Seven years ago, Illinois lawmakers tried to curb the practice of "pension spiking" by school districts.
Local districts would award huge pay hikes in the final years of a teacher's or administrator's career, which boosted his pension payout. The school district had to pay only for the short-term spike in pay, but the state pension fund was on the hook for years, even decades, of higher pension payments based on salary. Local school boards got to play Santa Claus and send the bill to Springfield.
In 2005, lawmakers capped the pension fund exposure to this scam. The pension impact of any annual pay hike above 6 percent in the last four years of an educator's employment would have to be covered by the local school district. But with compounding, that still meant an employee's pay could rise a whopping 26 percent over four years — with the pension costs picked up by the state-funded pension system.
So how has this played out? Exactly like you'd expect. Some local districts spike pay as much as they can under the law. ...More HERE
