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The governor’s pension plans

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* Gov. Pat Quinn’s pension reform ideas weren’t covered by the media in much detail last week, so I used my syndicated newspaper column to do just that

Gov. Pat Quinn outlined a plan last week to reform the state’s troubled pension systems. In doing so, Quinn appeared to outright reject some pension ideas offered up by House Republican Leader Tom Cross and Senate President John Cullerton.

The governor said pension reform negotiations, which have dragged on for well over a year, are in need of a fresh start. Republican Leader Cross’ reform proposal raises employee pension contributions in order to force public employees into either a lower-cost system or to a 401(k)-style plan. The state’s pension plans have billions of dollars in what’s called unfunded liability and the idea is to lower that liability by reducing retiree pension payouts.

The governor all but said Cross’ plan, which is hotly opposed by labor unions, needed to be tossed out. “I don’t think there’s a lot of enthusiasm by members of either party and either house for that particular bill,” the governor said. “We’re going to start from scratch and everybody will have a voice and we’ll get to a good place.”

Quinn claimed he wants “meaningful reform” of the pension system and laid out four “key variables.”

1) Employer contributions: This idea would force local school boards and universities to finally pay a significant share into the pension funds. Quinn said the contributions could be phased in over time. The governor also said that the transfer of responsibility from the state to the schools and universities wouldn’t necessarily result in higher local property taxes, which are capped, but could be done via economizing by employers. Cullerton said much the same thing. All three Democratic leaders have said they favor this concept, so watch for it to move forward.

2) Employee contributions: The governor now favors increasing employee pension contributions out of their paychecks. Cullerton’s chief legal counsel has suggested using various incentives in order to hike employee contributions by 3 percent, which could raise hundreds of millions a year if you include all state workers, public school teachers and state university employees. With the governor including the item on his list, the idea appears to be seriously in play.

It also doesn’t hurt that the Chicago Tribune’s latest poll showed that 50 percent of Illinoisans want to see employees contribute more to their pension funds to help pay for the billions of dollars of taxpayer underfunding over the past several decades. No other option presented by the newspaper’s pollster came even close to that number. The next highest was “Cut other state-funded programs,” which was backed by 30 percent.

3) Cost of living adjustments: Some of the talk at the Statehouse has been about possibly basing annual cost of living raises on the original retirement income, rather than basing the increases on the previous year’s amount. By doing that, the state would switch to “simple” interest and avoid the “magic” of compound interest, which really adds up over the years. This COLA readjustment was done for future hires during the last round of pension reforms. The COLAs could also be lowered or even possibly eliminated.

4) Retirement age: The retirement age has already been raised for future hires, but Quinn now wants to do that for current public employees.

Despite Quinn’s claim last week that any pension reforms would have to be “done in a constitutional manner,” AFSCME, which represents thousands of state workers, pointed out that a legal analysis prepared at the governor’s own behest in 2010 completely rejected the idea that pension benefits could be changed after an employee was hired.

The Illinois Constitution declares that public pension benefits are an “enforceable contractual relationship, the benefits of which shall not be diminished or impaired.” AFSCME and many others contend that the language means once a worker starts paying into the pension fund, the benefits can never be reduced in any way.

The governor also appeared to reject Cullerton’s idea to adjust the pension “ramp” which ultimately requires a 95 percent pension funding ratio by 2045. The idea is to have 95 percent of all pension payouts for the next 30 years. Cullerton has said that ought to be lowered to 80 percent, which could save lots of money.

“I think we should look at the ones I mentioned,” Quinn said when asked about the Cullerton idea.

* Related…

* Millions at stake for schools with change in pension plans

* Proposal would have schools take on future pension costs, not debt: But the proposal would require local schools to pick up the actual cost of a teacher’s pension going forward — an estimated $800 million among all the suburban and downstate schools this year. Chicago schools fund their own pension program.

* Editorial: Pension shift proposal is likely DOA

* Kadner: Pols pull bait-and-switch on teacher pensions, taxes

posted by Rich Miller
Tuesday, Feb 14, 12 @ 11:21 am

Comments

  1. Raising employee contributions is an easy thing to say. What is never mentioned is that Differnt employees pay Differnt amounts now. An across the board 8-9 % employee contribution seems about fair especially for those contributing alot less than that now.

