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Summary and audio linked here.
Chicago’s political leadership is floating a pension buyout program as evidence it is seriously addressing the city’s thirty-six-billion-dollar unfunded pension liability, but Mark Glennon, founder of the Illinois policy research organization Wirepoints, said that the proposal moves debt from one column to another rather than reducing it, and that the broader fiscal picture facing the city continues to deteriorate across every measurable dimension. Audio here.
Expect no retraction or apology. This what they do.
The state’s existing buyout program for its own pensions is the precedent for Chicago, which should be a warning: Look out for similar exaggerated claims and shoddy analysis.
Full interview and summary linked here.
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There is little to no hope of solving the pension crisis except in Federal Court. Every year the pension debt grows like a cancer (and it is one). Overley generous pensions for years and years are unsustainable. The wealthy taxpayers are fleeing the state and leaving low-income families to pay for a debt that they cannot.
Some other notables in HB4098 that need a deeper dive: Looks like the original plan of 90% funding by 2045 is now 100% by 2050 (pg 160) JRS and GARS are closed to new participants beginning in 2025? (pg 219,243) Participation in the retirement system created under this Article is restricted to persons who became participants of the System before January 8, 2025. Beginning on that date, the System shall not accept any new participants. Tier 2 retirement age would move up from 67 to 62 w/ 35 yrs service and 64 w/ 20 yrs service (pg 346). I assume… Read more »
I missed it – what’s in the omnibus for taxpayers?
Fixing tier 2 pensions before it becomes a more costly for starters.
Putting additional funding towards pensions.
Moving to 100% funding from 90% funding.
These are all things that benefit the fiscal health of Illinois and ultimately that is good news for every taxpayer. The current situation in Illinois is the direct result of not doing these types of things earlier. Pay more now or pay even more later.
So, tier 2 pension fix in hb4098 should be limited to making changes to meeting safe harbor requirements ONLY, as any benifit changes in addition to safe harbor would not be in taxpayers interest? Correct?
“as any benifit changes in addition to safe harbor would not be in taxpayers interest? Correct?” Not really. Taxpayers are funding services that they desire and vote for. If elected leaders believe that tier 2 benefits need to be enhanced beyond safe harbor, they are free to provide greater benefits. By definition, all spending benefits some of the taxpayers. While you or I may not see the benefit in such spending, other voters may believe it’s valuable. If it doesn’t meet the majorities will, the people will choose different leaders to decide future budgets. Everyone complains about spending that doesn’t… Read more »
Check out my 3rd point. It seems like they enhanced Tier 2 by lowering the retirement age, at least that’s how I interpreted it. Seriously, a little help?
I would also like to see what extending the amortization plan 5 years does for yearly payments. It’s good that they moved to that target but I suspect the motive was more so lowering the yearly payment than proper accounting.
Not sure if lowering the age was done to enhance tier 2 beyond safe harbor or if that was a method used to help bring into compliance.
Right, they never specified what changes needed to be made, only that it would cost more. But knocking five years off full vesting seems like a big deal because that also has the effect of eliminating the penalty for “early” retirement.
This bill includes something called a DROP plan. It guarantees 7% compounded interest. Amends the State Employee Article of the Illinois Pension Code. Creates a deferred retirement option plan (DROP) for a member who is otherwise eligible to retire under the Article; is a State policeman; holds the rank of trooper, special agent, or sergeant; and makes an election to participate in the DROP on or before January 1, 2027. Provides that a participant in the DROP may elect to participate for a period of time not to exceed 5 years. Provides that the System shall process the election and… Read more »
Thanks, even if i don’t understand it.
This may well be what this is all about: Not Certain Actuarial consultant says Tier 2 pension payments should rise by $5.6 billion through 2045 to put state in compliance with “safe harbor” provisions The Commission on Government Forecasting and Accountability hired the actuarial firm Segal to look at “safe harbor” questions surrounding the Tier 2 pension systems. The report was written by Senior Vice President & Consulting Actuary Matthew Strom… As requested, we are providing narrative and analysis regarding the impact of changes to the projected costs of the Teachers’ Retirement System of the State of Illinois (TRS), State… Read more »
What is “the drop”?
403 pages.
Apparently HB4098 is just some giant open end bill with overall theme of adding $500 mil a year funding and meeting minimum “safe habor” requirrementts for TIER II? But in reallity nobody knows , except martwick and a few others, what going to be added in untill fall at last minite as usual
IL’s version of pension reform
Great, so HB4098 is just the first, of perhaps, several new pension bills?:
Well, you and others are asking for pension reform and your elected leaders are working on it. As everyone knows, the pension funds need more money and while this isn’t enough, it at least is a move in the right direction. Pay more now or pay even more later.
I assume from your previous comments, if your a TIER I retierie or current TIER I gov employee your ONLY in favor of whatever ends up being passed in HB4098 as it benifits YOUR pension? And your opposed to any additional benefits and/or funding added in HB4098 for TIER II employees that will not benefit YOU? With possible exception, you feel some obligation to meeting “safe harbor” legal requirements for TIER II?
