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More pension hand-wringing

Friday, Apr 13, 2018

* A BGA employee has a new op-ed entitled “The $130 billion question Rauner and Pritzker won’t answer”

Lost in the standard-issue political histrionics of the Illinois governor’s race is serious talk of how to resolve a $130 billion public pension shortfall that has a stranglehold over much of what can be accomplished by any state leader.

Rivals Bruce Rauner and J.B. Pritzker agree on little, yet they so far have found common purpose in tiptoeing around the pension minefield that likely will dictate the success or failure of whichever of them is sworn in next year.

* And then he goes on to explain that one fix (changing the constitution) probably probably won’t work

So if the Constitution is an obstacle to change, why not just change the Constitution? That, in essence, is the argument underpinning a recent recommendation from the Civic Federation, a budget watchdog, for an Illinois Constitutional amendment aimed at modifying the pension clause to allow “reasonable, moderate changes” to retiree benefits. […]

“You can’t retroactively change substantive rights,” said Ann Lousin, a professor of constitutional law at John Marshall Law School who was a research assistant at the 1970 constitutional convention.

And another may be unwise

Indeed, the Chicago-based Government Finance Officers Association argues against state and local governments issuing bonds to cover pension obligations.

And another is risky

“Borrowing is a real desperation move,” said William Glasgall, who directs state and local initiatives for the Volcker Alliance, a New York-based nonprofit that advocates for policies that rebuild public trust in government. “A $100 billion sale is beyond absurd. I don’t think there are enough investors to buy something that size, especially given Illinois’ crappy bond rating.”

* Not mentioned is Pritzker’s idea

To manage future budgets and meet our pension obligations, we should determine a level dollar annual payment beginning now and into future years and re-amortize the pension payment schedule so we pay into the system at a rate that pays all pensioners what is due.

So, in other words, adjust the ramp. But that is more costly in the long term.

- Posted by Rich Miller        

82 Comments
  1. - north shore cynic - Friday, Apr 13, 18 @ 12:50 pm:

    Another phrase for Re-amortizing pension debt is “kicking the can down the road” which is the what the State and local fire and pension funds have down for the last 20 years or so..It only increases the cost


  2. - Grandson of Man - Friday, Apr 13, 18 @ 12:51 pm:

    Whatever is decided will ultimately come down to the proportion of sacrifice. Bruce wants public employees to eat massive concessions to fix the state. Pritzker wants to raise the state income tax on the wealthy, which would lessen cuts on people who do the state’s work and who often can barely keep their heads above water financially.


  3. - PJ - Friday, Apr 13, 18 @ 12:51 pm:

    I don’t think there’s generally good comprehension of the fact that there isn’t much to be done. Everyone knows about the problem: most people don’t seem to realize that the courts have strictly limited options.

    We have to pay it. There’s a few ways to do that, but that’s the only choice.


  4. - Yup! - Friday, Apr 13, 18 @ 12:53 pm:

    All new hires need should receive a 401K. Illinois is just going to keep digging, and a 401K at least gives us an end.


  5. - Sue - Friday, Apr 13, 18 @ 12:55 pm:

    Maybe someone should tell JB that his idea was already implemented by Edgar. Unfortunately overall revenue growth failed to keep up with the scheduled payments so now payments subsume 35 percent of the budget and are still growing. Add in Medicaid and it’s easy to see why our roars and bridges are falling apart. What needs to happen is to reach an enforceable agreement that in exchange for some diminishment(elimination of COLA which didn’t even exist when the constitution pension clause was ratified)- the State will somehow guarantee the payments to fund pensions above and beyond to obligation which exists today


  6. - Steve - Friday, Apr 13, 18 @ 1:00 pm:

    -“You can’t retroactively change substantive rights,” said Ann Lousin, a professor of constitutional law at John Marshall Law School who was a research assistant at the 1970 constitutional convention.-

    A federal bankruptcy judge can a heck of a lot.
    https://www.freep.com/story/news/local/detroit-bankruptcy/2014/11/07/rhodes-bankruptcy-decision/18648093/


  7. - TRN - Friday, Apr 13, 18 @ 1:00 pm:

    I’m no expert on this, but I thought the re-amortization plan Ralph Martire advocates (and JB endorsed) would actually increase annual costs in the short term but smooth out the long term costs.