    Comment by Fed up Tuesday, Feb 14, 12 @ 11:29 am

  2. As a state employee I am not opposed to some adjustments if negotiated.

    But before those negotiations even begin the following has to be done.

    The promises made in the current contract HAVE to be fulfilled. Otherwise the negotiations are starting with one side, the state employees, realizing that any agreement with this Governor is meaningless. You cannot negotiate with that knowledge.

    Secondly ALL state employees and elected officials share equally in the concessions. Currently my group pays 4% more towards my pension than other state employees in the same formula. There should be a pension payment percentage for those who also receive Social Security and a rate for those who don’t. And EVERYONE pays the same rate for their category.
    Also if the COLA is reduced for current employees it applies to all current employees and elected officials. If it is across the board 1.5% then that is for everyone. Staffers don’t get other adjustments, GA members don’t get extra bumps if they work past a certain age, etc. Like the Governor says ” Everyone in , no one left out.”

    Comment by Irish Tuesday, Feb 14, 12 @ 11:35 am

  3. State university employees already contribute 8% of their paycheck to SURS - and always have. However, most years, the State as employer failed to match the employer’s 8% share. The State also skipped payments into the other state pension systems also.

    The State didn’t even contribute the equivalent of the 6.2% they would have had to have contributed is state employees were covered by Social Security (most of the members of the five state pension systems are not covered by Social Security.)

    Thus, not only are the pension systems missing the half the State should have been paying - the systems are also missing the investment income that missing half would have generated.

    SB 512 called for state university employees to increase their contribution from 8% to 17% within two years.

    Thank goodness we have something like the Illinois Constitution that says that Illinois public pensions are a contractual relationship whose benefits can not be diminished.

    Arizona has a similar pension clause in their Constitution, yet their legislature still passed a law last year that raised state employees’ contributions. An Arizona judge recently rejected that AZ law, and now the state has to pay back the state employees that extra amount they were forced to pay in.

    Comment by JoeMelugins Tuesday, Feb 14, 12 @ 11:48 am

  4. GW Bush and his supporters exaggerated the present state of the Social Security system in their attempts to steer new dollars to investment managers through privatization.

    Critics of one of the nation’s largest employers — the US Postal Service — claim its pension system is a wreck, but consider this: it must pre-fund 75 years of future retiree health care benefits in just 10 years.

    The state has not been contributing, but how many years out must the pensions be funded to determine the sufficiency of the plans’ assets?

    Comment by Kasich Walker, Jr. Tuesday, Feb 14, 12 @ 11:56 am

  5. Pardon me if this has already been addressed — but has there been any discussion of not letting people collect pensions until they actually retire, or in other words not while they have full time employment elsewhere? I work for an engineering firm in the private sector and we have several former IDOT employees who work here full time while also, I believe, collecting full state pensions.

    Perhaps there is a good arguement why this is okay or why it would not be possible/meaningful to change this but it seems like one area to cut.

    Comment by Lakefront Liberal Tuesday, Feb 14, 12 @ 12:01 pm

  6. Isn’t it nice that one level of government thinks another level can just “economize” to offset increases in costs that it passes on to them! School districts have been asked to economize to the point where the quality of education is seriously impaired.

    Comment by Kerfuffle Tuesday, Feb 14, 12 @ 12:03 pm

  7. The Ramp is the easiest one to change. There are no pension systems that are at 95%. 80 or eve 75 would keep the system out of trouble, also increase the year it needs to be there. I also think there needs to be ONE SRS that includes Legislator Judges etc. with same rules that govern all.

    However, the only person that Quinn is going to listen to is Fahner because of the $$ behind his organization of millionares.

    Comment by He Makes Ryan Look Like a Saint Tuesday, Feb 14, 12 @ 12:11 pm

  8. Local school districts didn’t create the public policy on pensions, but they will be saddled with the cost.

    If they are going to do it then they better make the burden correlate with the benefits. As in the benefits paid into the collar counties and suburban Cook are much higher than the rest of downstate. The property tax hikes should reflect the same distribution.

    Good luck passing that.

    Comment by Don't Worry About the Government Tuesday, Feb 14, 12 @ 12:32 pm

  9. Local school districts have already taxed the people to the max. It is a shame to pay school taxes all of your adult life and the have them to keep going up when you are old and on a fixed income.This all comes down to years of free spending and no concern for the future. If I had ran my own finances like the state I would be living in a cardboard box!

