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Hynes pitches a revamped pension ramp

Wednesday, Feb 13, 2019

* Deputy Gov. Dan Hynes was on Chicago Tonight yesterday and talked about pensions. In addition to some of the other ideas floated in the past week (consolidation, asset transfers), Hynes made this pitch

We need to look at the funding schedule that was put in place 25 years ago, that at the time thought we would be spending about $4 billion on pensions and now it’s asking us to put $9 billion in. That is 20 percent of our revenues. And I don’t think the designers of that plan ever envisioned the state of Illinois putting 20 percent of its revenues into the pension systems. So we need to take a hard look at that.

Hynes also said that the “best place to start” when looking to consolidate pension funds was the 600-plus Downstate police and fire pension systems.

- Posted by Rich Miller        

95 Comments
  1. - Chris Widger - Wednesday, Feb 13, 19 @ 10:07 am:

    ==And I don’t think the designers of that plan ever envisioned the state of Illinois putting 20 percent of its revenues into the pension systems. So we need to take a hard look at that.==

    I don’t understand what the “hard look” will entail, other than either “we should try to negotiate with unions” (likely a non-starter) or “we need enough revenue to cover that.”


  2. - the Patriot - Wednesday, Feb 13, 19 @ 10:09 am:

    Any plan has to shift from defined benefits for new employees to 401k style plans. People are living too long and there is a reason no private companies still do defined benefit plans. If you don’t sunset the finale, you are just kicking the can.

    Dan makes sense, but lets set the end date on this game.


  3. - City Zen - Wednesday, Feb 13, 19 @ 10:09 am:

    2045: That’s your target year. If you want to put in more today or flatten the payment schedule, that’s fine, but no extending beyond the original 50 year target date.


  4. - DarkDante - Wednesday, Feb 13, 19 @ 10:10 am:

    Could be misrembereing, but I think S&P stated that a re-ramp would be a huge credit negative. I wonder if the new ramp envisions would sync up at all with Progressive income tax timeline. That might be more financially pallatable. My couple pennies.


  5. - Perrid - Wednesday, Feb 13, 19 @ 10:11 am:

    Gotta be careful with kicking the can further down the road. You can argue with the ratings agencies all you want, but we’re right above junk status and the agencies are not gonna like extending it every much.


  6. - Chicagonk - Wednesday, Feb 13, 19 @ 10:15 am:

    Just keep kicking that can.


  7. - Oswego Willy - Wednesday, Feb 13, 19 @ 10:21 am:

    The biggest thing with pensions and with the deficits is making the payments and making the payments themselves not so burdensome that it eats away the budget.

    I know, no big woop, easy-peasy…

    I can’t see, right now, a way that doesn’t include some sort of ramp, and trying to make, at least on paper, the payments feasible and working towards lowering the shortfall.

    The discussion with the Pritzker Administration is now at hand, and Hynes is taking that discussion to the two points with one overall goal.

    This is gonna be a hodge-podge of things to make it all work.


  8. - Lucky Pierre - Wednesday, Feb 13, 19 @ 10:22 am:

    I don’t think the designers of that plan thought the public sector unions would become the most powerful political force in Illinois, unwilling to compromise on policies that are bankrupting the state and countless cities.


  9. - Sue - Wednesday, Feb 13, 19 @ 10:27 am:

    That falling bridge featured in the news phots should include a big sign- this is what happens when all new revenue growth has to go directly to paying for pensions. Hynes is right- I promise if you ask Edgar- he wouldn’t have believed 20 plus percent of all revenue going to pensions in 2020 His plan didn’t anticipate shrinking State population and near zero growth in state revenues for a decade


  10. - Oswego Willy - Wednesday, Feb 13, 19 @ 10:29 am:

    ===I promise if you ask Edgar- he wouldn’t have believed 20 plus percent of all revenue going to pensions in 2020===

    I bet Edgar didn’t expect missing payments…

    You already know that.


  11. - Steve - Wednesday, Feb 13, 19 @ 10:30 am:

    I saw the interview. I encourage everyone to watch it. Whether you like Hynes or not: he’s one of the real experts on these financial matters. One sharp guy.


  12. - Last Bull Moose - Wednesday, Feb 13, 19 @ 10:34 am:

    Pension legislation should include a freeze on improving benefits. An exception would be made if Tier 2 needs to be improved to meet Social Security requirements.


  13. - Sparky791 - Wednesday, Feb 13, 19 @ 10:35 am:

    State doesn’t miss their share of payments we are not having this conversation. Now time to pay off the credit card they created.


