By: Mark Glennon*
The Center for Tax and Budget Accountability today released a report titled, Public Pensions: Frequently Asked Questions.
The “average” annual pension benefit for Illinois statewide pensions is just $45,832, says the report. Sounds pretty reasonable, which is why “averages” like that have been central to public unions’ messaging about pensions for years.
It’s bunk. While it might be true in a very literal sense, it’s so misleading and incomplete that it can only be described as dishonest. Here’s why:
“Average” pensions include those who work only part of their careers in the system providing the pension. So, a retiree who changed jobs at some point will have more than one pension or other retirement benefits. The only meaningful and honest way to look at averages is on a full-career basis. That is, what’s the average pension for somebody who works a full career in the pension system retiring today? You get far larger numbers.
To illustrate, let’s look at the two state pensions with the largest unfunded liabilities, which together account for 75% of our pension deficit, the Teachers Retirement System (TRS) and the State University Retirement System (SURS):
• The CTBA says the average TRS pension is $50,494 per year. However, the average pension for the most recent TRS retirees with 30-34 years of service (not even full career by most standards) is $67,224 per year. (TRS Annual Report, page 108.)
• The CTBA says the average SURS pension is $48,894 per year. However, the average pension for the most recent SURS retirees with 30 or more years of service is $79,692 per year. (SURS annual report, page 99.)
Then there’s a section in the CTBA report detailing why the pension crisis stems from borrowing against the pensions — basically, underfunding them and using money for other state purposes. What’s CTBA’s solution? Why, more of the same. They’ve long supported what they call “reamortizing” the pension debt. It’s hypocrisy. All that means is reducing annual contributions into the pensions and pushing the obligation further out for the next generations.
On the right is the CTBA’s own chart they used in legislative testimony to support their “reamortization,“ comparing annual Illinois pension funding under then-current law to the lower, strung-out contributions they proposed in red. They cut it off at 2045, though their extended contributions would last until 2060. They want lower contributions now, leaving the problem to kids and grand kids.
Along the same lines, the CTBA’s Executive Director, Ralph Martire, regularly peddles the myth, which actuaries ridicule, that 80% funding is healthy for a pension. An independent actuary who writes about pensions, Mary Pat Campbell, put him in her “Hall of Shame” for that reason — he effectively advocates for the very underfunding he derides.
This kind of nonsense has been coming out of the CTBA for years. Linked here is a video of Martire on WTTW’s Chicago Tonight in 2009 claiming that the average pension then was just $28,000! (Thank you to the angry reader who sent me that.) That hasn’t stopped WTTW and much of the rest of the media from constantly airing and citing him as if he’s credible.
The CTBA is union funded and its board is full of pensioners and union leaders, while claiming to be “bipartisan.” Linked here is a great piece on what they really are. Just like the public unions they represent in the pension debate, their tools are deceit and hypocrisy.
*Mark Glennon is founder of WirePoints. Opinions expressed are his own.
(Updated 1/22/16 to increase the SURS annual payment to the most recent date.)
Weekly crime statistics from the Chicago Police Department: Report through 4/14/2024.
If you’re frustrated with Illinois’ educational results, you may want to follow the money from teachers unions. In the last four years alone, Illinois lawmakers and political candidates have taken nearly $30 million in contributions from teachers unions and their national affiliates.
Wirepoints President Ted Dabrowski testified on April 10, 2024 to members of the House Revenue and Finance Committee at the invitation of Rep. Joe Sosnowski. Ted told lawmakers that the state’s property tax burden has become dire for countless Illinoisans.
Ted joined WLS 890’s PM Chicago Show to discuss Chicago’s worsening pension crisis, why the city’s crisis makes it such an outlier nationally, its negative impact on residents, government workers and retirees alike, and what Mayor Brandon Johnson should do about it.
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Was watching Chicago Tonight last night and noticed Martire was again attempting to sell his pension re-amortization plan and claimed 80% as the target funded ratio rate. But that counters the Commission on Govt Forecasting and Accountability which has a target funded ratio of 90% by 2045. Why would his funding ratio be less than what the govt recommends? What would Martire’s re-amortization graph look like if the target funded ratio was 90%? Or 100%? And how much is Tier 2 savings part of his calculation? I’m guessing his re-amortization is heavily dependent on Tier 2 savings, which would make… Read more »
Everything about the public sector pension math comes down to one fundamental axiom. It is all based on this… That the children and grandchildren have been clearly designated as the fiduciary responsible parties for this debt, should they decide to reside and work in Illinois. I make it very clear to my college age, technically talented kids, that they not grow their roots here. Simply because they would be beginning their financial earning careers at a negative position. Their first decade of working in Illinois will just be to reach the starting line, while other young folks elsewhere will be… Read more »
Bingo. They are child abusers. But, mercifully, the kids can move.
Yes too much borrowing can be bad. We have all seen this. Borrowing can also be necessary and wise to promote economic GROWTH. When Government borrows smart it passes both growth and debt upon future generations. We like when the future growth benifits outweigh the debt costs;We dislike when the pain of the debt outweighs the growth when govt. borrows dumb. To rail against government debt (as child abuse for example) as an evil cast upon future generations is pure demagoguery. It ignores the utility and reality of the govermental use of debt. Politicians for years advocated to underfund pensions… Read more »
Don’t claim that I support what the opposite of what I support. I want pension benefits cut. That’s the solution. I said “there is a case to be made….”
On the subject of debt, generally, it would be wise to remember the basic rule that all junior commercial lending officers are taught to tell customers: “We don’t lend to cover operating losses.” That’s what we are talking about here. Borrowing to support infrastructure and other projects with genuine long term ROI is appropriate.
