How much are state pension payments worth to Illinois school districts?
In Illinois, public school teachers have two pension systems: the Chicago Teachers Pension Fund, or CTPF, which covers Chicago Public Schools; and the Teachers Retirement System, or TRS, which covers everyone else.
Because CTPF belongs to a single district, it’s easy to see how money flows into or out of Chicago teachers’ pensions. But TRS rolls state payments for all other districts into one big sum, making it difficult to figure out how much any given district is benefiting.
To shed light on this question, CTBA estimated how much each district “receives” from the state on a per-pupil basis thanks to Illinois’ contribution to TRS. These benefits can be broken down into two categories: “Normal Cost,” or the amount that covers the pensions being earned by current employees in the current year; and “Legacy Cost,” the debt service the state owes TRS from decades of underfunding. (See the end of the post for methodology.)
As you can see, the payments are substantial. The average district in the Chicago suburbs received a total of $2,500 per student in state pension payments, ranging from $2,080 in McHenry County to $2,810 in DuPage. Downstate schools received less on average, but still $1,900 per student.
Because CPS is the only district in Illinois with the responsibility to fund its own pension, its state contribution is only nominal.
Another important aspect of this system is that, because pension payments for non-CPS school districts are paid for with taxes collected statewide, Chicago residents pay a portion of suburban and downstate teacher pensions. CTBA estimates that in FY2016, about $230 million in individual income taxes collected in the City of Chicago were used to make the state contribution to TRS.
To estimate the share of the state’s Normal Cost payment belonging to each school district, CTBA found each district’s share of the total state teacher payroll. Then that share was multiplied by the state’s total Normal Cost payment in FY2016 as reported in the 2016 TRS Actuarial Valuation.
To estimate the share of the state’s Legacy Cost payment belonging to each district, CTBA found each district’s share of Net Pension Liability, as reported in TRS’ “Information Required Under Governmental Accounting Standards Board Statement № 68.” Then that share was multiplied by the state’s total Legacy Cost payment for FY2016.