Aug. 25--Turns out that boosting public employee pensions isn't only about the laws awarding those guaranteed, 3 percent annual cost of living increases. It's also about timing.
In some communities where workers pay into the Illinois Municipal Retirement Fund, soon-to-be retirees have been relying on a little trick to increase their retirement income. They cash out for severance, unused vacation or sick days, or receive bonuses -- yes, bonuses -- in the months leading up to their retirements. That way, their overall salary for that final year is bigger, and that's a key factor in calculating the pensions they'll receive for the rest of their lives.
These public servants avoid laws that aim to stop so-called pension spiking by timing those payments just right -- near their retirement date but not in the last three months leading up to it. That way, they can get around laws that cap salaries in the final three months of employment -- the laws that were designed to stop pension spiking.
What's the saying, that rules are made to be broken? That's glib -- if often disastrous for others. This is a case study. And the others in question are, yes, taxpayers.
The state, drowning in the red ink of pension debt, has taken steps in recent years to limit pensionable salaries after it became commonplace, particularly in school districts, to give administrators, teachers and staff members huge raises at the end of their careers. In some districts, back-to-back, 20 percent raises in the final years of an educator's career were not uncommon. The spiked pay boosted pensions.
This was easy to do because the state (you, taxpayers) -- and not the local school districts who were giving away all this money -- picked up the added costs.
Oh -- and the generous school board members were heroes and heroines to the teachers unions, which tend to play a big role in electing ... school board members.
Turns out that municipalities have their own pension tricks too. But these tricks impact local property taxpayers. So if you're wondering why your property tax bill is so high, here's one answer.
The Tribune's Joe Mahr last week outlined some of the most egregious abuses in an article that should enrage all of us who fund them (you'll find it at chicagotribune.com/spiking.) Mahr found that late-career pay hikes in IMRF alone cost taxpayers at least $66 million in additional pension costs, just since 2012.
The kicker? Nobody really wanted to change the rules, even in the face of growing pension obligations, because officials with positions of power benefited from the system. For example, when a DuPage County Board member pushed to change the perk, the state's attorney's office wrote a legal opinion saying it would be unconstitutional to do so.
Wouldn't you know it? The very same perk helped a supervisor overseeing the division that issued opinions. He boosted his salary before retiring from roughly $69,000 to $82,000.
On and on it goes. Similar to its effort to curb pension spiking in school districts, the state passed a law to penalize local governments that awarded overly generous raises in the years before retirement. But -- thank you for this, Illinois lawmakers -- the law was so riddled with exemptions, many towns wriggled free of those penalties.
Others didn't. Bloomington, for example, paid the highest penalty statewide of $358,000 for its extreme generosity to ... one person. The city's human resources director had retired and used the perk to jack up her pension from about $92,000 to almost $113,000. Bloomington taxpayers were on the hook for that, along with other, smaller pension spikes.
The best way to tamp down on these abuses is for local governments -- villages and cities, townships and county boards -- to take a look at their existing statutes and make specific and binding changes. IMRF says it tries to discourage pension spiking. But that hasn't stopped the practice. Maybe IMRF ought to try a lot harder. One option: Publicize which local governments across Illinois are selfishly adding this stress to the fund.
Albert Einstein: "You have to learn the rules of the game. And then you have to play better than anyone else."
So far, the ones getting "played" are taxpayers. They need stricter rules. Local officials: This one is on you.