Quoting … “Politicians for years advocated to underfund pensions in liu of revenue increases. Amazingly Mark’s wirepoints, to this day, calls for more-of-the-same pension underfunding policy. Dont raise revenues and dont fund pensions. OMG. SERIOUSLY? A doubling down on a failed policy. Look where such has got us as a State. ” YES, seriously, We need to reduce the promised pensions & benefits for the future service of all CURRENT workers … becasuse they are GROSSLY EXCESSIVE (by any reasonable metric). Taxes should NOT be raised to fund these grossly excessive pensions & benefits that were granted ONLY as a… Read more »
A contract is a contract is a contract and of the state has made an agreement that should be kept….. If you not pay that which isdue because it was earned and agreed to why pay any welfare payments?
This report is sooo ripe for satire. FAQ’s…
1) What is a pension spike?
2) Why are union presidents eligible for state pensions?
3) How did a teacher union lobbyist substitute teach for one day a get a teachers pension?
4) If teachers only paid for 1.5% simple COLA, why do they get 3% compounded COLA today?
5) If the average pension is so low, why don’t pensioners redistribute their pension wealth to those on the lower end of the scale?
6) How much did the unions pay you to write this?
Quoting Citize Vs Machine …..
“6) How much did the unions pay you to write this?”
That is indeed an odd comment considering that this blog-article is CLEARLY very CRITICAL of the Public Sector Unions.
It is probable that a legislature today can not tie the hands of a legislature in the future. This is an “element of sovereignty.” According to the Yale Law Journal in 2002, “There is a principle of constitutional law holding that “one legislature may not bind the legislative authority of its successors.” … the principle means that legislatures may not enact entrenching statutes or entrenching rules: statutes or rules that bind the exercise of legislative power, by a subsequent legislature, over the subject matter of the entrenching provision. Judges have applied this rule of constitutional law in various settings, and… Read more »
Advocate,
I disagree, because there is ZERO justification for pushing the cost of today’s pension/benefits promises onto taxpayers so far in the future that they received no services from the workers whose pensions/benefits they are told that they must pay for.
The Constitutional impediment to VERY VERY materially reducing the pension accrual rate for the future service of all CURRENT workers IS (yes IS ) the problem. This MUST be changed. Current Public Sector pension/benefits promises are both unaffordable and grossly excessive by any reasonable metric.
If not possible, bankruptcy is the BEST course of action.
The last sentence in my above comment should have said ….
“If not possible, bankruptcy …. including VERY material reductions in FUTURE Service Pubic Sector pensions/benefits (and if financially “necessary”, in Past service accruals as well) ……. is the BEST and most fair/justifiable course of action.”
Mark, because of the impairment clause, amortization, increased revenues and/or argueably bankruptcy are the paths to FIXING the pension shortfall. All paths have substantial pain. The wise path for our State will be the path with LESS PAIN. There is no path with NO PAIN. Amortization, while not ideal, gives the State time to right the ship, without cutting bone and muscle. Bankruptcy, on the other hand, cuts bone and muscle….just ask the bondhold e rs from past public bankruptcies.
A salary freeze for Tier 1 employees, while not ideal, gives the State time to right the ship, without cutting bone and muscle.
If proposed payment plan extends beyond the life expectancy of person who proposed said payment plan, then payment plan is invalid.
Where do come up with that silly statement? Legislation is passed all the time for obligating citizens well beyond the lifetime of the one who made the proposal and even for many who must pay for it. Surely you recognize that; yet “King Nixit71” has made decree here that is made in the face of that everyday reality of life in IL and life in the United States for that matter.
Anonymous, Surely you must have understood that he was simply trying to make a POINT…..
That it is WRONG for those who personally BENEFIT from participation in these undeniably grossly excessive pension & benefit Plans …. i.e., our elected officials ……. to pass legislation (that anyone with a modicum of common sense) that they KNOW is unaffordable.
Advocate- Delaying does not decrease the pain, it increases it because the liabilities are compounding. Actually, however, there is a case to be made for delay (lower contributions) but only for the short term — until we get a new majority in the General Assembly serious about real pension reform. Lower contributions can be thought of as a sort of pension reform by default — the pensions won’t be paid in full, one way or another, so why waste taxpayer money on them now? That’s effectively what we are doing anyway — all pensions continue to be so badly underfunded… Read more »
Mark, If your plan to fix the pension mess is to wait until the general assembly gets a new majority then you have no plan. You have hopes… but NO PLAN. Amortization allows the State to make its pension obligations with the least ammount of fiscal pressure on the present State budget. A simple device to spread costs over time. When the pain is spread out over time, like a home mortgage, the seemingly unaffordable becomes possible. You may not like it, and have expressed displeasure to it…..but your alternative’s have not provided a better solution with less pain. Ask… Read more »
Secured bondholders get paid in full. It’s not discretionary.
I’ve written extensively about what what I think we should be doing. The short answer is pursuing all possible solutions large and small, immediately, including a constitutional amendment. Municipalities don’t need that for Ch. 9. The last resort would be amending Ch. 9 to include states.
Quoting … “Politicians for years advocated to underfund pensions in liu of revenue increases. Amazingly Mark’s wirepoints, to this day, calls for more-of-the-same pension underfunding policy. Dont raise revenues and dont fund pensions. OMG. SERIOUSLY? A doubling down on a failed policy. Look where such has got us as a State. ” YES, seriously, We need to reduce the promised pensions & benefits for the future service of all CURRENT workers … becasuse they are GROSSLY EXCESSIVE (by any reasonable metric). Taxes should NOT be raised to fund these grossly excessive pensions & benefits that were granted ONLY as a… Read more »