  14. - City Zen - Wednesday, Feb 13, 19 @ 10:35 am:

    ==I bet Edgar didn’t expect missing payments==

    Edgar didn’t miss a payment. Then again, he had the smallest payments on the schedule. And while there were missed payments that impacted the pension liability today, there’s still the matter of having enough money to meet the scheduled ramp payments to begin with.

    Ask yourself this…if Edgar had created a flat or flatter payment amortization plan, what would his budgets have looked like?


  15. - Oswego Willy - Wednesday, Feb 13, 19 @ 10:37 am:

    ===And while there were missed payments that impacted the pension liability today, there’s still the matter of having enough money to meet the scheduled ramp payments to begin with.===

    Why were the pension payments skipped?

    Be specific.

    ===had created a flat or flatter payment amortization plan, what would his budgets have looked like?===

    (Narrator: Edgar didn’t)


  16. - Oswego Willy - Wednesday, Feb 13, 19 @ 10:40 am:

    This would be a good time to revisit McKinney’s work in Crain’s…

    If we’re “revisiting”, we’re all missing the point of Hynes… trying to solve as best we can the problem.


  17. - cannon649 - Wednesday, Feb 13, 19 @ 10:41 am:

    The failing bridge is a great optic.

    The ” kick the can” policies of the last three decades is coming home- also note the 20 percent only kicks the can


  18. - Jose Abreu's next homer - Wednesday, Feb 13, 19 @ 10:43 am:

    Should’ve brought on Pat Quinn cuz I heard he was put on this Earth to solve the pension mess


  19. - Skeptic - Wednesday, Feb 13, 19 @ 10:43 am:

    “we should try to negotiate with unions”
    “public sector unions would become the most powerful political force”

    Repeat after me: Pensions are not a Union benefit.


  20. - Oswego Willy - Wednesday, Feb 13, 19 @ 10:46 am:

    ===unwilling to compromise===

    Ask the Illinois Supremes. They ruled as they did, using the constitution.

    Also, it was the state, not the workers than missed payments.

    Again, things you know, spamming things you know aren’t true…


  21. - Anonymous - Wednesday, Feb 13, 19 @ 10:47 am:

    Pensions are not a union benefits. Pensions are not a union benefit.


  22. - Harvest76 - Wednesday, Feb 13, 19 @ 10:48 am:

    ==there is a reason no private companies still do defined benefit plans.==
    Coca-Cola, Johnson & Johnson, JPMorgan Chase, Prudential, Merck, Eli Lilly and Company, Aflac, etc.


  23. - City Zen - Wednesday, Feb 13, 19 @ 10:52 am:

    Harvest76 - Now tell us what rates those corporations’ pension plans use for the discount rate and expected rate of return.


  24. - DownstateR - Wednesday, Feb 13, 19 @ 10:56 am:

    They are currently voluntary, but SURS has a 401a option; CMS has a 457 plan.

    https://www.surs.org/self-managed-plan

    https://www2.illinois.gov/cms/benefits/Deferred/Pages/DeferredCompensation.aspx


  25. - Mr. Chairman - Wednesday, Feb 13, 19 @ 11:02 am:

    Fresh idea. /snark


  26. - Al - Wednesday, Feb 13, 19 @ 11:02 am:

    Dan Hynne: I got a shovel and we know how to use it. Just dig dig dig a hole. Works every time. What could go wrong? Trust me.


  27. - A Jack - Wednesday, Feb 13, 19 @ 11:05 am:

    A new ramp should be a last resort to be used only if the economy is in a prolonged downturn.


  28. - NeverPoliticallyCorrect - Wednesday, Feb 13, 19 @ 11:09 am:

    While I like to rail against the poor decisions of the past regarding the pension mess it’s only value is in making sure we don’t repeat the same mistakes. Well the biggest error was in skipping payments. While everyone agrees now that was a huge error is anyone willing to introduce legislation to correct this. Also, as others have said, is anyone willing to say we can’t afford this type of system any longer? The Dems have complete control so we’ll find out if they have the courage to do this.


  29. - Harvest76 - Wednesday, Feb 13, 19 @ 11:11 am:

    ==Dan Hynne: I got a shovel and we know how to use it. Just dig dig dig a hole.==

    A shovel can be used to fill a hole too. Perspective.


  30. - NoGifts - Wednesday, Feb 13, 19 @ 11:17 am:

    It always strikes me as strange when we discuss pensions separately from “overhead” as part of employee costs. The employer share of health insurance, vacation and sick time, social security, and other benefits is a cost all companies have. Is the amount currently contributed by employer and employee the right amount to fund pensions for current employees? Is it even a relevant question to ask whether there are two different problems - shortfalls from the past for current retirees vs. whether current retirees and employers are paying the right amount?


