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Pension reform first order of business for state lawmakers

Published: Tuesday, April 9, 2013 9:20 a.m. CDT

(MCT) — One of the key sticking points in the debate over solving Illinois’ unfunded pension obligation is the so-called cost shift.

Many pension reform plans include moving the costs of teacher pensions from the state to local school districts. In a strict policy sense, the idea is a good one.

Many school districts have offered pension sweeteners to their employees, without having to pay when the expenses come due. It’s sort of an unfunded mandate in reverse. The pensions are only paid by the state for downstate schools; the Chicago teachers’ retirement system is funded by Chicago taxpayers.

That led to House Speaker Michael Madigan, D-Chicago, saying that downstate schools were getting a “free lunch.” Madigan should know better. There is no free lunch and, in Illinois, nothing is as simple as it seems.

The Illinois Senate Republican Caucus has responded to Madigan’s comment with a report that shows Chicago schools are receiving a disproportionate share of state funds.

One of the most glaring examples is in the poverty grants awarded by the state to districts with students who are defined as poor. Chicago has 31 percent of the poorest students in Illinois, but receives 47 percent of the poverty grant money, which amounts to about a $250 million disparity. Part of the reason for this shift is that schools with higher poverty rates receive a greater share of the grant money and in 2003 the definition of poverty was changed to make many more students eligible.

Another example is in the Property Tax Limitation Law adjustments. This legislation was designed to make sure districts were not punished because property values were climbing faster than allowed in tax cap counties. The result, however, has been that Chicago public schools, which have 18 percent of the state’s students, receive 49 percent of the PTELL adjustments. In essence, the state’s taxpayers are helping keep Chicago area property taxes low.

There are other examples, but those are two of the most glaring.

It’s also not a shock that the state’s method of school funding is a mess. Anyone who does even a cursory examination of state funding realizes it’s seriously out of whack. But the General Assembly hasn’t really looked at the issue since 1997.

The Republican caucus would like to take the cost shift out of the pension reform debate for this year, and then address school funding, including a cost shift, in the next session. That’s a decent plan, if it doesn’t stall solving the pension problem.

The unfunded pension crisis is so large that it towers over all other issues and the state budget. The state needs a pension reform plan, now. Illinois will be better off with a pension solution that includes a cost shift than with no pension solution.

But the disparity in state education funding deserves some close examination. It’s a difficult issue, but one that the General Assembly should tackle.

Pension reform, however, has to happen first.

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This editorial appeared in The Pantagraph (Bloomington, Ill.).

(c) 2013 The Pantagraph

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