  8. - Anonish - Friday, Apr 13, 18 @ 1:01 pm:

    The definition of “reasonable, moderate changes” will be the trick of that, won’t it.


  9. - TominChicago - Friday, Apr 13, 18 @ 1:13 pm:

    Steve - State’s can’t file for bankruptcy protection.


  10. - City Zen - Friday, Apr 13, 18 @ 1:14 pm:

    Re-amortization is no more than inter-generational theft. I have no desire to pay more money over a longer period of time. Neither do my children.


  11. - Oswego Willy - Friday, Apr 13, 18 @ 1:15 pm:

    ===…for an Illinois Constitutional amendment aimed at modifying the pension clause to allow “reasonable, moderate changes” to retiree benefits.===

    It’s like Commander Galloway…

    “No, no. I strenuously object”

    Ugh.

    I’ll defer to - RNUG -, (and Rich) to put a truer light on where this is, constitutional and politically.


  12. - Jibba - Friday, Apr 13, 18 @ 1:16 pm:

    Sensible discussion from Pritzker, others on the blog ignoring facts. For example, Yup fails to understand that new entrants into the system help pay off the old ones, so it is cheaper to continue the pension system rather than end it in favor of 401Ks. There’s also the little matter of social security taxes likely being imposed on top of pension costs if we move to a 401K, greatly increasing governmental costs per employee.

    Something that would actually help state and local budgets is to move to single payer health care. If health care is paid via taxes, those costs would be removed from state and local governmental budgets. Medicare disappears overnight, too. You could pay off the pensions and have room for a tax cut as well.


  13. - Six Degrees orf Separation - Friday, Apr 13, 18 @ 1:18 pm:

    ===A federal bankruptcy judge can a heck of a lot.===
    Questions-
    1. Were Detroit pensions a benefit or a right? In Illinois, they were specifically made an enforceable contract.
    2. Were Detroit pensions protected from diminishment by the state constitution? I’m going to say no.


  14. - Demoralized - Friday, Apr 13, 18 @ 1:20 pm:

    == What needs to happen is to reach an enforceable agreement that in exchange for some diminishment(elimination of COLA which didn’t even exist when the constitution pension clause was ratified)- the State will somehow guarantee the payments to fund pensions above and beyond to obligation which exists today==

    Unless you’re allowing the employee to keep what they have or giving them some benefit in return you’re barking up the wrong tree.


  15. - Sisu - Friday, Apr 13, 18 @ 1:23 pm:

    The famous McKinney article about how we got here
    for the millionth time.
    http://www.chicagobusiness.com/section/pensions


  16. - Roman - Friday, Apr 13, 18 @ 1:24 pm:

    Change the state constitution? That risk violating the “contract clause” of the U.S. constitution, which says no state shall pass any law impairing the Obligation of Contracts.

    New employees in a 401k? Does absolutely nothing to eliminate the existing debt, which is the main problem. Besides, the existing Tier 2 plan arguably saves the state more than a 401k approach because it drastically reduces benefits while allowing the state to avoid employer Social Security costs.


  17. - City Zen - Friday, Apr 13, 18 @ 1:26 pm:

    ==Yup fails to understand that new entrants into the system help pay off the old ones==

    This is a bug, not a feature.


  18. - Realist - Friday, Apr 13, 18 @ 1:26 pm:

    Ok folks please get real on the pension question. Someone I don’t care did not put contributions in like they should have and that was wrong. Let’s move on. It is not realistic to try and put the required amount of money into the fund to cover ALL future payments all at once. The 130blllion is an estimate on all future payments, it is not the amount that will be paid annually in 30 years.

    So let’s figure out what we need to pay annually to cover that years outlays. There is a current balance of $16plus billion dollars in the SERS fund currently.

    It made $1.5 billion last year through contributions and investments. So let’s deposit into the fund the outlays from 2017. Then each year the legislature appropriates the outlays from the previous year. This is maintain the fund for as long as there is a state of Illinois

    Over the last 10 years the outlay figure has remained pretty

    constant. Yes we will not be in compliance with the law but we realistically never will be. This seems like the least painful way to address the funds solvency. No giant payments to the fund to be invested on wall street no tax increases needed to cover it no need to cut benefits. Win win win


  19. - cdog - Friday, Apr 13, 18 @ 1:26 pm:

    Change the Constitution.