  31. - Huh? - Wednesday, Feb 13, 19 @ 11:17 am:

    Sue - for the last time IDOT pays for road and bridge construction from the road fund which is funded by MFT. IDOT gets no money from the general revenue fund.

    Conflating a bridge in very bad condition with the under funded pensions is disingenuous. Two different check books with completely different funding.

    BTW - your best friend and ex-governor did nothing to help the financial condition of the State.


  32. - My Button is Broke... - Wednesday, Feb 13, 19 @ 11:19 am:

    I don’t know how you ever fund the pensions without it being 20% of revenues at some point. Even with the current payment schedule, and assuming all assumptions are met, the unfunded liability will continue to grow until 2029…


  33. - Smalls - Wednesday, Feb 13, 19 @ 11:23 am:

    From TRS’s website on a recent actuarial presentation:

    -Required State contribution for fiscal 2020 is $4.81 billion, an 11% increase from
    the preliminarily revised fiscal 2019 contribution of $4.35 billion
    -The fiscal 2020 State contribution under the Board-Adopted Actuarial Funding
    Policy is $7.88 billion
    -Statutory contribution is approximately 60% of the Board funding policy amount
    -The $3.07 billion contribution shortfall increases future contribution requirements

    So the state doesn’t even want to make their artificially low statutory contribution under the current ramp, and wants to revise that ramp. Keep in mind this current ramp isn’t even close to paying for what it should be.

    We can’t just keep kicking the can down the road. We can’t.


  34. - Anonymous - Wednesday, Feb 13, 19 @ 11:37 am:

    Harvest, at least three of those companies listed have done away with defined benefit plans. I know from experience. The others I bet don’t have them either, but can’t confirm.


  35. - Smalls - Wednesday, Feb 13, 19 @ 11:39 am:

    And keep in mind that the $3.2B deficit that the Pritzker administration released last week does not include these additional pension contributions that should be made according to the actuary studies. SURS was almost another $1 billion short. So that $3.2B deficit is really about a $7B deficit, out of a $42B general fund. So they are short roughly 1/6 of what they should be paying.


  36. - Thomas Paine - Wednesday, Feb 13, 19 @ 11:42 am:

    “Summit fever” is the term used to describe mountaineers so intent on reaching a zenith that they abandon all reason and ignore new evidence of Danger or that things are not going according to plan.

    Summit fever is deadly. In fact, it’s the #1 killer. It’s why people get struck by lightning, freeze to death, get buried in avalanches or get lost and never heard from again.

    The smart thing to do when things are not going according to plan is to chart a new course, even if that new course means trapsing back down the mountain.

    Personally I think we would all be just fine and state finances much better off if we got rid of the ramp completely, moved to a flat payment system, but lowered the goal to 80% funding by 2045 instead of 100%. Certainly would relieve pressure on the progressive income tax brackets which ought to make GOP joyful.


  37. - City Zen - Wednesday, Feb 13, 19 @ 11:46 am:

    ==A shovel can be used to fill a hole too.==

    Indeed, but who’s carcass are we covering?


  38. - JS Mill - Wednesday, Feb 13, 19 @ 11:46 am:

    =I don’t think the designers of that plan thought the public sector unions would become the most powerful political force in Illinois, =

    So create your own more powerful organization OR realize that you are in the minority and stop the victimhood shtick.

    =unwilling to compromise on policies that are bankrupting the state and countless cities.=

    These are not policies. They are fundamental laws codified by the Illinois Constitution.

    The pensions are not bankrupting the state.

    The debt that has to be repaid is the problem. The pension money was diverted to other expenditures that you benefitted from.

    The pensions are not unaffordable. The investment returns for TRS are such that TRS does not often have to touch the principle to pay pensioners.


  39. - Roman - Wednesday, Feb 13, 19 @ 11:57 am:

    - Lucky Pierre -

    Despite the fierce opposition of those public sector unions, a Democratic legislature and governor passed a pension reform plan. The Supreme Court, applying Scalia-style strict constructionism, unanimously threw it out. The constitutions (both state and federal) are the obstacles.


  40. - Skeptic - Wednesday, Feb 13, 19 @ 12:00 pm:

    ” at least three of those companies listed have done away with defined benefit plans.” And…? Has the ISC told them explicitly they couldn’t?


