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Suburban/downstate pension “free lunch” vs. Chicago “7-course meal”

Illinois is currently responsible for the employer pension contribution for the Illinois Teachers’ Retirement System (TRS), while Chicago is responsible for the Chicago Teachers’ Pension Fund (CTPF).

As a result, the Illinois TRS contribution has been described by Illinois Speaker Madigan and others as a “Free Lunch” for suburban and downstate school districts during pension reform discussions.

What’s missing from these discussions is the “7-Course Meal” that Illinois provides to Chicago in extra school funding over and above the funding provided to school districts with similar property values.

Click for full-size printable PDF chart

The chart at right shows School District Revenue per Student, and the blue bar is revenue from Illinois.

The “Free Lunch” is $483 per student paid by Illinois directly to TRS for normal pension costs, which is expected to total $0.7 billion next year. This amount was added to the chart to make it apples-to-apples with Chicago, which is responsible for its pension costs.

The “7-Course Meal” is $3,479 per student in extra school funding for Chicago from Illinois. This is a total of $1.2 billion in extra funding from Illinois.

Chicago’s extra funding from Illinois is a subsidy from suburban and downstate taxpayers that keeps Chicago property taxes far lower than other communities (see Why are Chicago property taxes so low?).

There have been several proposals of a “cost shift” of the “Free Lunch” to local school districts as part of pension reform discussions in Springfield. Rather than include the “cost shift” in the complex pension reform discussions, this should be part of Illinois school funding reform.

One of the reasons often mentioned for the “cost shift” is to establish greater local accountability for end-of-career “pension spiking.” This can more easily be addressed as separate legislation: A simpler solution to “pension spiking”

Illinois school funding reform should include fixes not only for the “7-Course Meal” and the “Free Lunch,” but also how Illinois school funding policies contribute to the glaring disparity in school property tax rates between various communities.

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