agreements, eligible employees could receive up to four years of 6% increases in their last years of employment; up to $20,000 in lump sum payments following retirement; and up to $10 a day for unused sick leave.

At the start of this school year the Board had imposed contract terms for the 2011-2012 school year which provided for reductions in pay and in the insurance program greater than those agreed to as outlined above.

Through a series of meetings with a federal mediator after the start of the school year, however, the parties were able to reach agreement on all economic and language issues for a three-year contract.

The parties expect to finalize the contract language and execute an agreement as soon as possible.

Chris Spoerl, the Board President, said,

“These negotiations have taken a long time to complete — since November 2010 in fact – in large measure because of the very serious financial challenges faced by the district. These were not easy labor talks but the board is confident that the new agreement will help put the district on a more stable financial ground for the next three years.”

The Cary School District's Administrative Office.

A press release from Cary Elementary School District 26:

Board and CEA Reach Tentative Agreement on All Issues

The Board of Education of Cary Community Consolidated School District 26 and the Cary Education Association, which represents the teachers in labor negotiations, announced today that on Wednesday evening they reached a
tentative agreement on all outstanding issues.

The parties have been in negotiations since November in an effort to reach agreement on a new contract.

The previous collective bargaining agreement expired at the start of the 2011‐2012 school years.

The terms of the contract will be presented to the teachers for ratification next week and the Board of Education soon after. Details of the agreement will be released after ratification.

= = = = =

Unlike McHenry County College, which released a summary of the contract its board will approve tonight, local school boards, such as Cary’s, won’t let taxpayers know how the bulk of their taxes will be spent.  Typically, 80% of a school district’s operating expenditures go for salaries.  Some, of course, are for non-teachers, but faculty salaries make up most of that 80%.

I cannot understand why this does not disturb more people.

Here’s what’s on the web site:

The signed copy of the press release.

Joint Press Release Cary BOE and CEA
posted 5 hours ago by Caryil d26

The Board of Education of Cary Community Consolidated School District 26 and The Cary Education Association which represents the teachers announced tonight that they have reached a tentative agreement to resolve the significant financial issues between the parties and are optimistic that they can reach full agreement on all remaining issues.

The parties are set to meet next week in an effort to reach an agreement on all remaining issues.

The details of the tentative agreement will be made after the board of education and association members have ratified it.

= = = = =

Again, I would point out that taxpayers should be able to read proposed contracts before they are ratified by thr elected representatives.  In my memory only Huntley School District 158 did so and that was for the contract before last.  That was when Larry Snow was on the school board.

Marshall Lowe put political messates on his sign on Route 14. Last week's was in support of the Distrit 26 School Board.

The teachers in Cary Grade Schools are teaching.

They could be striking as the School Board imposed a contract on them.

But, they’re not striking.

They want to talk more.

The meeting is at the Cary Junior High.

= = = = =
The message on Marshall Lowe’s sign says,

DIST 26 BOARD

FOR SOME ITS A HARD

PILL TO SWALLOW BUT

STAY THE COURSE

Wednesday was the first day of school and teachers were not striking.

They were asking for more negotiations.

Here's the entrance to the Cary Grade School District's Administration Center.

Maybe there will be a meeting next week.