  41. - titan - Wednesday, Feb 13, 19 @ 12:00 pm:

    +++ And I don’t think the designers of that plan ever envisioned the state of Illinois putting 20 percent of its revenues into the pension systems +++

    No, they envisioned the state making its full annual payments all along (instead of effectively borrowing from the pension funds), and had it done so, the % of the state budget needed annually would be much lower (and pretty reasonable)


  42. - City Zen - Wednesday, Feb 13, 19 @ 12:12 pm:

    ==The smart thing to do when things are not going according to plan is to chart a new course, even if that new course means trapsing back down the mountain.==

    Unless that plan requires the Sherpas carrying you on their backs.

    ==got rid of the ramp completely, moved to a flat payment system, but lowered the goal to 80% funding by 2045 instead of 100%.==

    It’s 90%, not 100%. Why is 80% the magical goal? Why not 50% or 20%?


  43. - Grandson of Man - Wednesday, Feb 13, 19 @ 12:13 pm:

    “The debt that has to be repaid is the problem”

    That is the problem, and reamortization would be a way to help us pay down the debt. It’s what Pritzker supports. It will need more revenue, but it’s well worth it.

    A graduated income tax with revenue dedicated to paying this debt would help unburden so many. People with lower/middle incomes have carried the wealthy for way too long in Illinois. If the graduated income tax fails to get enacted, then reform ideas have to be commensurate with those who can afford them. We can’t be cutting workers anymore while they are being taxed at the same rate as millionaires.


  44. - City Zen - Wednesday, Feb 13, 19 @ 12:25 pm:

    ==The pension money was diverted to other expenditures that you benefitted from.==

    And you. Where do you think the money for employee raises came from, the lottery?

    ==The pensions are not unaffordable.==

    If they are so affordable, why that we keep re-amortizing the debt and moving the target funding level? If debt is the problem, then why did the dozens of benefit enhancements over the years while mired in debt?

    Perfect way to test affordability: Make the full pension payment under the current budget. Should be plenty of money left over to fund operating expenses, no? Still waiting for someone to call that “affordable” bluff.


  45. - Jibba - Wednesday, Feb 13, 19 @ 12:33 pm:

    CZ, you seem to argue both ways. You don’t want a tax increase to pay for the contributions needed, nor do you want the can kicked any farther down the road. How do you expect to get to the end of the road if there is no tax increase? Any constitutional ideas will be appreciated.

    Why 80%? 80% is better than 40%. And it may be an achievable goal. When we get to 80%, the credit agencies will still be screaming, as they would at 90%. I doubt they will be happy at 100%.


  46. - RNUG - Wednesday, Feb 13, 19 @ 12:37 pm:

    == we should try to negotiate with unions ==

    Unions have zero, repeat, ZERO to do with the State pensions. That is strictly between the State and each individual State employee / retiree.


  47. - Anonymous - Wednesday, Feb 13, 19 @ 12:39 pm:

    1. They don’t have a 3.2 billion shortfall in the budget. There is another 8 billion from prior years unpaid. It’s like 12 billion.
    2. The 133 B in pension shortfall is more like $200B in reality and there’s a market downturn coming.
    3. People will leave rather than pay the kind of tax rate needed to cover that.


  48. - RNUG - Wednesday, Feb 13, 19 @ 12:42 pm:

    == Any plan has to shift from defined benefits for new employees to 401k style plans. ==

    That will cost more for quite a few years than the current system if you include any level of employer (State) match.

    Then add in the SS contributions that will have to be made for everyone in the TRS system … and the Feds won’t wait for the employer (State) share of that.

    Finally, depending on exactly how it is implemented, it will likely result in a noticable reduction in teachers take home pay. You think you have trouble filling K-12 teaching positions now …


  49. - Anon - Wednesday, Feb 13, 19 @ 12:42 pm:

    RNUG - Thank you. Even if the unions agreed to some revision to pensions it would not be binding on the employees or retirees (union or not). Any state employee could challenge the proposal.


  50. - RNUG - Wednesday, Feb 13, 19 @ 12:45 pm:

    == Pension legislation should include a freeze on improving benefits. An exception would be made if Tier 2 needs to be improved to meet Social Security requirements. ==

    That makes sense and I could back that. Falls under the heading of “first,, stop digging a hole”. Won’t change a dime of what I’d currently owed, but it would make for a feel good political headline.


  51. - RNUG - Wednesday, Feb 13, 19 @ 12:50 pm:

    == CMS has a 457 plan. ==

    Clarification: the SERS 457 plan is optional / additional retirement savings on top of the standard State pension. Only employee money is contributed to the 457 plan. It is similar to an individual 401K plan with one major exception; money can be withdrawn from a 457 at any age without penalty as long is the person is no longer employed by government.