    Comment by Nieva Tuesday, Feb 14, 12 @ 12:32 pm

  10. I think even the mildest pension reforms are going to be too much for Quinn and the Legislature, especially the Legislature, in this election year.And after that, it’s the runup to Quinn’s re-election campaign. Maybe 2015.

    Having said that, it seems to me that adjustments in the annual increase formula and modest increases in current employee contributions, at least for higher-paid employees would fair, and would be least onerous. I don’t believe most private pensions have cost of living increases. And these days a defined benefit pension guaranteed by taxpayers is a far more valuable benefit than it used to be even 20 years ago, given the vagaries of the markets.

    But my sense, again, is going to be that the Democrats-who-rule will take a deficits don’t matter approach and let the whole issue slide. They could be right of course. Maybe the markets will boom and extra high returns will come back to the pension funds. The markets are doing better these days.

    Comment by Cassandra Tuesday, Feb 14, 12 @ 12:35 pm

  11. Isn’t messing with the COLA exactly what caused the Supreme Court to rule it unconstitutional to reduce benefits.

    @Lakefront Liberal - do you really mean what you wrote? No retiree’s can work if they draw on a pension they earned? I retired and work part time. Might make 10 grand in a good year. You don’t think I should be able to do this while drawing my pension?

    Comment by Leave a Light on George Tuesday, Feb 14, 12 @ 12:43 pm

  12. Few seem remember this but Gov. Quinn proposed increasing employee contributions in his first proposed budget as Governor, just a few months after Blago’s arrest. My recollection is that it was quickly dismissed by most and never seriously on the table for discussion by the 4 caucuses.

    Comment by slow down Tuesday, Feb 14, 12 @ 12:59 pm

  13. - Lakefront Liberal @ 12:01 pm - So the Speaker cannot retire from the GA and go back to his law practice? Once someone retires from the state they cannot work any place else? You would limit the amount of money a person could earn if they had once worked in a state position, but if they worked in the private sector they could have unlimited opportunities to improve their fiscal situation.

    Do you believe these folks are working because they love it? Or maybe they are working because they cannot make it on their pensions alone. Boy that sure shoots a hole in the belief that all state employees are given a six figure golden parachute when they retire!

    Comment by Irish Tuesday, Feb 14, 12 @ 1:05 pm

  14. ==Currently my group pays 4% more towards my pension than other state employees in the same formula. There should be a pension payment percentage for those who also receive Social Security and a rate for those who don’t. And EVERYONE pays the same rate for their category.==

    Strange - why does one group (which group?) pay 4% more than other state employees?

    Comment by Robert Tuesday, Feb 14, 12 @ 1:09 pm

  15. I hope the Governor and Cullerton compromise by doing both gentlemen’s ideas rather than compromising by doing neither.

    Comment by Robert Tuesday, Feb 14, 12 @ 1:11 pm

  16. Pensions should be reformed from this day foward.
    And pensions for anybody 65 years or younger
    should be changed. As far as politicans managing
    these pensions that should be change. The State is broke now is the time to fix it.

    Comment by mokenavince Tuesday, Feb 14, 12 @ 1:15 pm

  17. Robert @ 1:09pm - During Blagos administration if you weren’t in a union and you weren’t one of his hand picked people you were in limbo and subject to whatever edicts he wanted to throw at you. We are on the low end of middle management. We did not get a raise of any sort in four years and the one year we did, we also got hit with an increase in our employee contribution to our pensions of 4% which more than wiped out any gains we made in our raise. We fought to get into a union so we could get out of limbo.

    Once in the union we had a couple of years where we got our increases then we made a deal with Mr. Quinn where we would take 8 furlough days and defer portions of our negotiated raises to help the state in economic hard times. In exchange Mr. Quinn would not lay off any of our members and he would leave the rest of our raises intact until 7/1/2012. Last July AFTER we had made our concessions Mr. Quinn decided he got what he wanted and reneged on his part of the agreement and eliminated the remaining raises called for in the contract, even though he had just given raises to his people and to other state employees.

    Maybe that is why CAT decided North Carolina was better. Maybe their Governor doesn’t lie.

