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New study confirms Tier II pensions are inadequate, harmful to education

3/03/2016

A new study confirms what we have said all along: Illinois’ Tier II pension plan is unfair and woefully inadequate for newer teachers. Worse yet, it’s harming education in our state.
 
Education Week recently reported on the findings in the study by Bellwether Education Partners, a Washington consulting firm. What they discovered is alarming. From the study:
"Seventy-eight percent of newly hired teachers in 2014 are expected to leave the Illinois teaching workforce before teaching 26 years, the point at which a teacher “breaks even” on her contributions. This means that over three-quarters of the state’s newly hired teachers will not receive any positive accrual of retirement benefits."

So, a majority of teachers who participate in the plan will be shortchanged, and many will receive less money upon retirement than they paid into the plan during their careers in public service. That’s not just unfair, it’s unacceptable.
 
Lawmakers spent decades under-funding our state’s pension systems and created the crisis we face today. But the Tier II plan passed by the General Assembly in 2011 is not a fair answer to our pension woes.  
 
Compared to their Tier I colleagues who were hired prior to January 1, 2011, Tier II members must work five years longer to be vested in the system and are not eligible to retire until age 67 — as many as 12 years more than those in Tier I. 
 
The result is drastically lower benefits for newer members – so much so that our union, some lawmakers, and others consistently question whether the plan is even legal
"Public school teachers in Illinois don’t pay into Social Security. Neither do the schools that hire them. The federal government allows this for public sector workers only if they receive benefits that exceed what they would get from the federal retirement program. Tier II workers haven’t started retiring yet, but some analysts are sure that once they do, their benefits will not be enough to qualify them for the Social Security exemption."
Read the rest of this comprehensive story from Illinois Issues here.

More, from Education Week:
"So steep are the scale-backs that without adjustments, the Tier II plan could by 2027 fall afoul of federal rules requiring benefits to be at least as good the minimum benefit promised to workers under Social Security, according to news reports. (Most Illinois public employees do not participate in Social Security.)"

If it goes unaddressed, the state could find itself fighting another costly legal battle, similar to the one it lost last year when pension-slashing SB 1 was declared unconstitutional.
 
What is most troubling, though, is the damage being done to teaching and learning under Tier II’s inequalities. Leslie Kan, an author of the Bellwether study, told Education Week:
"Ultimately, this not only puts teachers' financial futures at risk, but it also could have long-term effects on whether the state can ensure a sufficient, stable teaching force. It makes it a very precarious situation," Kan said. "The state wants to have a robust teaching workforce but they're reaching a point where teachers are going to push back."

Last year, Governor Rauner admitted that Tier II is grossly inadequate when he hired Dr. Tony Smith to serve as state superintendent of schools. Included in Smith’s contract is a big perk – a special annual cash stipend to make up for the lower Tier II pension benefit he receives as a new employee. IFT President Dan Montgomery called it, "…illegal, hypocritical, and a stunning display of the Governor’s real priorities."
 
But rather than work to find a fair and legal path for pension funding, the Governor has pushed his irresponsible priorities. Last year, he suggested that Tier I members accept lesser benefits, essentially forcing them into a new Tier III plan. Included in his 500-page proposal was a “poison pill” to restrict the collective bargaining rights that give teachers, firefighters, nurses, and others a voice in their working conditions and professions. The IFT and our We Are One coalition of unions flatly rejected the illegal and purely political plan.
 
Still, Governor Rauner continues to demonstrate his unwillingness to find real pension solutions and to instead wage a personal war against teachers, firefighters, nurses, and other workers. In January, he announced his support for a so-called “consideration” model, which would offer public employees a "choice" between two diminished benefits: either give up cost-of-living-increases or including pay raises in the calculation of your retirement benefits. Unsurprisingly, his latest plan also includes a provision to eliminate workers’ rights to bargain salary increases with their employers. The IFT and We Are One Illinois responded:
"…Rauner's latest proposal is irresponsible and divisive. Slashing retirement security by forcing workers to choose between two diminished options is clearly unconstitutional. And to no one's surprise, poison pills in the governor's plan would wipe out the right of working people to have a collective voice on the job on behalf of their families and those they serve…."

As in many other areas, it is clear that Governor Rauner does not share our values, and he is not looking out for the best interests of Illinois students and citizens. Despite his rhetoric, the Governor’s actions are hurting our communities, making regular women and men sacrifice while refusing to ask the very wealthy to pay their fair share. 

The IFT and our We Are One Illinois coalition will continue to advocate for our members to address this important issue and find fair, legal solutions to the challenges we face.
 
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