UPDATE 10/1/17: TRS, which is over 60% of the state’s pension system, now says they won’t be able to implement Tier 3 changes until next fiscal year, per a JournalStar article linked here. So, very little of the supposed savings of $500 million per year assumed under the new budget will be realized.

The Better Government Association has a “Whodunit” article this week questioning the supposed savings of $500 million dollars per year from adoption of the “Tier 3” changes in the state pension system. Nobody can prove up that number, and it appears very clear only part of whatever savings there are can be realized this year because the changes will take time to implement.

First, here’s the real answer on “whodunit,” which you might not conclude from the article: Somebody on Rauner’s former staff who just made up the numbers — for which Rauner deserves blame. But the General Assembly is just as guilty.

Rauner put out the Tier 3 proposal and the $500 million claim in February, as the BGA points out. Rauner changed out most of his staff in July and August. Think maybe the former staff person responsible is “former” because of things like this? Yup.

The BGA is right to question the numbers. If the claimed savings are near correct it’s just luck because nobody has professionally scored how the changes will work out. I doubt the numbers are right. We’ve written about other surprises, smoke and mirrors in the budget few in the General Assembly understood and this is just another.

Democrats in the General Assembly and some in the press were quick to blame Rauner, saying they just copied Rauner’s proposal and his numbers.” This was adopted at the recommendation of the governor,” said Rep. Greg Harris, the Chicago Democrat who is the party’s chief budget negotiator in the House. Crain’s put their own headline on the BGA story to focus the blame on Rauner: “This Rauner pension stopgap doesn’t add up.”

Oh, come on. The budget with the Tier 3 changes was passed six days after the new fiscal year had already started. It takes no pension expert to know that complex changes can’t be implemented immediately. And did anybody ask whether an actuary had looked at the proposal or if somebody else qualified had scored it? Did they ask to see any analysis? No, not that anybody has identified.

Blame Rauner’s former staff and therefore Rauner because the buck stops with him. But blame all in the General Assembly who voted for it, too.

The biggest lesson here is one you should already know: Don’t believe anything about savings from a pension reform proposal until some credible professional analyzes and scores it.

We’ve been similarly snowed before by both parties. Most recently, Rauner and many Democrats have claimed almost $1 billion per year can be saved from the “consideration” approach to pension reform. The press repeats that unchallenged. But nobody has ever produced an actuarial analysis or anything else credible. I’m extremely doubtful something even close to $1 billion could be saved under that approach.

It’s all just another chapter in the prevailing, fictional version of Illinois’ financial crisis.

Mark Glennon is founder of Wirepoints. Opinions expressed are his own.


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2 years ago

What are the chances Michael Madigan did not know of the issue when the House overrode the Governor’s veto of Senate Bill 42 which became Public Act 100-0023.

If he’s as disciplined and detailed as is commonly portrayed, especially with a data point on a significant topic coming from his arch rival, Governor Rauner, the likelihood would seem to be about zero.

So was Michael Madigan, and John Cullerton for that matter, sloppy and not fact check the claim, or what is really going on.