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Illinois Gov. Rauner Would Fine Schools For “Spiking” Pensions

Illinois public schools that hand out late-career pay raises could be subject to heightened penalties under the Rauner administration.

Gov. Bruce Rauner this week laid out a series of pension-related measures as part of his budget proposal; among them was the idea of levying a penalty on schools that give late-career raises to teachers.

Illinois already penalizes schools for handing out such raises if they exceed 6 percent. Under Rauner’s proposal, schools would be penalized for any such raise that exceeds the cost of inflation, which is a much lower threshold.

More from the Daily Herald:

Tucked away in his plan to cut teachers’ pensions, though, is a detail school districts would have to be wary of should Rauner’s plans become law.

Here’s all it says on the list of details released publicly by the governor’s office: “Eliminates spiking.”

Rauner wants to change a state law that makes local school districts pay penalties if they give big end-of-career pay raises to teachers and administrators.

School districts can still give the pay raises, but the state says local officials have to pay for the pension consequences.

Now, school districts have to pay penalties if they give late-career pay raises of more than 6 percent. Rauner wants to enact penalties for those pay raises if they’re greater than the rate of inflation, which lately has been around 1 percent.

Suburban schools have already had to pay big bucks when they’ve been caught by the 6 percent law. For the 2012-2013 school year, for example, Elgin Area District U-46 had to pay $135,393.

The year before that, Schaumburg Township District 54 had to pay $489,841.

Most districts avoid big penalties, even writing in a 6 percent pay raise cap into their contracts with teachers. But 1 percent is a lot lower, of course.

“While a so-called reform was enacted in an effort to prevent pension spiking, teacher contracts in recent years have made the six percent cap a floor rather than a ceiling,” Rauner spokesman Lance Trover said.

A teacher’s salary during his/her final year of teaching plays a large role in determining pension benefits.

By Steven Vance [CC-BY-2.0 (http://creativecommons.org/licenses/by/2.0)], via Wikimedia Commons

Video: Solving Teacher Pension Underfunding

Here’s a long discussion on the state of teacher pension systems and how public policy can address the systems’ liability issues while causing the least amount of harm to teachers, retirees and students.

From the video description:

America’s teacher-pension systems (with up to a trillion dollars in unfunded liabilities according to some estimates) present a raging public-policy dilemma. Career teachers absolutely deserve a secure retirement, but lawmakers promised them benefits that the system cannot afford, as those promises were based on short-term political considerations and bad math. Now the bill is coming due, and someone’s going to get soaked.
What’s the least bad option going forward? Who should bear the brunt of this legacy of fiscal irresponsibility? Current retirees? Today’s teachers? New teachers? School districts? Taxpayers? The students themselves?

Video: New York Gov. Draws Flak For Teacher Pension Comment

New York Gov. Andrew Cuomo has upset some teachers and their unions after a comment last week about schools being more concerned about keeping pensions intact than improving schools.

The comment in question:

“We’ve sent thousands of children to schools we knew were failing from an educational point of view. Albany has been too concerned with protecting the pension rights of teachers and not concerned enough with the future of students.”

The above video discusses Cuomo’s comment and why he may have said it.

Feature photo credit: Andrew Cuomo by Pat Arnow.jpeg: Pat Arnow derivative work: UpstateNYer (Andrew Cuomo by Pat Arnow.jpeg) [CC BY-SA 2.0 (http://creativecommons.org/licenses/by-sa/2.0)], via Wikimedia Commons

Georgia Candidate Wants Pension Funds to Invest In Start-Ups

Jason Carter, Georgia’s Democratic candidate for governor, released his economic plan this month, and in it there’s an idea of particular interest to pensions: Carter wants to make it easier for the Teachers Retirement System of Georgia to invest in Georgia-based start-ups.

From the Atlanta Journal-Constitution:

The Democrat argues in his economic pivot that he wants teacher pensions to be able to pump funds into local startups “so long as we’re making sure that we can manage the risk in ways that make sense.” He sees it as a way to boost a state-backed effort to invest in venture capital firms that, as you’ll see in today’s AJC, has lagged.

“The things that concern the teachers is to make sure you’re stewarding the pension appropriately. So it’s crucial to make sure that we are managing the risk in ways that works,” he said. “But we shouldn’t have those pension funds losing out on higher growths and higher returns just because of artificial caps on what it can do.”

Georgia lawmakers cleared the way for pension funds to invest up to 5 percent of their assets in alternative investments, such as venture capital firms, that had at least $100 million on the books. But the law excluded the Teachers Retirement System of Georgia, the state’s largest public pension with nearly $59 billion in assets.

North Carolina and other nearby states allow their teachers’ fund to invest in startups, but Gov. Nathan Deal and other Republicans have raised red flags. Lawmakers signaled they were reluctant to include the teachers fund in the 2012 legislation because the group’s board hadn’t approved the changes.

Critics are wary of the risk attached to investing in unproven companies. Other critics say it would open the door for cronyism and make pension investments increasingly political.

A 2012 state law enabled most Georgia pension funds to invest in alternatives for the first time. But the law prohibits alternatives from making up more than 5 percent of total assets.

Christie Vetoes Early Retirement Incentives for Teachers

Chris Christie used his conditional veto power to reject one portion of a broader bill that would make it easier for privately run schools to operate in New Jersey.

The portion of the bill vetoed by Christie would have given certain teachers–specifically, those likely to face layoffs in the near future–a range of perks to retire early. From NJ.com:

Gov. Chris Christie has rejected changes to the Urban Hope Act, specifically taking exception to language that would allow Camden public school teachers to retire early.

The change, he wrote in his conditional veto Monday, would put too much of a strain on an already floundering state pension system.

“The bill … authorizes early retirement incentives to certain school district employees, and may exacerbate the solvency of the pension system,” Christie wrote.

Christie asked the Legislature to reconsider the bill without the retirement incentives.

Specifically, the vetoed portion would have offered early retirement incentives to school employees in Camden, New Jersey.

The Urban Hope Act, if passed, would open the door for charter schools to operate in Camden. But the city has already had to lay off nearly 250 public school employees, and more layoffs are likely on the way.

That’s why public teacher’s unions negotiated the line item in the bill giving teachers a chance to retire early as opposed to being laid off. From NJ Spotlight:

The bill had included an expansive early retirement package that had irked some on both the Democratic and Republican sides.

Assemblyman Troy Singleton, D-Camden, had said the package was only fair in the face of expected layoffs and other cuts in Camden. The New Jersey Education Association supported the early retirement piece, but nonetheless opposed the bill overall.

But Christie called the early retirement package hypocritical at a time when the state is grappling with a pension liability crisis.

The bill now goes back to the Senate. If the legislature approves Christie’s changes, the bill will go back to Christie. He is expected to pass the bill if it stays intact.