Kicking the can
Friday, May 31, 2013
* We talked yesterday about the We Are One report on the Teachers Retirement System actuarial analysis of SB 1, the House’s pension reform plan. The union report claimed that Speaker Madigan’s reform plan would force teachers into Social Security, which would greatly drive up costs. The reason is that benefits would be less than the teachers would actually be paying into the system.
Rep. Elaine Nekritz, Madigan’s pension point-person, didn’t deny this and issued a statement…
* I checked with TRS this morning and they said SB1 is short $6-7 billion in payments between now and 2045. But that cost estimate is based only on the assumption that the money would be baked into the 32-year plan right away.
So, delaying this for 10-12 (or even 15, according to TRS) years from now will increase that $6-7 billion cost considerably. The more they delay, the higher the cost. Just like we got into this mess in the first place.
* And the TRS estimate doesn’t include the cost of fixing the exact same problem with the “Tier 2″ plan that passed in 2010. I asked TRS for those numbers, but they don’t have them yet.
Now, $6-7 billion is pretty small compared to the $100 billion unfunded liability problem, even with the added interest of waiting at least a decade. But if the House bill passes, the state would be essentially saving money now that it’ll have to pay in the future by slashing estimates of the benefits it will need to pay.