End pay spikes once and for all
Illinois needs to pull the plug on any early retirement incentives that impose extra costs on its public pension systems.
With Illinois in the midst of a full-fledged budget and public pension crisis, it's not just foolish, but self-destructive, for local school districts to spike the salaries of employees near retirement to boost their pensions.
In 2005, the General Assembly passed legislation that limited teacher salary spiking, a phrase that refers to giving outsized pay increases to people who will soon retire, to increase their pensions. But that 2005 reform, while putting an end to some of the mindless increases school districts throughout the state approved, created problems legislators need to address.
Given Illinois' pension woes — and the draconian steps legislators must take to resolve them — it's hard to believe that during the past 20 years local and state officials fell all over themselves to offer public employees incentives to retire early and collect generous pensions.
What was stupid then (there's no kinder way to put it) looks even worse now. Among the worst abusers of the system were local school officials who discovered a perverse incentive to abuse Illinois' Teachers Retirement System.
School officials concluded that they could save their districts money by encouraging older, more experienced teachers to retire and then replace them with younger, less costly ones. So they started offering end-of-career salary spikes to veteran teachers who pledged to retire in one to four years.
The Mahomet schools offered a series of 20 percent increases to both teachers and already well-paid administrators, but it was hardly alone. There's plenty of blame to go around.
TRS administrators eventually became so concerned about the rising costs imposed on the pension system that they prevailed upon state legislators to limit the salary spikes to 6 percent a year. Any increases higher than that, legislators decided, would require the school districts to pay a penalty intended to cover the extra costs to TRS.
Suddenly, faced with being forced to pay the extra retirement costs themselves, school districts ended the salary spiking. Unfortunately, the 6 percent ceiling became a floor, with teachers' unions demanding and receiving pledges from school boards to hand out a series of 6 percent increases to retiring school employees.
Let's be clear about what was going on — per their contracts, regular teachers were receiving smaller increases than the 6 percent hikes for teachers near retirement.
Because that law remains in place, members of the House and Senate need to draft legislation that requires school districts to cover the entire cost of early retirement incentives, not just anything above 6 percent. Impending retirees are entitled to receive what other members of their bargaining units receive, not a penny more unless the local school district wants to pay for it.
Staring the state's public pension crisis in the face, some school districts have, on their own, ended the 6 percent pay spikes as retirement incentives. Champaign and Urbana negotiated an end to them in their recent contracts. Danville's retirement incentive remains in place, but school officials there say they expect it to end in 2015.
Wherever they are in place, they must end, if not by local decision then by legislation.
The early retirement orgy that gripped Illinois is a classic case of shortsighted decisions with severe long-range consequences.
At least some of our current agony — that includes the agony of public employees who will be affected by the recent reform approved by legislators and Gov. Pat Quinn — could have been avoided had state and local officials acted responsibly on retirement incentives. Let that lesson remain in our collective memory as Illinois moves forward.