Alliance Legislative Report 97-51

Distributed via Email: May 16, 2012

LET LEGISLATORS KNOW OF OPPOSITION

With just two weeks left before the scheduled legislative adjournment date, the Illinois General Assembly may be getting close to voting on pension legislation. Plans include shifting the state’s portion of the Teachers’ Retirement System (TRS) pension liability to the local school district or taking away all of the Corporate Personal Property Replacement Tax (CPPRT) that currently flows to school districts and sending that money to the pension systems. Votes on these measures could occur today or tomorrow.

School board members, superintendents, principals, and school business officials are urged to call their State Representative and Senator today and ask them to oppose these pension proposals. Even if you have contacted your legislator already, please do so again. Legislators have repeatedly stated that they have not heard from Alliance members on the issue of the pension cost shift.

PENSION COST SHIFT – REAL COST TO DISTRICTS

• If the legislature shifts the “normal costs” of the TRS pension liability to local school districts, each school district will be required to pay 7.65% of its TRS payroll to TRS each year. This would total approximately $700 million statewide in the first year.
• This cost shift could be due and payable immediately in Fiscal Year 2013.
• There will be no property tax levy to assist school districts in funding this new requirement.
• If the state’s unfunded liability (above and beyond the “normal costs) is also shifted to local school districts – a proposal that is on the table among legislative leaders – the statewide cost to local school districts could jump to nearly $1.2 billion in FY 2014 (and above $2 billion in the out-years).
• The Moody’s Investors Service has issued a publication this month that states that if the pension costs are shifted to local school districts, there will be negative effects on the districts, including lower bond ratings and, therefore, higher costs for school districts.

CPPRT PROPOSAL – REAL COST TO DISTRICTS

• If all of the CPPRT funds are diverted to the state’s pension systems, over $1 billion will be taken from local governments and school districts.
• The first proposal would take CPPRT money away from school districts outside of Chicago – $536 million that is now being used in local school district budgets.
• The second proposal would take CPPRT funds away from school districts and all local governments outside of the Chicago -- $982 million worth.
• The third proposal would take CPPRT funds away from all local governments and school districts including the City of Chicago -- $1.4 billion worth.
• CPPRT funding is part of the General State Aid school funding formula and eliminating these funds would create even further strain on the State budget regarding school district funding.

OTHER TALKING POINTS ON ADDING NEW COSTS TO SCHOOLS

• Shifting the pension costs to the local school district will mean a cut in the education program.
• Explain exactly what cuts would have to be made locally to make up for a 7.65% cut in the TRS payroll.
• Because of education labor laws, it is too late for school districts to lay off teachers for the 2012-13 school year.
• Collective bargaining agreements are currently in place in school districts, making it difficult to make required cuts until the bargaining contracts expire.
• In current FY 2012, GSA will be prorated at 95%, likely resulting in the loss of the final state aid payment to school districts.
• According to the State Superintendent of Education, education funding has declined by nearly $660 million since FY 2009.
• The current statutory GSA foundation level is $6,119 per pupil; the current year’s actual level will be $5,953 per pupil. With possible additional cuts to the K-12 budget, the foundation level could be decreased another $300 - $500 per pupil.

This legislative report is written and edited by the lobbyists of the Illinois Association of School Boards to provide information to the members of the organizations that comprise the Statewide School Management Alliance.

Bill Text/Status: Illinois General Assembly www.ilga.gov

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