    It is not black and white that “reasonable and moderate” is substantive.
    Substantive relative to what?
    Small system wide changes that affect the totals are not necessarily substantive at the individual pensioner level.


  20. - Realist - Friday, Apr 13, 18 @ 1:28 pm:

    Go read for yourself

    https://www.srs.illinois.gov/SERS/annreports_sers.htm


  21. - Anonymous - Friday, Apr 13, 18 @ 1:31 pm:

    Roman and Realist have said all that needs to be said.

    But one thing’s for sure. We’ve been in a full out panic over this for quite a while, meanwhile doing not a single thing as the debt mounts. How much debt until something happens toward paying something— anything toward it?


  22. - anon35 - Friday, Apr 13, 18 @ 1:35 pm:

    “New employees in a 401k? Does absolutely nothing to eliminate the existing debt, which is the main problem. Besides, the existing Tier 2 plan arguably saves the state more than a 401k approach because it drastically reduces benefits while allowing the state to avoid employer Social Security costs.”

    This is absolutely right. The existing debt has to be paid, no matter what.


  23. - VanillaMan - Friday, Apr 13, 18 @ 1:35 pm:

    It’s sad how a generation of non-savers is asking a generation of non-savers to solve questions about pensions.

    It’s like asking them how their cell phones work and them pointing at the phone chargers.


  24. - JS Mill - Friday, Apr 13, 18 @ 1:36 pm:

    == What needs to happen is to reach an enforceable agreement that in exchange for some diminishment(elimination of COLA which didn’t even exist when the constitution pension clause was ratified)- the State will somehow guarantee the payments to fund pensions above and beyond to obligation which exists today==

    Unless you’re allowing the employee to keep what they have or giving them some benefit in return you’re barking up the wrong tree.=

    Demo, @Sue knows that she just does not care. Those like @Sue just do not believe pub;lic employees should be paid what they were promised in exchange for the service they provided. Contracts for other people are meaningless. If that happened to them (and maybe it did and that is why they want to steal from others) you know we would hear about it.

    The pensions have to be paid. Tier 2 solved the long and some short term cost issues. Martire has, for more than a decade, offered the most logical solution.


  25. - A Jack - Friday, Apr 13, 18 @ 1:41 pm:

    The state is on the hook, not only for the principle of the contributions, but the investment interest those contributions would have made had they been invested when they were originally owed.

    So the bond sale would save the state the difference between the interest on the contributions and the interest in the bonds.

    It would have been a good idea to borrow that money when interest rates were lower and the state’s bond rating wasn’t so low. But they blew their opportunity by playing with unconstitutional gimmicks.


  26. - lake county democrat - Friday, Apr 13, 18 @ 1:41 pm:

    )) You can’t retroactively change substantive rights ((

    No reason not to amend the constitution for future rights - i.e., when you’re in a hole, stop digging.

    Some (including the bizarrely despised Scott Drury) have proposed offering cheaper lump sum payments as an option to current pensioners. You could even offer *some* money now to current employees in exchange for restructuring their future pensions. Nothing mandatory, so it wouldn’t be a cut in benefits. It’s potentially cruel, but given how many people raided their retirement accounts during the recession, I suspect there’d be significant longterm savings.
    (Forgive me if this has been mentioned in the comments already)


  27. - Ron - Friday, Apr 13, 18 @ 1:42 pm:

    Why not re amortize over 50 years on a more or less straight line with a 1-2% growth rate, which is in line with Illinois pathetic GSP growth. What would that cost?


  28. - DuPage - Friday, Apr 13, 18 @ 1:44 pm:

    To quote Jim Edgar, (a Republican with actual integrity). When asked about the pensions, he said “we have to pay this”.


  29. - Ron - Friday, Apr 13, 18 @ 1:45 pm:

    Also, we should freeze wages on every current Tier 1 employee unless they agree to get out of the tier 1 system.


