November 30, 2013 By: Mark Glennon
John Bury is an actuary and a nationally recognized pension expert in New Jersey, who writes regularly about public pension plans around the country. I sent him the link to the outline of Illinois’ pension deal that was released yesterday and asked him to take a look. He sent this response, which is also on his site:
UPDATE (3:00 PM, 11/30/13): Mr. Bury wrote up his critique of the pension proposal point by point, which is linked here. It’s specific and hilarious. Our legislators, he says, in order to come up with something they could pass off as fulling funding the pensions, came close to just saying they will put $1 trillion into the pensions in 2044. His original comments are here, and enlightening:
Unnecessarily complicated (and certain to bring about years of litigation).
The State gov’t of Illinois needs to declare a fiscal emergency and hard freeze ALL of the DB Plans for all CURRENT employees. Replace them (for FUTURE service) with a modest DC Plan with a 3-5% of pay Taxpayer “match” just as is common practice in the Private Sector.
Nothing short of this will prevent the entire State from becoming insolvent (even though there isn’t a snow-balls-chance-in-hell that they would do so). While the linked changes do produce some savings, those savings are woefully inadequate and deferred WAY too far into the future year to prevent that insolvency.
To summarize…it’s business-as-usual for Illinois politicians….,a plan with no “meat” on the bones.
If you are depending on anywhere near your full promised pension to survive in retirement, I suggest you seriously start working on a “Plan B”.
I especially like the idea of declaring a ‘fiscal emergency.’ It has no real legal significance but would wake the state up to the gravity of our problems. It should have been done at lease eleven years ago when it was first apparent the Illinois was broke, as I wrote that it was then. Chicago should do the same. Instead, we have both Democrats and Republicans saying things like “there’s no crisis” and that the pension deal represents “comprehensive reform,” which is laughable, and leaves the state still in denial.