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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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The whole concept of “80% pension funding is healthy” is based on a faulty understanding of pension accounting in the corporate world. The 80% goal isn’t an esoteric concept, it is a mathematical product of how companies measure the discount rate of their pension obligations versus the expected rate of return on their pension plan investments. Since governments use different assumptions than corporations, that 80% target is meaningless. In fact, based on the assumptions used by the public pension systems, the target rate should be 100%, mathematically-speaking.
Why are pension advocates so enamored with *not* wanting to fully fund pensions? I constantly hear excuses as to why 100% funding isn’t necessary even though it’s mathematically the one true way to guarantee pensions for all retirees. Wanting anything less than 100% funding is anti-science.
My guess is that such people think (realize!) achieving 100% is the impossible dream scenario. There ALWAYS has been—and will be—politically appealing causes of higher priority to our legislators. After all, they want to be re-elected, don’t they?
I agree with you nixit. Let’s fund these to 100%. We need more taxes and/or less spending elsewhere to do so. Where do you suggest we get the additional revenue? We need about 5 billion more per year going to pensions to stop digging deeper.
Keep in mind the pension “reformers” don’t want to fully fund them either. They just want to magically say we don’t owe as much.
Take the revenue from the existing compensation pool of money for any participants of the pension systems. Since that’s where they borrowed from to begin with when they were shorting the pensions, it makes sense to start there. Once that solution has been executed to its full extent, they might have to raise taxes, but that would diminish and impair my own retirement, which is unacceptable. I’m going to expect fiscal compensation in return if that’s the route we go. What’s the state offering me?
No one wants to fund the pensions because it’s mathematically impossible to do so, even if the diversion of every tax dollar into pensions made the entire state look like blighted East St. Louis. PPF keeps saying “raise taxes or cut services” but it’s pretty clear that both options together, even using the most aggressive scenarios, isn’t enough to fully fund the pensions. There are many third options but PFF willfully ignores them like they violate the law of physics or something. But the pension crisis is a man made problem that will inevitably involve a man made solution, and… Read more »
Whatever pain is required to solve the pension issue must be equally distributed. Raising my taxes, which diminishes and impairs my retirement while simultaneously enhancing the retirement benefits of current pension participants, is unequal. Why would I accept such a discriminatory solution?
It’s not discriminatory. All taxpayers (including public employees) are required to pay. The pensioners are owed the money and the taxpayers owe it. It’s that simple. It doesn’t impair your retirement any more than any other bill or tax that you are required to pay.
” It doesn’t impair your retirement any more than any other bill or tax that you are required to pay.”
This is exactly what a pension pilferer would say
Don’t be a deadbeat debtsor. The taxpayers of Illinois owe the pensioners. Anyone trying to change those terms is a thief.
Ok Grifter!
So says Mike Madigan who paid in $351,000 into his own pension but is expected to receive $2.9 million.
But da contract clause, dose contract clause, pay me, pay me, I earned dat pension!
Question. What is the actuarial table for a pension based on? Is it based on life expectancy tables set by the government? That would make it 77 for men and 81 for women. So is the under funding based on that? What happens if there is a cure for cancer or heart disease and average life spans are increased? Reason is a friend is a retired union carpenter out of Chicago and looking at his pension info it seems to indicate that the pension is only guaranteed for 5 years and after that the pension amount can be altered depending… Read more »
I don’t know the answers you want directly, but maybe you know that roughly 18-or-so months ago the federal govt. changed the RMD schedules which were to be in effect starting Jan. 1, 2022. Meantime the COVID situation ramped up and might well have altered life span expectations. But, assuming no change in that law here is what a posting on Google hasxto say: “For example, if you take your first RMD in 2022 at age 72, your distribution period is 27.4 years (vs. 25.6 years, based on the old table). When you turn 74 it will be 25.5 years… Read more »
Thanks.
Bottom line: Politicians declared ‘pension holidays’ and failed to fund adequately. In essence, they borrowed from the pension funds to support their agendas, ignoring the obligations negotiated by state and local governments.
I do not receive a pension, but understand that a contract is a contract. The 1970 amendment was a compromise to protect pensioners because underfunding seemed inevitable as politicians diverted funds in order to maintain their positions.
Don’t blame pensioners, go to the root cause: the politicians who diverted funds from the state’s contractual obligation.
They borrowed from the pensions so they could pay for increased healthcare benefits and wage increases that enhanced their pensions. I will not diminish my retirement until this is resolved.
If only it was your choice.