  30. - Anonymous - Friday, Apr 13, 18 @ 1:47 pm:

    Already been frozen


  31. - Ike - Friday, Apr 13, 18 @ 1:50 pm:

    Ron = broken record


  32. - Anon - Friday, Apr 13, 18 @ 1:51 pm:

    If we have any semblance of a recession anytime soon the state will be ungovernable financially.

    People’s taxes will be going up substantially while seeing simulataneous big cut backs in services.

    The federal government I suspect down the road will do something about the pension crisis nationwide as states find themselves unable to meet both their pension obligations and the costs of running their states.


  33. - Shake - Friday, Apr 13, 18 @ 1:51 pm:

    Gee Ron, That Sounds Fair??


  34. - Norseman - Friday, Apr 13, 18 @ 1:51 pm:

    === But that is more costly in the long term. ===

    That’s what usually happens when you don’t pay your bills. It comes back to bite you in the end.

    There are no magic beans to rid the State of this debt that policy-makers put on it’s taxpayers to keep taxes arbitrarily low. Either enact a dedicated funding source (not very likely) or re-amortize the debt as has been discussed.


  35. - Ron - Friday, Apr 13, 18 @ 1:55 pm:

    Norseman, The 5th highest state and local tax burden in the nation is low?


  36. - Ron - Friday, Apr 13, 18 @ 1:57 pm:

    Anonymous, frozen forever? Literally they will never receive a pay raise again?


  37. - Old Uncle Fred - Friday, Apr 13, 18 @ 1:59 pm:

    Such an emotional issue, and made worse by people on both sides spinning it their way.

    I have no issue paying what is owed. And taxes need to be raised to make that happen. But the refusal to allow the plans to be modified on a go forward basis for tier 1 employees is where some discussion needs to take place. If that means amending the constitution, so be it. I just don’t feel it is equitable to have a 30 year old tier 1 employee earn those egregious benefits for another 30 years.

    If that makes me a bad person, so be it. Like I said, raise my taxes for what is owed, but if you don’t want to fix what’s broken on a go forward basis, another state that fixed this issue can have my money.

    Good luck everyone.


  38. - RNUG - Friday, Apr 13, 18 @ 2:00 pm:

    == All new hires need should receive a 401K. Illinois is just going to keep digging, and a 401K at least gives us an end. ==

    The Tier 2 pension system put in place to new hires in 2011 is 100% funded by the employees with no State (employer) contribution and even generates a slight surplus to pay on the Tier 1 debt.

    Why would you want to get of Tier 2 and replace it with a 401K style plan that, most likely,will have some employer level of contribution / match which will probably cost more than Tier 2?


  39. - Jibba - Friday, Apr 13, 18 @ 2:00 pm:

    At least Ron suggests a constitutional solution rather than magic beans or a deus ex machina. I don’t necessarily agree with him, but give him props for that.

    We probably need all solutions at once: reamortization, reduced pay scale, tax increase, “alternative solutions” such voluntary settlements, reduced services, shift of pensions in exchange for increased school funding, etc. But we will have pay the debt off, because it is the only solution.


  40. - Norseman - Friday, Apr 13, 18 @ 2:01 pm:

    === No reason not to amend the constitution for future rights … ===

    The G.A. already has the ability to change the pension for future employees. No need for a CA. However, my bet is that all the government haters would like to change the Constitution to “public employees may or may not get a pension.” Test your luck.


  41. - RNUG - Friday, Apr 13, 18 @ 2:03 pm:

    == We have to pay it. There’s a few ways to do that, but that’s the only choice. ==

    Exactly.

    The choices are part a lot more now (and save some money in the long run) or pay a little more now but a lot more in total over time.


  42. - lake county democrat - Friday, Apr 13, 18 @ 2:05 pm:

    Norseman - My take is that you count on the G.A. for anything, especially the way labor controls one party and has influence in the other. It’s a little like redistricting: if it’s so meaningless, the opponents wouldn’t fight it so hard.

    Don’t want to let Jibba’s comments go without an amen - we often look for the “magic bullet” (I’m as guilty as anyone) but it often takes a boring, multifaceted approach. Makes that almost always.


  43. - RNUG hi - Friday, Apr 13, 18 @ 2:05 pm:

    == A federal bankruptcy judge can a heck of a lot. ==

    All 5 pension funds are obligations of the State. State’s can’t take bankruptcy. Period.