    Comment by Irish Tuesday, Feb 14, 12 @ 1:23 pm

  18. Quinns ideas:

    #1. Excellent and long overdue. The current system amounts to moral hazard. The school boards and universities poach senior administrators and faculty in their fifties at inflated salaries knowing the state will carry the can for their retirement at a rate inflated by those inflated final salaries. Requiring employer contributions in TRS and SURS will put a stop to this shell game. You’ll see a particularly large impact on superintendents’ salaries, for example.

    #2. Opposed. It’s already 50-50 between employee and state, in a situation where the retirement system replaces Social Security for public employees. Worsening it further puts the public sector at a competitive disadvantage to matching schemes in the private sector. You don’t want to end up making it worse than being on Social Security alone.

    #3. Ending COLA compounding. Alarming. People on traditional plans will be in deep trouble. People who elected for the portable plan will be job hunting so they can get out of it.

    #4. Retirement age. Probably makes some sense, but bears watching.

    I’m curious why they don’t consider this .. the state of Illinois outsources so much compared to other states. Bring that back in house and you’re able to recapitalize the system with fresh contributions, which result in fewer liabilities than in the past because the new employees, ex contractors, will be signing up under the reforms already undertaken. After all, almost nobody can run a healthy pension system on a declining workforce without turning the whole thing into a 401k or 403; you need stability or growth.

    Other point . . . read JoeMelugins above. The state’s shortchanging of the pension system has been an outrage, especially given that state employees aren’t on social security, and now the bill is due. Let’s keep the income tax at five percent permanently and use a portion of it to backfill this gap. Let’s just accept the free lunch was never actually free; the check is now due.

    Comment by Angry Chicagoan Tuesday, Feb 14, 12 @ 1:23 pm

  19. It is pretty simplistic to say that pensions should be reformed from this day forward. I’m still amazed that the victims are the ones here being fingered to pay! HOw’s about all the money that was NOT put into the teacher pension fund but gifted to other programs be now DEBITED from those beneficiaries and put into the proper fund it was intended for? It all just sounds to me like trying, convicting and sentencing the victim while the perp goes free! By the way, pensions are all that these people receive! They never made beans to begin with, so they don’t have bonuses, stock options, expense accounts, company cars/phone/credit cards………….in other words, what in heaven’s name could they ever have saved toward retirement? Their contributions to their own pension WAS their retirement savings!

    Comment by REALLY? Tuesday, Feb 14, 12 @ 1:39 pm

  20. Somehow I don’t think the folks at the Journal-Star ed board would like the cost-shifting proposal any more if it gave the locals the option to negotiate benefits. It’s easy to criticize the Sugar Daddy as long as he’s not threatening to take your candy away.

    Comment by The Elderly Man You Used to Love Tuesday, Feb 14, 12 @ 1:40 pm

  21. Let’s clarify something here……Members of SERS, JRS & GARS do indeed contribute to Social Security & receive its benefit……while members of TRS do not. I’m not sure about SURS.

    Also, I’m sick of all this 401k talk as it relates to state employees……is the state going to provide some sort of match, like is common practice in the private sector? Until they do that, I would never dare rolling my pension into a 401k. Cross’s bill certainly diminishes the benefits of state employees, and is therefore unconstitutional, regardless of whether it gives employees a choice of which new plan they take…….all 3 choices outlined are less beneficial to the employee….BOOM, Unconstitutional.

    Comment by TCB Tuesday, Feb 14, 12 @ 1:52 pm

  22. We are all such victims. The poor taxpayer. The poor pension recipient. The poor governor. The poor General Assembly. The poor business owners.

    The faster we all put skin in the game, the quicker this problem will resolve.

    Taxpayers will have to pay even more taxes.

    Union benefits will have to be “diminished” because they are unsustainable (even if the GA had contributed the amount they were supposed to).

    Spending throughout Illinois needs to be slashed not trimmed.

    The General Assembly and the Governor will have to assume responsibility and manage the grown up conversation of fixing the problem. If they can’t then they aren’t good at their job and should be replaced.

    Comment by Don't Worry About the Government Tuesday, Feb 14, 12 @ 2:04 pm

  23. TCB, only some of SERS participants pay into Social Security. TRS, SURS and the rest do not.

    According to AFSCME, who should know,
    “Nearly four in five participants in state-funded
    retirement systems (78%—including teachers, other school district workers and university employees) don’t qualify for Social Security. For most public employees, their pension is the sole source of retirement income.”

