Illinois governor proposes shifting pension costs to school districts, universities

Illinois Gov. Bruce Rauner in a budget address Wednesday unveiled a proposal for school districts and universities in the state to share the cost of funding their pension plans.

Mr. Rauner proposed phasing in the new shared costs over four years in 25% increments and provide local governments and school districts with "increased education funding, the power to dissolve or consolidate units of local government, and more flexibility in contracting, bidding and sharing services," according to a transcript of the address on his website.

Further details and figures were not provided.

Mr. Rauner added that Chicago Public Schools "will get the same offsets as all other school districts in the state, including its portion of the increase under the new funding formula. But, recognizing that CPS got to keep the benefits of its special block grant in the base of our new funding formula, we propose that CPS absorb its normal pension costs as it did before last year."

The Illinois General Assembly in August passed a bill to help prop up the $9.8 billion Chicago Public School Teachers' Pension & Retirement Fund with an additional $209 million contribution from the state. As of June 30, 2016, the Chicago teachers' pension fund had a funded status of 52.4% on an actuarial basis.

Under the bill, the state agreed to contribute $221 million to the Chicago teachers' pension fund in fiscal year 2018, up from $12 million the previous year and authorized the Chicago Board of Education to increase its property tax levy by at least $120 million to help with its rising pension contributions. The required employer contribution to CTPF in fiscal year 2017 was $733 million. The expected contribution for the current fiscal year is $773 million.

Janice K. Jackson, CEO of Chicago Public Schools, said in an emailed statement: "Our state made historic progress just six months ago, and we cannot go backwards. The families, educators and courageous lawmakers who fought so hard to achieve fair funding will not allow their hard-earned progress to be reversed, and together we will ensure Illinois students receive the resources they deserve and were promised."

Also in the address, Mr. Rauner said universities would pay their own pension costs to be phased in over four years, as well as their health-care costs, "with offset tools that include an additional $205 million in appropriations in FY19," he said.

"The simple truth is this: We have to change the way we manage pension costs and group health expenses. If we don't, our finances will continue to deteriorate, our economy will remain sluggish and our tax burdens will stay high and keep rising," Mr. Rauner said. He added the changes will save the state $696 million in 2018.

Rachel Bold, Mr. Rauner's spokeswoman, did not respond to questions by press time.