Cary Grade School Board President at Looks D155 Finances and at Sen. Pam Althoff’s Pension Bill

From Cary Elementary School District 26 Board President:

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

Given the financial challenges facing D-155 over the next few years, it is imperative that the Board be led by those that will meet those challenges in a fiscally responsible manner.

D-155, as well as many other local districts, is facing the problem of how to effectively manage in a declining enrollment environment and an efficient cost structure.

Further compounding the problem is the fact that the State is currently laying a legislative minefield in front of school districts.

School districts will be dealing with:

  1. A levy freeze of a yet to be determined duration,
  2. A change in the school funding formula by the State, and
  3. Increased costs related to the pension program.

School districts will need to adjust to an environment where existing union contracts expand labor costs at 3%-4% or more while levy revenue will be frozen for an extended period of time.

As to changing the school funding formula, all previous legislative attempts were scored showing significant cuts to suburban districts.

I expect the latest effort will further exacerbate suburban districts’ revenue issues.

Lastly, having spent some time this weekend deciphering Althoff’s SB2172 regarding pension modifications, the State is planning to add some significant cost components onto the school districts.

One of the most significant changes relates to pension spiking, typically seen as 4 year increases at 6%/year (6-6-6-6).

Most districts have some form of this in their union contract.

One of SB2172 changes modifies the employer penalty incurred for any excess salary over 6%, down to CPI.

This penalty is the net present value of the excess benefit based on where the retiree sits on the actuary table, with an 8.5% return.

It can be fairly onerous.

The problem of course is that districts are now contractually committed to 6-6-6-6 and will have to pay significant penalties for the amount over CPI.

My rough estimate is that the typical retiree will cost a district an additional $50+K penalty.

And that’s not the only negative impact related to retirement costs featured in that bill.

So, we’re left with a district that is declining in enrollment, is operating inefficiently, has a cost structure that is growing faster than its revenue, has excess facility capacity, and will face frozen levies, reduced State funding, and increased retirement costa.

It is imperative that the new D-155 board possess the financial acumen and will power to address its challenges head on in the coming months.

Failure to do so will have long term negative consequences.


Comments

Cary Grade School Board President at Looks D155 Finances and at Sen. Pam Althoff’s Pension Bill — 4 Comments

  1. The Northwest Herald on Saturday voiced their opinion about teacher end of career salary hikes.

    The same practice by the way is also found in administrator contracts, which is one reason why it often continues unless the public and / or board demands and end to the hikes.

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    Northwest Herald

    Finally Some Good News for Former Motorola Site

    March 25, 2017

    “Thumbs-down: To the practice of artificially hiking teacher salaries in the final years of a teacher’s service to increase the pensions they receive, as done by Crystal Lake District 47 in the last contract which allows 6 percent raises for each of a teacher’s final three years.”

    http://www.nwherald.com/2017/03/23/finally-some-good-news-for-former-motorola-site/arjafqx

  2. Each General Assembly there are many pieces of legislation that deal with pensions.

    Regarding TRS, in addition to SB 2172, there is SB 2173, HB 4027, SB 16, and probably others in the 100th General Assembly.

    TRS is sometimes referred to in the legislation as “Downstate Teacher” or “Article 16” (referring to the Article in the Illinois Pension Code for TRS).

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    The Illinois Association of School Boards posts a weekly Alliance Legislative Report about legislation that affects schools, although they typically don’t cover pension legislation.

    http://www.iasb.com/govrel/alrmenu.cfm

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  3. Don’t know why the President is worried!

    – The teachers will simply go on strike

    – the NWH, the Herald and parents / guardians will demand the School Board gives the union whatever they want

    – the School Board will cave and simply increase fees or find another source of revenue

    Remember – it’s for the children (the pensions, the salary increases etc.).

  4. NOW is the time for REAL Changes to be made!

    or I see a lot of tax payers being sucked drier1

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