  44. - Demoralized - Friday, Apr 13, 18 @ 2:06 pm:

    ==we should freeze wages ==

    You first. You really gotta let go of this disdain you have for state employees. It’s just sad.


  45. - Demoralized - Friday, Apr 13, 18 @ 2:07 pm:

    ==The G.A. already has the ability to change the pension for future employees==

    Exactly. And they already have. That’s not what some folks want, though. They aren’t going to be satisfied until they are able to reduce pensions for those currently in the Tier 1 system.


  46. - Grandson of Man - Friday, Apr 13, 18 @ 2:07 pm:

    It’s only fitting that IPI types and Rauner pay a higher income tax that should go toward paying pensions. Not saying it will work out directly that way, but directly or indirectly, they have to pay more so we can have more money to pay our pension debt.


  47. - Ron - Friday, Apr 13, 18 @ 2:07 pm:

    The constitutional amendment is necessary so this can NEVER happen again.


  48. - Thomas Paine - Friday, Apr 13, 18 @ 2:08 pm:

    My suggestion is a variation of Hynes’ Rainy Day Fund:

    When revenues increase, instead of using those monies primarily to expanding programs, require a fixed percent of all new nevenue be appropriated on top of what the ramp requires.


  49. - RNUG - Friday, Apr 13, 18 @ 2:09 pm:

    == the State will somehow guarantee the payments to fund pensions above and beyond to obligation which exists today ==

    Great idea … but it is established law that current GA’s can not obligated future GA’, so it is a non-starter. That is partly why the IL SC reached the conclusion they did in IFT and other pension cases.


  50. - RNUG - Friday, Apr 13, 18 @ 2:10 pm:

    == but I thought the re-amortization plan Ralph Martire advocates (and JB endorsed) would actually increase annual costs in the short term but smooth out the long term costs. ==

    True.


  51. - Ron - Friday, Apr 13, 18 @ 2:10 pm:

    Thomas, completely agree. Also, the state needs to stop providing services that it has in the past.

    Taxes can’t be raised, we already have the 5th highest state and local tax burden in the country.


  52. - Demoralized - Friday, Apr 13, 18 @ 2:11 pm:

    ==we already have the 5th highest state and local tax burden in the country==

    Enough already. Stop spamming.


  53. - RNUG - Friday, Apr 13, 18 @ 2:16 pm:

    == Why not re amortize over 50 years on a more or less straight line with a 1-2% growth rate, which is in line with Illinois pathetic GSP growth. What would that cost? ==

    The problem, short term (about 8 - 10 depending on term chosen), is it costs more than the current State payments into the pension systems.


  54. - Ron - Friday, Apr 13, 18 @ 2:17 pm:

    Demoralized, I have no disdain for public workers. I do hate seeing a once great state lose population due to having a massive tax burden, terrible job growth and high unemployment.


  55. - RNUG - Friday, Apr 13, 18 @ 2:19 pm:

    == the refusal to allow the plans to be modified on a go forward basis for tier 1 employees is where some discussion needs to take place. ==

    The IL SC has already and consistently ruled that out.

    For an overview, read Eric Madiar’s “Welching” document, then the Kanerva and SB-1 decisions.


  56. - JB13 - Friday, Apr 13, 18 @ 2:26 pm:

    It will be interesting to see how much more Illinois voters will allow themselves to be taxed to provide fewer and fewer services as pensions gobble up more and more of state and local budgets. “Yes, Ms. Taxpayer, you won’t get that new park, and your kid’s school is falling apart, and good luck finding a public servant to help you, but don’t you feel so much better knowing that your ever higher income, sales and property taxes will ensure retirees who quit at the age of 55 can move to Florida and pay no income tax on 75 percent of the spiked salary they earned for the final three years of their employment?”


  57. - RNUG - Friday, Apr 13, 18 @ 2:28 pm:

    == The constitutional amendment is necessary so this can NEVER happen again. ==

    You can change the rules for new hires anytime the GA is willing to pass a bill. No need to change the State Constitution.


  58. - Ron - Friday, Apr 13, 18 @ 2:31 pm:

    JB13, that’s exactly why we can’t raise taxes anymore. The state will have to do less. Illinois is already almost the highest taxed state in the country.