    Comment by Joe Melugins Tuesday, Feb 14, 12 @ 2:12 pm

  24. @Dont Worry = Spending throughout Illinois needs to be slashed not trimmed.=

    Where should these cuts be made?

    Given that about 40% of the budget goes to education, how do propose we achieve any real savings without just inflicting major pain on local districts….since schools are still expected to provide the same education to their students (or risk losing federal money also).

    Given that pension benefits, like it or not, are guaranteed by the Illinois Constitution how do you propose the State achieves any significant pension savings in the short-term?

    Given that the state already has a very low number of public employees, how do propose we achieve savings in personal services/operating costs when 14 agencies last year took cuts so bad that they couldn’t meet payroll for the entire year & likely more agencies will fall into that category in FY13?

    Again, all we get is vague rhetoric, without suggestions. The choices are hard, not matter where you make them….state parks @ DNR, elderly/infant care @ DHS, education @ ISBE & Higher-ed, state employee/teachers pensions, or even job training @ DCEO.

    Comment by TCB Tuesday, Feb 14, 12 @ 2:25 pm

  25. @Joe

    Thanks for the clarification on SURS, I honestly had no idea one way or the other.

    As for SERS, I’m very curious which SERS members are exempt from Social Security, because I’ve never heard such a thing. If you could provide me some sort of link, I’d really appreciate it, because you’ve peaked my curiosity on this matter.

    Comment by TCB Tuesday, Feb 14, 12 @ 2:29 pm

  26. Many “pensioners” in the private sector were promised certain retirement benefits. The companies can no longer deliver on those because of there financial situation so they have been changed, surrendered, etc. Why do government employees think they should have (we all know how this got into the constitution) a constitutional right to a guarenteed retirement free of market forces?

    Comment by Its the Economy.... Tuesday, Feb 14, 12 @ 3:00 pm

  27. @ Economy =Why do government employees think they should have (we all know how this got into the constitution) a constitutional right to a guarenteed retirement free of market forces? =

    Uh, because it’s in the illinois Constitution.

    Why do any of us think that you have the right to vote, own property, bear arms? Uh, because its in the US Constitution.

    Comment by TCB Tuesday, Feb 14, 12 @ 3:06 pm

  28. Sorry……It doesn’t matter how or why it’s in there….It’s there & it’s up to the state to honor it.

    Comment by TCB Tuesday, Feb 14, 12 @ 3:08 pm

  29. Accept the US constitution was not re-visited where special interests were able to get obviuosly self serving clauses into it. I was a state employee for many years and left over this type of entitlement people have. I also took my money out of the pension fund knowing the benefits promised were not sustainable!!

    Comment by Its the Economy.... Tuesday, Feb 14, 12 @ 3:13 pm

  30. Some SERS members are exempt from SS. These are law enforcement positions including state troopers, Sec. of State Police, DNR Police, and many other job titles in the Alternative Retirement Formula. Some job titles in the Alternative Formula are coordinated with SS meaning they get a little lower Alternative Formula rate and SS as well. It’s confusing, I know ……

    Comment by Taxpayer 79 Tuesday, Feb 14, 12 @ 3:18 pm

  31. I was in the alternative formula. When I left state employment I was paying 12. 5% to SERS and I am not eligible for social security (and apparently never will be as Lakefront Liberal has revoked my right to employment in the private sector) . My pension is it for me.

    Yes, I did get to “retire” at an earlier age than most but I played a young man’s game. The public does not need or deserve 65 year old cops on the street.

    Comment by Leave a Light on George Tuesday, Feb 14, 12 @ 3:31 pm

  32. @Ecomony

    I guess we will see who is right, but it seems like a poor financial decision to me.

    Comment by TCB Tuesday, Feb 14, 12 @ 3:36 pm

  33. As of June 30, 2010, according to the director of HFS, of the 80,800 retirees in the five pension plans, who were participating in the healthcare program, 53,600(66%) were covered by Medicare. The other 34% were early retirees or were otherwise not eligible for Medicare. If one doesn’t qualify for Social Security (on his/her own or spouse’s work record) then he/she is ineligible for free Medicare Part A and in that case he/she is not required to enroll in Medicare Part B. (Page 16 of latest CMS Plan Benefit Choice Booklet)
    @Joe quotes AFSCME as saying 78% of participants don’t qualify for Social Security. How do we reconcile these two statements? I would like to know how many plan retirees are over the age of 65 and not enrolled in Medicare Part B. All Americans 65 and older are eligible for Medicare Part B regardless of their eligibility for Social Security. They must pay for it but so do Social Security recipients. If these retirees were required to enroll in Medicare Part B it could reduce some of the healthcare costs

    Comment by capncrunch Tuesday, Feb 14, 12 @ 4:06 pm

  34. Saw an article the other day pointing out that the big ‘mortgage settlement’ wouldn’t cost the banks that much - it would actually hurt the mortgage debt holders that bought the notes. Among them: government employee pensions funds.

