The claim that D39 spikes salaries prior to teachers’ retirement is false, and is spread by a group with an agenda to cut real spending for D39’s educational programs.
State rules discourage pension-spiking and provide for fines. D39 is clearly against raising salaries before retirement by more than 6% (known as “pension-spiking”), and has negotiated one of the most anti-spiking contracts in IL. However, Districts (including D39) may from time to time pay fines for reasons beyond their control when a teacher does not give notice as intended.
BACKGROUND: Pension calculations are based on a teacher’s average salary during the last 5 years of employment. Five years pre-retirement, teachers, from time to time, took on extra duties (e.g., lunch duty, coaching) resulting in raises over 6% in their final years. These wages determined annual pension. If a teacher’s salary increased over 6% in any of the five years before retirement, the increase has been characterized as “Pension Spiking”.
IL’s REMEDY AND DISTRICTS’ CONTRACT NEGOTIATIONS: The State fines a District if a teacher gets a raise of over 6% in any of the 5 years before retirement. Teachers noted that non-retiring teachers are able to supplement their salaries by adding duties and advancing educationally, in excess of 6%, and that treating retiring teachers differently is unfair. In response, many Districts throughout IL collectively bargained to grant teachers a 6% raise for each of the 5 years before retirement, and no more, so long as the teacher gives notice 5 years before retirement, irrespective of extra duties or educational advancement.
D39 CONTRACT HAS ADDITIONAL PROTECTIONS TO PREVENT SPIKES: D39 is one of the only districts that has negotiated a 5% pre-retirement annual raise (not 6%). By locking teachers into a 5-year deal, D39 ensures the raises of retiring teachers will stay at 5%, and prevents a 6%+ pension spike.
EXAMPLE OF A POSSIBLE PENALTY SCENARIO:
- 2016 – Teacher Smith sees a one-year salary increase of 7%, comprised of (i) CPI-based raise; (ii) salary adjustment for Smith’s educational advancement; and (iii) Smith taking on extra duties.
- 2018 – Smith retires unexpectedly. Smith is penalized for failure to give 5 years advance notice, but retires anyway for personal reasons.
- RESULT: D39 is fined because Smith received a 7% pre-retirement raise.
- ECONOMIC IMPACT: Even when a penalty is imposed, it often ends up being financially advantageous for D39 and the State. A 7% raise in one of the 5 years prior to retirement generates a fine. But, that fine does not necessarily outweigh 5% raises x 5 years. In many cases, it is less of a financial hit for D39 to pay a one-time fine on a 1% overage versus paying 5% raises for 5 years. The State benefits as well, because (in this scenario) the teacher’s final pension will be lower than what it would have been under 5% x 5 years.
BOTTOM LINE: The “spike” & “fine” scenario above is outside of D39’s control. Without notice from the teacher, D39 cannot cap the teacher’s raise. It does not happen often – particularly because the teacher is also penalized. D39 has built retirement & notice incentives into its contract (which is also advantageous from a planning perspective). Since instituting these changes, D39’s “spike fees” have reduced.