  59. - Ron - Friday, Apr 13, 18 @ 2:33 pm:

    RNUG, the goal of the constitutional amendment is prevent this from everything happening again. All it takes is a GA and governor to increase public worker benefits to obscene levels again and we’re back to the same problem.


  60. - Anonymous - Friday, Apr 13, 18 @ 2:35 pm:

    The rules have been changed. It’s called Tier 2.


  61. - NOT Milton Friedman - Friday, Apr 13, 18 @ 2:41 pm:

    @RUNG - Help me out here why can’t this suggestion fly?

    -So let’s figure out what we need to pay annually to cover that years outlays. There is a current balance of $16plus billion dollars in the SERS fund currently.

    It made $1.5 billion last year through contributions and investments. So let’s deposit into the fund the outlays from 2017. Then each year the legislature appropriates the outlays from the previous year. This is maintain the fund for as long as there is a state of Illinois-

    Could we pay just what is going out every year to pensioner’s? Would this be less than the state pays in now?


  62. - HangingOn - Friday, Apr 13, 18 @ 2:58 pm:

    =state needs to stop providing services==

    Ok, so what will you give up? Clean water? Schools? Police? Roads? Child Safety? Cleaner Air? Ya know, if people would stop abusing kids, if people would stop polluting, if people would stop committing crime, if we had hovercars, there wouldn’t be such a need for services. So why don’t you get right on those things so you can stop paying for them like you want to.


  63. - Huckleberry Mentat - Friday, Apr 13, 18 @ 3:04 pm:

    Maybe fees paid to firms managing pension investments were too generous and also need to be clawed back through a reasonable and moderate methodology


  64. - Anonymous - Friday, Apr 13, 18 @ 3:04 pm:

    Have not had a raise in several years and do not see one coming

    Can’t wait to retire
    At least then I’ll get a raise


  65. - Sue - Friday, Apr 13, 18 @ 3:11 pm:

    I know what the Supreme Court previously said but has it ever been asked the following- does the pension clause guarantee benefits in existence as of the date enacted or also enhancements. COLA wasn’t added until 1990 20 years after the constitutional provision was passed. It’s COLA which is bankrupting the State. Eliminate the COLA and funding would be much more doable actuarially. My guess is this is a losing argument but it would go a long way in solving the problem


  66. - Rich Miller - Friday, Apr 13, 18 @ 3:12 pm:

    ===I know what the Supreme Court previously said but has it ever been asked the following===

    You obviously don’t know what the court said.


  67. - Chris Widger - Friday, Apr 13, 18 @ 3:15 pm:

    We need a progressive income tax, a soda tax, casinos, sportsbetting (though that one’s up to the feds, I think), legalized marijuana. We’ve lost our moral authority. Revenue has to go up. It’ll take eight years before we can elect anyone who might try to reduce spending or act as a check on unions, so let’s give that up for now and see what we can do on the revenue side.


  68. - RNUG - Friday, Apr 13, 18 @ 3:20 pm:

    == Could we pay just what is going out every year to pensioner’s? ==

    It would work for a while, but the amount every year would increase for, probably, the next 25 - 30 years or so. Several factors go into this, more Tier 1 tetiring and pulling out money instead of contributing, the increasing pension amounts (from increased salaries over time and the AAI), and the decreased earnings from the lack of capital in the pension funds.

    == Would this be less than the state pays in now? ==

    Can’t honestly say. That is all on my home computer … and I’m a couple of thousand miles away on vacation.

    Adding … short of cutting the actual benefits, the State can do anything they want to in terms of paying the pensions, as long as they do pay them. They could switch to what you propose, basically paying out of cash flow. Where the rub comes in is the State also borrows money … and the bankers won’t be very happy with such a scheme because it would start to erode the reserve ability to make bond payments.

    That said, the rating agencies would prefer some kind of reasonable plan to ease the Edgar Pension Ramp’s eating up more and more tax revenue … because that is the real issues,paying for the other services at the same time.

    Regardless of the Federal pension reporting rules, I suspect the rating agencies would be happy with a ramp reset that achieves 70% - 80% over 35 - 50 years, especially if it included another 1% tax dedicated to the pension funds. We don’t need to be at 90% or 100% because the State, unlike a business, can’t go out of existence.