    Comment by Happy Returns Tuesday, Feb 14, 12 @ 4:06 pm

  35. Every on subject court case from 1970 forward (plus NY cases since the IL clause is based on the older NY clause) has said the rules at time of hiring apply, so you can’t change things retroactively. I’ve cited those cases before …

    As I understand it, the most you can do to change things for existing employees is offer each employee a choice that includes a new benefit in exchange for surrendering his or her right to the old rules. It has to be a true choice where they can keep the old rules in their entirety without any changes forced on them. I also believe, because of IRS rules, it has to be a one-time irrevocable choice.

    Comment by Retired Non-Union Guy Tuesday, Feb 14, 12 @ 4:12 pm

  36. ===”The Illinois Constitution declares that public pension benefits are an ‘enforceable contractual relationship, the benefits of which shall not be diminished or impaired.’ AFSCME and many others contend that the language means once a worker starts paying into the pension fund, the benefits can never be reduced in any way.”===

    “Many others” includes the Illinois Supreme Court who, in their Sklodowski decision, stated that “This court has held that the contractual relationship is governed by the actual terms of the Pension Code at the time the employee becomes a member of the pension system.” So trying to change the COLA now is simply unconstitutional; same with upping the retirement age. Period. Unilaterally trying to up the employee contribution without any consideration is a violation of contract law. In addition, Eric Madar, the Illinois Senate legal advisor has stated that an increase in the employee contribution without a corresponding increase in the benefit, could be construed as a diminishment of that benefit.

    Facts are facts folks. The problem was caused by the state’s non-payment, or reduced payments of their portion of pension contributions. For everyone to pay their fair share, the solution lies in increasing state taxes to pay for the money that our elected reps used for other programs. The number of you who think that making the victim, state employees, shoulder the burden letting the taxpayer off the hook, amazes me. Thank God the pensions are protected by the state constitution.

    As for the word “unsustainable”. Back that up with some actual figures showing how that unsustainabiltiy actually occurs, and when. Otherwise it’s just right wing propoganda.

    Finally, if the unions had the legislature in their pockets as you right wingers constantly state, we would be having this conversation now would we?

    See you in court.

    Comment by PublicServant Tuesday, Feb 14, 12 @ 4:22 pm

  37. It’s the Economy, are you actually telling us that you left a State job and took your contributions out of SERS because you thought State workers felt “entitled?”.
    Further, am I correct in saying that you believe that the Bill of Rights in the U.S. Constitution came about because of “special interests?”
    If I got it all down right, this is the goofiest post I have ever read here.

    Comment by Arthur Andersen Tuesday, Feb 14, 12 @ 4:40 pm

  38. Art, that post is right up there with the goofiest, but there are many competitors for the title.

    Comment by PublicServant Tuesday, Feb 14, 12 @ 4:43 pm

  39. @TCB

    Maybe Economy has a point. The legislature declaring wars (not the Prez); rights to speedy trial; right to bear arms; & more: all in the constitution.

    Comment by Kasich Walker, Jr. Tuesday, Feb 14, 12 @ 5:26 pm

  40. Let us all forget who has the best state pension. It is the members of the GA who are part timers who make 85% at 20 years and it doesn’t stop there, for every year over 20 they get 3% each year. So if they work 30 years they get 115%. They get to pay only 11.5% for their pension. The alternative employees (state police,etc) who get 80% after 27 years they pay 12.5%. And we wonder why we have a problem.

    Comment by Fed-Up Tuesday, Feb 14, 12 @ 5:37 pm

  41. Oh, and by the way, public employees don’t have an investment menu to choose from. The 9.4% that teachers pay into their retirement was never an option for them. To say they trusted blindly…………..did they have some kind of choice? In addition, when these “taxpayers” talk about having to pay, pay, pay……….do they think public employees are NOT taxpayers? They’re paying along with the best of you!

