Illinois Reverses Course on Salary Cap Bill that Would Mitigate Benefits

Illinois Gov. J.B. Pritzker has reversed course on a salary cap offering that intended to inhibit “pension spiking” practices, where school district employees would boost their salary to the maximum amount permissible just before retiring to increase their retirement benefits. The state’s teachers’ retirement system calculates retiree benefits by discerning the average amount of an employee’s highest four consecutive years of salary within the final 10 years of their career.

The state legislature approved a 6% end-of-career salary cap to state district employees 14 years ago, in an effort to stem the tide of pension spiking. Any increases above 6% would mean that taxpayers would have to pay increased contributions—so the employees decided to max out that 6% every year before their retirement

The issue led to lawmakers in the state slashing the salary cap limit down from 6% to 3% in last year’s budget proposal. However, the new budget brought it back up to 6% again.

A representative for the TRS told CIO that it was “not too consequential of a decision,” and didn’t influence the overall funding level of the pension fund much. In fact, the pension fund did not even have a chance to implement last year’s 3% threshold on salary cap adjustments.

Advocates for the removal of the 3% say that the 6% cap makes Illinois an attractive job market for those in the educational industry. “Restoring the 6% threshold means we are allowing districts to attract the best and brightest to their schools,” Illinois Education Association President Kathi Griffin said in a prepared statement.

The IEA asserts that the law penalized veteran educators on an unjust basis, and had the potential to significantly reduce lifetime earnings for all teachers in the state.

“The 3% was simply a cost shift putting the financial burden on local taxpayers and college students instead of the state,” the IEA wrote in a statement on the issue.

Tags: Illinois, J. B. Pritzker, Pension