    If I was Rauner or Madigan or Cullerton, I would put the State budget people together with CBTA staff and design a sustainable compromise.


  69. - RNUG - Friday, Apr 13, 18 @ 3:27 pm:

    == does the pension clause guarantee benefits in existence as of the date enacted or also enhancements. ==

    They’ve already said in place at time of hire PLUS enhancements granted by the GA. And in one or two of those ruling, they also reached back to pre-1970 law for some precedents.

    And COLA isn’t causing anything. State retirees don’t get a COLA. The GA deliberately avoided setting up a variable COLA because of the high inflation in the late 1970’s and early 1980’s. Rates of 12% to 17% would have broke the State.


  70. - Chris Widger - Friday, Apr 13, 18 @ 3:34 pm:

    ==The GA deliberately avoided setting up a variable COLA because of the high inflation in the late 1970’s and early 1980’s. Rates of 12% to 17% would have broke the State.==

    Not to say that you should, but couldn’t you just cap it at the lower of, say, 3% and CPI-u?


  71. - Ron - Friday, Apr 13, 18 @ 3:36 pm:

    3% annually compounded increases when inflation has been near 1% for a decade


  72. - RNUG - Friday, Apr 13, 18 @ 3:39 pm:

    == Not to say that you should, but couldn’t you just cap it at the lower of, say, 3% and CPI-u? ==

    That’s more or less what Tier 2 did.


  73. - Ron - Friday, Apr 13, 18 @ 3:41 pm:

    Chris a logical government would do that, but illinois is a state of the government for the government.


  74. - Anonymous - Friday, Apr 13, 18 @ 3:41 pm:

    What people refer to as the COLA is actually AAI and was paid for with each and every deduction from the paycheck. It’s not a gift. It was the employees’ retirement saving plan.


  75. - Oswego Willy - Friday, Apr 13, 18 @ 3:43 pm:

    Nothing better than reading - RNUG - going about his business here.

    Thanks - RNUG -


  76. - RNUG - Friday, Apr 13, 18 @ 3:47 pm:

    == 3% annually compounded increases when inflation has been near 1% for a decade ==

    Long term and almost every 10 to 30 year period since the Feds started getting records, it has averaged 2.9% to 3.2%. The last decade has been an anomaly caused by the Feds keeping the inter-bank lending rate a zero or near zero. It ain’t going to be that over the next decade.

    If you truly believe changing the 3% AAI to a trailing CPI-U COLA is a good idea, let the State offer an UNCAPPED one, and give retirees an option to switch.

    I’m guessing a decade from now you will be crying to have the 3% AAI back in place … because the uncapped COLA will be costing too much.


  77. - Grandson of Man - Friday, Apr 13, 18 @ 3:57 pm:

    When it comes to the super-wealthy and super-privileged like Rauner and the IPI, state workers have given enough. Rauner is absolutely convulsing with refusal to pay a higher state income tax. Why should state workers stick their necks out to be cut when Rauner and his supporters refuse to pay a penny more?


  78. - wondering - Friday, Apr 13, 18 @ 4:08 pm:

    Not Milt: You got it. The feds have no pension fund, they pay as they go on military pensions, etc. The phony 130 billion deficit could be erased tomorrow by legislative action. Having investment dividend not needed.


  79. - Ron - Friday, Apr 13, 18 @ 4:08 pm:

    Anonymous, please explain how a 3% compounding increase has been paid for.


  80. - Ron - Friday, Apr 13, 18 @ 4:10 pm:

    RNUG , the state should not offer any increase and have all employees in 401ks that are unmatched until benefit protection is removed from the state Constitution


  81. - Ron - Friday, Apr 13, 18 @ 4:15 pm:

    Grandson, the citizens of illinois have the fifth highest state and local tax burden in the nation. I am now paying $1000s more annually after the income tax increase.


  82. - titan - Friday, Apr 13, 18 @ 4:33 pm:

    Ron - If you’re paying multiple thousands more with the 2% increase in the income tax, then you’re apparently one of those very rich people that it is only “fair” that you should be paying lots more than you already are.


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