    Comment by REALLY? Tuesday, Feb 14, 12 @ 5:40 pm

  42. FedUp-the GA pension has so little to do with our budget problems as to be a laughable comment

    Comment by steve schnorf Tuesday, Feb 14, 12 @ 5:53 pm

  43. Getting a judicial determination on eliminating the COLA would be a great idea- A number of states are litigating whether COLA has constiutional impairmnet protection- I am sure Steve Schnorf would agree that eliminating or reducing COLA increases would be a huge driver of any reductions in the unfunded liability- Granting COLA’s the last several years of 3 percent has been a huge bonus to the recipients since the CPI has been trailing 3 percent

    Comment by Sue Tuesday, Feb 14, 12 @ 6:03 pm

  44. So COLAS could be eliminated for Social Security recipients as well? Might as well tackle all troubled funds

    Comment by REALLY? Tuesday, Feb 14, 12 @ 6:25 pm

  45. Messing with the COLA, at least for TRS, is an instant impairment as currently defined to the extent a portion of the member contribution (.5%) is designated in statute to fund it. Does the contribution cover the cost of the COLA? Not likely. Is that a primary contributor to the growing liability? No way. Just do the math. As always, the biggest contributor to underfunding is past underfunding.

    Comment by Arthur Andersen Tuesday, Feb 14, 12 @ 7:07 pm

  46. Steve @ 5:53 — Is has very little to do with the budget problems but it points out once again that the most lucretive benefits are going to the ones who are so vocal in diminishing other people’s pensions. AND who were the ones responsible for the missed payments and borrowing that put the pensions in the position they are now.

    It is statement of the frame of mind these folks have. Don’t touch mine I am worth it take it from the peons.

    Comment by Irish Tuesday, Feb 14, 12 @ 8:01 pm

  47. Sue @ 6:03,

    Ain’t going to happen. I’ll see you in court and I have case law on my side. Except one case where noted, all are actual IL pension case law.

    the Pension Clause affords constitutional protection to pension benefits as enforceable contractual rights that “vest” when public employees begin participating in the pension system. The Clause, in turn, prohibits unilateral action by the legislature “which directly
    diminish[es] the benefits to be received by those who became members of the pension system prior to the enactment of legislation, though they are not yet eligible to retire.”

    For support of the above, see Schroeder v. Morton Grove Police Pension Bd (1991) and Kraus v. Bd. of Trustees of the Police Pension Fund of Niles (1979)

    The {implied Illinois} Supreme Court has held that pension benefits “cannot be altered, modified or released except in accordance with usual contract principles.” Any modifications, of course, would need to be supported by new consideration and the mutual assent of the affected public employee.

    For the above, see Buddell v. Bd. of Trustees of the State Universities Retirement Sys. (1987), Kraus and also the NY decision Lomax v. Matthews (1951) which specifically said COLAs were protected.

    holding pursuant to Article VI, § 14 of the 1970 Illinois Constitution as a mandate that judges receive previously-awarded cost of living increases

    For the above, see Jorgensen v. Blagojevich (2004) and the previous Lyle v. City of Chicago (1935)

    Comment by Retired Non-Union Guy Tuesday, Feb 14, 12 @ 8:22 pm

  48. Its the Economy…. @ 3:13 said: “I also took my money out of the pension fund …”

    If you had the minimum 8 years required to vest in SERS, then in my opinion, that was the absolute worst financial decision you could have made.

    Comment by Retired Non-Union Guy Tuesday, Feb 14, 12 @ 8:30 pm

  49. REALLY? @ 6:25

    The Feds already play a game that reduces COLAs by reworking the list of items included in the “cost of living” basket definition every few years … which lowers it for SS pensioners

    Comment by Retired Non-Union Guy Tuesday, Feb 14, 12 @ 8:35 pm

  50. Sue @ 6:03,

    This year SSA granted a COLA of 3.6%

    Comment by Retired Non-Union Guy Tuesday, Feb 14, 12 @ 8:39 pm

  51. @TCB
    ===Thanks for the clarification on SURS, I honestly had no idea one way or the other===
    My wife is in SURS and she can not get my SS widows benefit due to the Government Penson Offset (GPO) provision in SS.