You’re assuming a LOT THERE, Bubba! I presume you know about how some people comically denigrate the word assume. If not, I could elucidate.
You made incorrect assumptions and are reading into the statement way too much. We do not and have not been fully funding pensions. They will have to be paid so we should start putting aside more money for them. The other option is to wait and owe even more money later. Voters choice.
I’m only going by previous comments you made where I believe you stated the only way to fix pension mess was to 1.) increase taxes or 2.) cut spending? It seems HB4098 has several goals to this point. It increases pension contributions, still far short of actuarial recommendations, by $500 mil for TIER I & TIER II pensions. So I assume if your TIER I your all for the $500 mil funding increase, a portion of which will go to fund YOUR TIER I pension. But then HB4098 includes all kinds of other provisions in +400 page bill, (changing funding… Read more »
“But, if your a TIER I retiree or current TIER I gov employee beyond the added $500 mil pension funding all the other provisions that are in bill or could be added are NOT a benefit to YOUR TIER I pension deal” You continue to believe that tier 1 pensions being paid are contingent on the funding level of the pension funds. This is not the case. Pension funding is more of a report card on the states future finances than the pensions themselves. Plenty of money for pensions under “pay go” but it will squeeze out other services and… Read more »
good answer. But I was more asking your opinion about TIER II benefits being added IN ADDITION “to comply with safe harbor rules” and possible cost or projected cost. HB4098 seems to already be adding such provisions with no idea of cost. You got R. Martire, for example, in press already calling for increasing benefits for TIER II beyond “safe harbor”.
You’re asking me to comment on something that is not in the bill and is just more speculation on your part. I’ll play along though, my position is that I don’t think we should start any new spending programs that aren’t required until our budget starts paying annual actuarial payments to pensions. Then we can add new spending. That new spending will then have to compete with other wish list items. Would the voters prefer enhanced tier 2 pensions to better attract future employees or would they rather have all day kindergarten? If they want both? Well then taxes will… Read more »
Great post!!!
My pet peeve on this is why are we funding this sanctuary city crap when we should be funding, like it or not, the legally approved pension liabilities?
dumb question for PPF & James, since your the “grownups in the room”. What state are requirements, if any, for how TIER I & TIER II pension funds allocated within each pension? Are two separate accounting statements required?
“What state are requirements,” Your sentence doesn’t make sense to me. If you are asking if there is separate funds for tier 1 or tier 2 then the answer is no. There is also no requirement (other than self imposed laws that the state can change) that pensions funds are actually funded. The only requirement is that pensioners receive their pension check. No pension fund? The state will be writing checks out of the general fund. You seem to be hoping that you can pit tier 1 pensioners against tier 2 pensioners. It doesn’t matter. The state is on the… Read more »
Got it. “The state is on the hook either way.” So tier 2’s irrelevant
It is high time those pension funds get the adequate funding that they are due. Regardless of assorted opinions the tier 1 pensions are the law of the land in Illinois and need to be funded. With any luck spending in other areas will be cut but don’t hold your breath. My thoughts are tax and fee hikes are on the way but we shall see. On the good side perhaps spending cuts and/or tax hikes will wake up Illinoisans to the problem but don’t hold your breath; I know I won’t.
Except that compliance with virtually all IL laws other than that of gravity is optional because laws are selectively enforced. That’s particularly been the case with balanced budgets and pension funding. These days, “need to be funded” is precatory — wishful thinking at best.
We should all keep on breathing while contributing to legislators and judges who will continue to do whatever they think necessary to be re-elected in the hope that their own successors will continue to refill the punch bowl.
‘To sleep: perchance to dream: ay, there’s the rub.’
“These days, “need to be funded” is precatory — wishful thinking at best.”
Wonderful comment for IL, especially! So many things in IL need to be funded by the taxpayer … until they don’t.
Until they don’t doesn’t apply to pensions or repaying bondholders. Reparations, expanded medicaid, all day kindergarten, etc… do not. The state will eventually be forced to choose between optional spending and additional taxes. The sooner we start fully funding pensions the sooner we can come to that reality. It’s up to the voters though and they don’t seem too worried about it, unfortunately.
It is the taxpayers and not the State that is on the hook but no big deal; my neighbors ; all inform me about the wonderful new Public Safety building we have this year. Life is so wonderful in Illinois. My brother in law even admits how great Illinois is to its neighboring states.
Those pension obligations will not be ignored. They have constitutional protection plain and simple. Illinois real estate will be confiscated to pay those pensions if need be and sadly I wont live long enough to see that but I wish I would. The smug faces of Illinois know it alls having their property confiscated for their not demanding their elected representatives pay the bills would be a fun watch.
The constitution is just one aspect of “law of the land.” The Constitution requires a balanced budget. Here’s what that means: “We are constitutionally required to have a balanced budget passed by the legislature, signed by our governor before we enter our fiscal year. It’s a constitutional requirement that’s being totally ignored,” [Leslie] Munger said, during an October 5, 2016, news conference. Ignored just like full actuarial funding of pensions is being ignored. The same constitution says “The State shall provide for an efficient system of high quality public educational institutions and services.” How’s that going for efficiency and high… Read more »