School officials wonder where money for pension-funding change would come from
By Bob Okon bokon@stmedianetwork.com December 20, 2012 5:38PM
Richard Pagliaro, Assistant Superintendent for Business & Personnel, in his office at the Joliet Township High School Administration Center in Joliet, Illinois, Friday, December 14, 2012. | Joseph P. Meier~Sun Times Media
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Updated: January 22, 2013 6:09AM
Richard Pagliaro sees a good side and a bad side to the potential shift of teacher pension funding to local school districts.
After all, said Pagliaro, the assistant superintendent for business at Joliet Township High School, at least the school district would make sure the money goes to pensions. Funding pensions is something the state has been notoriously bad about.
“It gives us control of pension funds,” Pagliaro said. “It goes directly to people who know how to manage pensions.”
What he worries about sounds crazy, but you can’t blame him.
He wonders if local school districts will be forced to send Springfield money to cover teacher pensions. And state legislators would be free to spend that money on whatever they want.
“It’s definitely a fear in my mind,” he said. “Think back to the lottery. When they were pushing a state lottery, what did they say? All of the money would go to education. It never happened.”
As lawmakers in Springfield continue to discuss ways of addressing the state’s looming budget crisis, more and more talk focuses on taking the responsibility for funding suburban teacher pensions away from the state and making local school districts foot the bill. Local school officials are watching a number of strange possibilities unfold.
One is that the state will force school districts to take on the new cost of funding pensions and at the same time, in order to appease taxpayers, prohibit the schools from raising property taxes to pay for the pensions.
“The question is where is that money going to come from,” Pagliaro said. “Right now, the state is digging in its heels and saying, Fund it. We’re not going to let you tax for it.”
About a dollar or two would be what it would cost property taxpayers in the Joliet district to fund the first year of the pension shift, Pagliaro said. Of course, that’s only the first year, and that’s based on the assumption that only 1 percent of the cost would be shifted to the school district in that year.
That percentage would keep growing in future years, pointed out Angela Smith, assistant superintendent for business at the Plainfield School District. Meanwhile, the schools would face an immediate budget crunch.
“If they put this 1 percent on us next year and all things being equal, we’d have to figure out how to cover $1.1 million,” Smith said.
That amount of money pays for roughly 20 teachers, Smith said. And the school district could very well have to cut staff to cover the costs of pensions if it cannot levy a new tax to pay for them.
If Plainfield can levy a new property tax, it would amount to about $25 on an average home with a value of $210,000, Smith said.
Something has to give somewhere to cover the rising costs of government employee pensions.
At the city of Joliet, pension contributions have increased in the last decade from $10 million a year to $30 million.
“We’ve been increasing the pension contributions over the last five years at a fairly significant rate,” City Manager Thomas Thanas said.
The city has specific property tax levies to fund police and fire pensions. And cities have other taxing options. This year, Joliet raised sales taxes and utility taxes to balance its budget.
Schools tax only property. And the state limits how much schools can increase property taxes. So school officials such as Pagliaro do not believe they will be able to increase taxes to cover the new pension costs.
“Right now, they’re saying you can’t tax for it,” Pagliaro said. “You have to take it out of your current funds. ... It’s basically what they term an unfunded mandate.”
