Can’t this state ever do anything right?
Friday, Jul 19, 2019 - Posted by Rich Miller
* Civic Federation a little over a year ago…
The assumed reductions in State pension contributions are the result of three provisions in the FY2019 budget legislation. The most important is a voluntary buyout plan that offers certain employees who are about to retire upfront cash payments—in exchange for delayed and lower automatic annual increases in their benefits. The plan accounts for $382 million, or 86%, of the total budgeted State pension savings for the fiscal year that began on July 1, 2018.[1]
Public records show that the $382 million figure comes from actuarial reviews of a different pension buyout plan. As a result, it is not clear whether the savings estimate applies to the enacted measure. Even if the savings estimate is relevant, it remains to be seen whether the assumed participation rate of 25% is realistic.
The $382 million savings estimate is based on actuarial reviews of House Bill 5472. The measure has not come up for a vote in the General Assembly, but the actuarial studies were prepared by the pension funds at the legislature’s request in advance of a public hearing last February. There was no public hearing on the enacted pension measure. [Emphasis added.]
I totally missed that story last year.
* And now…
A new pension buyout plan designed to save hundreds of millions of dollars for the State of Illinois in the fiscal year that just ended actually generated relatively minor savings in FY2019 and does not appear likely to meet the annual cost-reduction target over the next few years.
The shortfall has occurred despite robust participation by members of the State Employees’ Retirement System (SERS), the pension fund that was supposed to account for most of the savings. The problem stems from the original savings estimate, which was overstated because it was based on a different buyout plan and further inflated due to technical miscalculations, according to SERS officials. […]
Actual General Funds savings are now pegged at about $13 million, largely from the COLA buyout at SERS, according to recent reports by the three pension funds. […]
To pay for the buyouts, the State was authorized to sell up to $1 billion of bonds. So far, the State has issued $300 million at an interest cost of 5.74%. Of the $298.5 million in net proceeds, records from the Illinois Comptroller’s website show expenditures of $29.6 million for buyouts at SERS and $1.6 million for buyouts at TRS. SERS reports having spent an additional $17.6 million in FY2019, which is not yet reflected in the Comptroller’s records. The remaining bond proceeds continue to cost the State interest, but have not yet resulted in any pension savings.
So, we’ve got a big pile of borrowed money just sitting there piling up interest and a cost savings projection that is wildly out of whack.
Just ducky.
…Adding… Hannah Meisel at the Daily Line wrote about this last week and I missed it somehow. Click here.
- RNUG - Friday, Jul 19, 19 @ 3:12 pm:
I’ll just say I questioned the AAI buyout projections and savings as overly optimistic.
- El Conquistador - Friday, Jul 19, 19 @ 3:12 pm:
No one wants to hear it but we have to pay the bills. The time for squirrelly financial shenanigans and political rhetoric has passed.
- twowaystreet - Friday, Jul 19, 19 @ 3:19 pm:
Curious to hear the original bill sponsors responses on this..
- Jibba - Friday, Jul 19, 19 @ 3:20 pm:
Who woulda predicted it? Guess they should have checked CapFax, since we all did.
- revvedup - Friday, Jul 19, 19 @ 3:20 pm:
Nobody’s perfect, everyone makes mistakes, etc., etc. but this again paints our State agencies and elected officials as terribly incompetent, with the possibility of outright liars not ruled out).
- Annonin' - Friday, Jul 19, 19 @ 3:21 pm:
Shame on you. How could anyone ignore a Batnick/GovJunk brainstorm….And then a scoop from Ms Meisel tsk tsk
- TheInvisibleMan - Friday, Jul 19, 19 @ 3:24 pm:
Isn’t this the program rep Batinick was bragging about being hugely successful, and that he helped create the plan?
Did someone direct the audit of that other buyout plan deliberately to obfuscate their own bill?
- Anonymous - Friday, Jul 19, 19 @ 3:31 pm:
“Can’t this state ever do anything right.”
I’m afraid the answer seems to be, no.
Even when something good happens, I’m just waiting for the other shoe to drop.
- DJT - Friday, Jul 19, 19 @ 3:34 pm:
==Can’t this state ever do anything right?==
Why don’t you go back and help fix the totally broken and crime infested places from which you came. Then come back and show us how….Oh, wait. Someone already used that one. Sorry.
- Oswego Willy - Friday, Jul 19, 19 @ 3:34 pm:
It’s as though working against the best situation is in the DNA of governing here
- Back to the Future - Friday, Jul 19, 19 @ 3:38 pm:
The question was “Can’t this state do anything right?
The people I know that work in direct service to the public generally seem to do things right. The State has a lot of really good employees, but management and elected officials sadly can not seem to do anything right.
Really tired of reading these accounts of nonsense.
- Mason born - Friday, Jul 19, 19 @ 3:45 pm:
Still surprised they got that many takers for the buy out.
- thoughts matter - Friday, Jul 19, 19 @ 3:54 pm:
I can’t believe they missed the fact that they were calculating off the other buyout plan. Which was presumably the buyout of people who had left the state but not yet applied for retirement,
I just used the SERS estimate your immediate retirement buyout tool. Yes, the upfront would be a nice chunk $42,000. However, the tool has a break even point calculated. if I or my spouse live 14 years after retirement. I will lose money buy taking the buyout. My family lives well into their 80s and often in their 90s. Not taking their buyout.
- Generic Drone - Friday, Jul 19, 19 @ 4:07 pm:
Back to the future nailed it. It appears as tho upper management as well as legislators just can’t stop messing everything up. Ugh.
- I Miss Bentohs - Friday, Jul 19, 19 @ 4:07 pm:
Impossible this did not work when this is how it was sold to State employees:
We are going to save $382 million for the State if you sign up for this, so you should sign up and give us this portion of your retirement.
- Bruce( no not him) - Friday, Jul 19, 19 @ 4:09 pm:
Anonymous at 3:31 is me. Sorry
- Cubs in '16 - Friday, Jul 19, 19 @ 4:15 pm:
===It appears as tho upper management as well as legislators just can’t stop messing everything up===
Ironically, the more things get messed up the more layers of micromanagement are added as a solution.
- Anon Y - Friday, Jul 19, 19 @ 4:29 pm:
Use the bond money to pay down some of the pension liability then enact regulations in which only after an independent financial Analysis is conducted can the legislation be effective if there is a projected cost savings.