    Comment by Philo-Center of the Universe Tuesday, Feb 14, 12 @ 8:40 pm

  52. capncrunch @ 4:06

    Small correction: spouse’s SS work record doesn’t really matter re Part A. Even if your spouse qualified for SS & free Part A, all that does is let the uncoordinated State retiree in the door to pay for their Part A coverage. This is true even if the retiree is a survivor of a deceased spouse who was SS qualified; all being a survivor does is qualify you to buy Part A. In most cases, if you buy Part A, you also have to buy Part B.

    I’m very familiar with that rule because my surviving parent falls under it.

    Comment by Retired Non-Union Guy Tuesday, Feb 14, 12 @ 9:12 pm

  53. Steve
    So sorry to make you laugh, you are so right, it is not the amount it is about the idea that those that put us in this place are getting that percentage. My Rep once told that they don’t make much so they deserve that percentage. What a joke, they probably make more than most state employees. I bet that if changes are made it won’t apply to them.

    Comment by Fed-Up Tuesday, Feb 14, 12 @ 9:36 pm

  54. Retired Non-Union Guy: post at 8:35 p.m.

    What “basket”?

    Comment by REALLY? Wednesday, Feb 15, 12 @ 9:29 am

  55. Really,

    The COLA is based on the CPI. I was using a shorthand reference to the CPI market basket. Just tried to pull that up off the fed web site but the link I tried identifying the actual components in the basket isn’t working at the moment.

    For completeness of the record, the feds claim they don’t play games with the CPI:

    http://www.bls.gov/cpi/cpiqa.htm#Question_5

    You will note in their answer above they don’t deny they’ve made changes, they say it hasn’t made much difference.

    Comment by Retired Non-Union Guy Wednesday, Feb 15, 12 @ 2:13 pm

  56. The bottom line is that state employees in the pension systems have done nothing wrong. They have made their contributions into their pension systems every paycheck.

    On the other hand, all Illinois taxpayers have gotten by cheaply with the 3% income tax rate Illinois had for 20 years - but that 3% rate didn’t generate enough revenue to allow the State to pay its employer’s share into the pensions.

    At any rate, the Courts in Arizona and New Hampshire have rejected those state’s attempts at making state employees contribute more for their pensions. Both those states had pension clauses in their Constitutions, similar to the clause Illinois has.

    So Governor Quinn, or Rep. Cross, or any other legislator’s efforts to force state employees to pay higher contributions, have a good chance of being defeated in court.

    Courts Block Efforts at Public Pension Change
    http://www.governing.com/news/state/sl-courts-block-efforts-at-public-pension-change.html

    Comment by Joe Melugins Wednesday, Feb 15, 12 @ 3:26 pm

  57. Public pensions, Social Security, and Medicare are sometimes complicated. As a member paying into SURS, I do not have Social Security withheld from my paycheck, but I do have 8% of every paycheck taken out and put into SURS. That was a condition of employment.

    In theory, the State was supposed to match that 8%, but most years they didn’t. Think of it as what shape Social Security would be in, if all the employers quit contributing the employer’s 6.2% contribution into Social Security for its employees.

    But for the Illinois public pensions, not only are those pensions short the half the State failed to pay in, but they are also short the investment returns that income would have generated.

    By the way, Medicare taxes are taken out of my paycheck, so I will be eligible for Medicare - just not Social Security.

    Comment by Joe Melugins Wednesday, Feb 15, 12 @ 3:37 pm

  58. Folks, the 3% increase in the pension each year is not a COLA; it is a contractually guaranteed annual 3% incresae regardless of whether the inflation rate is 0, 3% or 10%. As a former member of SURS I paid for this during my working years; 0.5% of my annual 8% of salary contribution was explicitly dedicated to this purpose. Any attempt to change the 3% increases after the fact, after I have already paid for them up front, is a clear-cut contractual violation and cannot possibly be upheld in court.

    Comment by former Illinoisan Wednesday, Feb 15, 12 @ 5:04 pm

  59. On February 9th, the Illinois Institute of Government & Public Affairs (out of the University of Illinois) released a new analysis of Illinois’ SURS pension issues, and proposed a set of reforms for SURS

    http://igpa.uillinois.edu/system/files/SURS-Paper.pdf

    Comment by Joe Melugins Thursday, Feb 16, 12 @ 2:46 pm

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