-- Connecting the dots between our economy, government and business --
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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Communities will be forced to decide as household income is forced to pay higher and higher percentages toward property tax obligations for defined-benefit pension obligations instead of food/children/housing/pets/personal medical/personal retirement.
Then, communities will disintegrate. The math just doesn’t work.
The Illinois Police and Fire pension plans are basically unsustainable. The Illinois Constitution’s prohibition on adjusting pension benefits, the cost-of-living adjustment that for many years exceeded the CPI, high participant accrual rates, participants length retirement, which can easily exceed 2x the work career, low age of retirement eligibility, the minimal participant contribution rates (<10%), the required asset allocations and local governments’ historical underfunding of plans with the use of antiquated actuarial tables all contribute to the deep hole the plans are in now. Eliminating Tier 2 will only exacerbate the problem. I deeply appreciate our first responders. They do difficult… Read more »
Yes, but but something like 3/4 of the overall annual cost to taxpayers results from the decades long interest that’s been allowed to accrue because of continually underfunding the pension systems at their full actuarial levels. So, the amount that annually goes to retirees is 25% of the state’s payment. Investors and bankers get the other 75%. You may be one of those who choose to blame retirees, but if you were to continually underpay your own annual debts at some point the courts would blame YOU rather than the amount of debt you chose to allow to accrue!
James,
While I agree with your assessment that the absurd overall annual cost to the taxpayers is the result of underfunding, investors and bankers are not getting the other “75%”. That other cost associated with underfunding is the opportunity cost of not having the additional investments paid in an actuarial manner along with the investment growth that would have followed. That other “75%” or whatever the exact number, isn’t being paid to banks or investors it merely represents and underpayment to ourselves. Essentially, the taxpayers of yesterday borrowed from the taxpayers of today.
Well said as usual.
I wouldn’t put a number on what % of the deficits are due to past underpayments, but the pension challenge has been well known for 30 years or more, I’d guess. Even today, with the law requiring funding to just 90% by 2040, is postponing the reckoning. “Investors and bankers get the other 75%” ? I’m unclear on this comment/ If the funding deficit is to be reduced (and it doesn’t appear to be, because the deficit continues to grow, the money needs to be invested by professionals. Where should it go except to investors and bankers to get a… Read more »
It obviously depends on the pension plan but the latest data for TRS (downstate and suburban teachers) shows that 62% of employer contributions are allocated towards past underfunding. The state can easily afford the “normal” cost of pensions, it’s the legacy cost of borrowing (underfunding) that is presenting fiscal challenges.
I have a recommendation. Just put in a 401(k) like the rest of the citizens have, and drop the pension. That would eliminate the unfairness in both the pension, and in the total compensation between these jobs and the rest of us.
Law enforcement isn’t just a “job;” it’s a dangerous vocation.
If ANY public sector group deserves special retirement assurances, law enforcement definitely does.
They are the thin blue line that separates citizens from anarchy; the sheep from the wolves.
Considering CPD’s reduced ranks, the job is even more dangerous.
Would you carry a gun and a badge for a 401(k)? If so, sign up.
We need to eliminate Teacher, Politician and Civil Servant Employees unsustainable pensions. The problem with keeping them for the Law Enforcement and Firefighters is all of the others will demand them and we just cannot keep taking on the burden of supporting their retirement pensions while trying to save up enough for our own. These pensions have been bleeding the taxpayers dry. Enough is enough. They should be on Social Security and 401K plans.
You could eliminate that for new employees but existing ones aren’t giving up their pensions.
Respectfully so is nursing and the medical field in general. Nurses are the frontline for patients which have every disease known to man. Some patients are violent/abusive/have cancer/burns/gunshots/stabbings/open sores you name it and who knows what communicable diseases. Nurses can only put so much into a retirement plan which is capped at I believe at $22.5K not sure and investments are subject to market fluctuations. There is some matching. Nothing guaranteed. Many do not put in the full allowed amount since it’s approx 30% or more of their salary. Not easy but where to the public sector workers go when… Read more »