After nearly 30 years in the classroom, 3rd-grade teacher Lori Hassler is taking early retirement at the end of this school year because of health concerns. But she’s anxious about her pension.
Hassler, 54, said she returned to Jeans Elementary School in Burr Ridge for her final year without a contract–and may be paid less in retirement than she anticipated because of sweeping new changes in the state Teachers’ Retirement System.
The changes, mandated by a law that took effect July 1, are aimed at repairing the bloated-yet-underfunded retirement plan by making it more expensive for districts to allow early retirements and eliminating controversial end-of-career salary bumps for teachers. But the fallout has been prolonged teacher contract talks across the state as administrators and union officials grapple with how pension funds will be affected.
According to the Illinois Education Association, of the 450 districts negotiating contracts this year, roughly 150 were not settled weeks after school began, an unusually high number, because of uncertainty surrounding the pension plan. Under the legislation, TRS officials must decide on rules to govern the changes, and then legislators have to approve the rules, which is expected by November.
Hassler’s situation typifies what many critics say is wrong with the pension changes. Annual raises for teachers are capped at 6 percent in years prior to retirement. Previously, raises could have been as high as 20 percent, which became a drain on the state pension plan because teachers’ annuities are calculated at about 75 percent of their final-year salary.
“The general public thinks that sounds outlandish, but it’s really not,” Hassler said. “What 54-year-old with a master’s degree in the business world will only be making $65,000?”
The salary cap means that Hassler, who was advised by her doctor to retire because she has severe high blood pressure and is on heart medication, will make less this year under a new Burr Ridge Elementary School District 180 contract approved in late September than she would if she were not retiring. She says she would have been due a raise above 6 percent, but now the salary cap kicks in with her notice to retire and she estimates it will cost her about $1,200 less in pension money each year.
Districts that opt to pay retiring teachers more than the cap allows must pay substantial penalties to the retirement system. That amount is yet to be determined.
“I’ve heard figures as high as $40,000 a teacher,” said Jill Coleman, school board president of District 180. “I’d much rather pay the teachers … than pay the penalty to TRS.”
By modifying the pension programs of teachers and other state workers, legislators were able to balance the budget. About $1 billion was slashed from the teachers’ plan.
The pension plan also now is embroiled in allegations of corruption and federal indictments. A former trustee of the system as well as a prominent Chicago attorney who served as outside counsel for the system’s board have been accused of trying to extort kickbacks from investment firms seeking business with the system.
The former trustee, Stuart Levine, has pleaded not guilty to the federal charges. The attorney, Steven Loren, and another prominent Chicago attorney indicted in the scheme, Joseph Cari, pleaded guilty to charges last month and are cooperating with federal investigators.
TRS did not support the changes in pension legislation.
“This was compromise legislation, and compromises always have problems,” said Jon Bauman, executive director of TRS, an independent state agency.
Nick Yelverton, director of government affairs for TRS, said 4,800 teachers retired or entered the TRS system in 2004, and in 2005, there were 6,900 teachers. He said he can’t explain the spike in retirements.
“There certainly are a lot of factors,” he said, including changes in the retirement system. “There really is no single explanation.”
But teachers union officials say the jump in retirements is because of teachers seeing the state tampering with their pensions and causing uncertainty.
Under the old plan, teachers who chose to retire before 34 years of service paid a one-time sum of 7 percent of their highest salary to TRS, while their districts doled out an additional 20 percent. But many districts shouldered both costs, because schools could hire less-expensive teachers once those at the top of the pay scale leave.
The state now has upped the percentage that teachers and districts pay, to 11.5 percent and 23.5 percent, respectively. The retirement threshold has been raised to 35 years.
As a result, most districts are unwilling to stretch their already tight budgets and pay teachers’ share of the costs. Contract talks in one Downstate district dragged on until late August because of the pension situation.”We didn’t want to pay the penalty for early retirement,” said Supt. Richard Morgan of Carrier Mills-Stonefort District 2, where the top of the pay scale is just under $50,000 and teachers traditionally receive a $10,000 salary bump at the end of their career. Pension issues also figured into contract negotiations in Hinsdale Elementary School District 181, where a strike loomed but an agreement was reached in September. The average teacher salary is around $70,394, according to state school report card data, compared with the state average of $54,440.
Union officials say they have received reports of older educators being passed over for coaching and other extracurricular duties because districts fear that those added hours would push the teachers over the 6 percent salary cap.
Bauman conceded as much, saying “normal regular salary progressions and extra duties and coaching can also push a teacher over the threshold.”
This is one of many issues that teacher union leaders hope TRS officials will consider when clarifying the regulations.
“Eventually, either this year, next year or the year after, every single district in the state will be impacted by this issue,” said Dave Griffith, president of the Naperville Unit Education Association. “[Legislators] put a broad brush to the problem and hurt a lot of people at the same time.”
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gaduroja@tribune.com
