Why It's So Good to Be a Teacher in Many Illinois School Districts

by | August 26, 2015

By Diane Rado

A brief but significant phrase appears about halfway through the 106-page teachers union contract in northwest suburban School District 21: "The Board shall pay the entire amount of the staff member's contribution to the Teachers' Retirement System (TRS)."

What that means, according to administrators, is that nearly 500 teachers in the Wheeling-based district don't have to pay anything toward their pensions -- a perk worth several million dollars. Instead, the district and its local taxpayers cover the cost of teachers' pension contributions -- 9.4 percent of their earnings.

Wheeling's perk for teachers is not unusual. Hundreds of districts have reported that they are covering all or some of the pension contributions that teachers, by law, are required to make, from Lombard's elementary district in DuPage County to the Zion-Benton high school district in Lake County to Rockford's large K-12 district and dozens of districts downstate, according to state data.

Taxpayers may not know about the perk because it's been overshadowed by other bargaining issues and not always easy to find or understand in teacher contracts. But the practice is in the limelight as tensions rise over negotiating a new teachers contract in Chicago Public Schools, which has its own teachers union, separate from the TRS pension for suburban and downstate educators.

Facing financial crisis, CPS officials and Mayor Rahm Emanuel want teachers to pay the full share of their pension contributions. The district has long paid 7 percentage points of the 9 percent contribution required for teachers. The Chicago Teachers Union argues that such a change would mean a steep pay cut.

Thousands of educators across the state get a better deal than CPS teachers -- their districts have been paying the full amount of teachers' contributions to TRS, the largest state pension system and among the worst funded in the nation.

To give the perk, districts use a formula that essentially adds money on top of regular teacher salaries to cover all or part of teacher pension contributions, then takes that money out to pay TRS. The perk can apply to administrators and staff as well.

District and union officials say the practice can attract teachers in competitive areas or provide a benefit to educators who agree to accept lower salary increases in exchange for the district covering their pension obligations. In other cases, it's a matter of tradition -- a perk gets written into teacher contracts and remains there for decades.

"It is a benefit that we offer to our teachers, and just like any benefit, it takes a long time to make any changes," said Lynn Glickman, head of human resources in Wheeling's District 21. "It is a pretty common practice right here in this area," she said, "and we are competing with other districts."

A teacher salary study published in April by the Illinois State Board of Education shows that 499 of 769 districts that responded said they were covering all or some pension payments for their teachers, with most districts reporting that they covered the full 9.4 percent contribution. CPS is not listed in the study.

About 90 districts in the Chicago region, roughly a third, reported paying full or partial pension contributions for teachers, but some district officials said mistakes in reporting or misinterpretations of the state's questions in the study could skew those figures.

For example, Naperville District 203 reported paying the full amount of teachers' contributions to TRS. But when the Tribune contacted the district, the chief human resources officer, Carol Hetman, said that wasn't the case. "From our perspective, we thought we were answering the right way. We're going to relook at how we answer," Hetman said. "I can tell you that we are not paying."

The situation is complicated because, according to state law, members of TRS, including teachers, "shall make contributions" to their pension plan. But districts send the contributions to TRS using money "from the same source of funds which is used in paying salary to the member." According to TRS documents, the teacher contributions are then treated as "employer contributions" under the federal tax code, and are tax-exempt, "regardless of who actually pays the 9.4 percent contribution."

The documents also say that "while the contribution is a member obligation, the employer may agree to pay this contribution for the member as a benefit."

The pension system's stance is that teachers are paying their share, according to spokesman David Urbanek.

"It is the position of TRS that TRS members are following state law and are paying their legally mandated contributions," Urbanek said.

Nevertheless, policy experts, districts and teachers say districts are covering the pension contributions for their teachers.

Lombard School District 44 has clear language in its contract: "The board shall pay the contribution due the TRS at no cost to the teacher."

In Zion-Benton Township High School District 126, the contract language is more difficult, referencing the complicated formula used to pay the contributions to TRS. The phrasing includes: "On behalf of the teacher, the board shall remit no greater than nine and four-tenths percent (current ITRS factor .103753) of the teacher's creditable earnings, to the Illinois Teachers' Retirement System (ITRS)."

Zion-Benton district Superintendent Chris Clark said the pension contribution is one part of a "total compensation package" that includes salary and TRS benefits for teachers. A portion of the total package goes directly to the teacher as base pay, and the other part goes to TRS to cover the teacher's pension contribution, she said.

"It's been negotiated that way for years," Clark said.

Ted Dabrowski is vice president of policy at the nonprofit Illinois Policy Institute, a conservative watchdog organization in Chicago and Springfield. He spearheaded a 2011 analysis called "Teachers' Pensions: Who's Really Paying?" using data from the state Board of Education's salary study and TRS, and reviewing about 300 teacher contracts.

The conclusion: "In nearly two-thirds of districts across the state, teachers don't contribute the full 'employee share' toward their pensions. In fact, most of these districts don't require their teachers to contribute anything toward their own retirement. Instead, the contributions are paid for or 'picked up' by school districts -- and by extension, local taxpayers. During the 2009-10 school year alone, this little-known perk cost taxpayers more than $430 million."

"When we came out with this, everybody called us liars," Dabrowski said in an interview with the Tribune. "Now, everybody understands what this is."

The state's two teachers unions, the Illinois Education Association and the Illinois Federation of Teachers, stressed that who pays is a decision that should be made together by teachers and district officials.

"The most important point is that this is negotiated as part of the larger compensation agreement. That's why there isn't an answer to who 'should' pay it. It depends entirely on the district," said IFT spokeswoman Aviva Bowen. She added, "Every district will have a different set of circumstances and finances."

At the IEA, spokesman Charlie McBarron said that when districts cover teachers' contributions, it's a cost saver. "If the money was paid as salary, it would be subject to FICA (payroll) tax and would, therefore, cost the district additional dollars," he said.

In addition, "districts want their students to have the best teachers in their classrooms. These agreements, where they have been negotiated, can make a district more attractive to prospective or current teachers."

In the most recent teacher contract in Cicero School District 99, the district and union agreed to get rid of the practice of paying teachers' pension contributions, instead putting the roughly 9 percent for pensions into the salary schedule, which boosts pay for teachers.

"It was a wash for the teacher, in terms of take-home pay staying the same," said Tom Smith, a regional field service director for the Illinois Federation of Teachers.

Decades ago, when districts agreed to pick up the cost of teachers' pension contributions, it was usually in lieu of a salary increase for that year, Smith said. It also was a less transparent way to give teachers more money.

"I think probably part of it was a public relations ploy. We want to give raises, but we don't want that to be reflected in the salary schedule," Smith said.

Whether more districts will move away from paying teachers' pension contributions is not clear.

Rockford's District 205 just finished negotiating a new teachers contract and kept its long-standing perk of paying teachers' pension contributions, according to union officials and the district.

"It really didn't come up at all," said teachers union Vice President Paul Goddard.

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