Illinois’ Teacher Pension Plans Favor White, Affluent Students

Report says pension plans deepen school funding inequities.

Illinois’ statewide teacher pension plans exacerbate school funding disparities, according to a new report from nonprofit Bellwether Education Partners’

According to the report, teacher pensions increase funding inequities because they are derived from teacher salaries, which are unevenly distributed across schools.

 “We found that spending on teacher pensions is yet another way that states invest fewer resources into schools serving the highest concentrations of low-income students and students of color,” said the report.

The report, “Illinois’ Teacher Pension Plans Deepen School Funding Inequities,” scrutinized the impact of pension spending in Illinois on school finance equity. It analyzed 10 years of Illinois educator data between 2003 and 2012. For those years, the state of Illinois made available a database on every educator in the state, including how long they had served and how much they earned.

After culling the data, aggregated educator salaries to the school level and calculated the pension contributions using the state’s actual contribution rates. It then paired that data with each school’s student demographics. The organization said this allowed it to track school-level salary and pension spending, and compare it with student poverty rates and student racial demographics.

“The most experienced teachers, and thus the highest paid, are much more likely to work in low-poverty schools and serve a lower percentage of students of color,” said the report. “Because pension contributions are made as a percentage of salary, teacher pension systems mirror and amplify any inequities in the way teachers are distributed among schools.”

The report found that, on average, the funding gap between high- and low-poverty schools is $582 per student. However, once pension spending is factored in, that disparity grows to more than $1,200 per student.

“The effect of pension spending on funding inequity is even greater when looking at student race,” said the report. “Pension spending increases school funding gaps by race by over 250%.”

Across the state, the salary-based gap based on student race is $375 per pupil, said the report. However, pension spending alone accounts for a difference of $566 per student, and, after accounting for pension spending, the gap more than doubles to $941 per student.

“Pension spending in Illinois affects school funding equity so significantly in part due to the fact that there are two pension systems operating in the state,” said the report, “one for Chicago Public Schools (CPS), and another for the remaining districts.”

According to the report, CPS funded their pension system at a lower rate than the state did for its pension system. And since a majority of the state’s highest concentrations of nonwhite students, and high-poverty schools are located in Chicago, this widened the funding inequities. However, the report also said that even if all districts were a part of the state pension system, pension spending would still exacerbate inequities due to the underlying disparities in teacher salary distribution. 

“Understanding that the issues with teacher pensions extend beyond questions of retirement and even the long-term fiscal health of state education systems is crucial to both improving the pension system itself,” said the report, “and to more completely addressing school funding gaps.”

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