  52. - Steve Polite - Wednesday, Feb 13, 19 @ 1:11 pm:

    @the Patriot 10:09 “There is a reason no private companies still do defined benefit plans” - Greed.


  53. - City Zen - Wednesday, Feb 13, 19 @ 1:13 pm:

    ==CZ, you seem to argue both ways.==

    Arguing for wage increases and larger pension payments (or re-amortization to pay for the wage increases) is having it both ways. Compensation is compensation. If one aspect of your compensation package consisting of salary, benefits, and retirement consumes too much of your compensation pie, the others slices need to be smaller.

    Make the full pension payment under existing budget. We might finally solve the “if the state made their pension payments…” riddle once and for all.

    ==Why 80%?==

    Better question: Why do we keep proposing lower and lower funding levels? Why not 70%?

    ==An exception would be made if Tier 2 needs to be improved to meet Social Security requirements.==

    Are the actuaries assuming a Tier 2 pension enhancement when calculating the “savings” from Tier 2 and calculating the future pension liability? If not now, when?


  54. - Anonymous - Wednesday, Feb 13, 19 @ 1:13 pm:

    Good, a ramp is necessary unless we reduce spending. I doubt JB has any interest in government spending reductions.


  55. - Anon - Wednesday, Feb 13, 19 @ 1:14 pm:

    I hope and pray the ratings agencies make quite clear to JB,Madigan and everyone else that any effort to revise the ramp in a way that kicks the can will be met with a Junk grade rating for the state’s credit.

    That will stop this madness dead in its tracks.

    Smoke and mirrors is not going to make this problem go away or make it better.


  56. - low level - Wednesday, Feb 13, 19 @ 1:17 pm:

    People like Lucky P dont seem to understand public employees paid into a pension plan their entire career. Its not some nice giveaway the state promised.


  57. - Jibba - Wednesday, Feb 13, 19 @ 1:23 pm:

    CZ, remind me not to play dodge ball with you.

    1) The pension debt is not the fault of the employees. The funds that were previously diverted to other things did not become part of their compensation package, so how can you justify penalizing them now because the state did not set aside the funds previously? It is not sensible to say that the employees need to take pay cuts to pay off the state’s portion of their retirement.

    2) Why not 70% All these numbers are arbitrary since the state cannot go out of business. Applying standards from business is a silly exercise. Having said that, any employee would be happier at 100%, but any increase is better than the status quo. If 80% is achievable in 30-50 years, let’s start on that road. We can always continue above 80% when the time comes.


  58. - JS Mill - Wednesday, Feb 13, 19 @ 1:26 pm:

    =Where do you think the money for employee raises came from, the lottery?=

    Mine came from local property taxes. So what?

    =If they are so affordable, why that we keep re-amortizing the debt and moving the target funding level? If debt is the problem, then why did the dozens of benefit enhancements over the years while mired in debt?

    Perfect way to test affordability: Make the full pension payment under the current budget. Should be plenty of money left over to fund operating expenses, no? Still waiting for someone to call that “affordable” bluff.=

    You argue my point. The debt is the problem. If the payments were made as required by law our state budget would be about $5-$6 billion healthier. The annual cost of the state pension system, excluding debt payments is less than $2 billion. Thanks to Tier 2 the number is decreasing. For the annual cost.

    To understand if it is really sustainable and affordable what you would actually look at is the annual (year over year) cost without the debt payment. It works.

    =We might finally solve the “if the state made their pension payments…” =

    See above. In reality, you can’t truly answer that question without a time machine but I digress. What would be interesting to know is what is the principle payment amount and what reflects penalties and interest.


  59. - Lucky Pierre - Wednesday, Feb 13, 19 @ 1:38 pm:

    Its not some nice giveaway the state promised.

    According to General Assembly Retirement System (GARS) disclosures, 137 lawmakers chose to participate in the state pension system while the rest have thankfully opted out. To fund these future retirement annuities, the state government made a $21.7 million payment in 2017, meaning each participating lawmaker’s future pension cost taxpayers $158,547 last year.

    https://www.forbes.com/sites/adamandrzejewski/2018/04/28/the-pension-palace-for-illinois-lawmakers-2017/#53cb7d744b04


  60. - Nick - Wednesday, Feb 13, 19 @ 1:48 pm:

    Has there been a study that went back all the years the state failed to make proper payments and ran the numbers to see where we would be today If the payments were made like they were supposed to have been paid

    Those results could go along way to finally put an end to this argument


  61. - City Zen - Wednesday, Feb 13, 19 @ 1:51 pm:

    ==If the payments were made as required by law our state budget would be about $5-$6 billion healthier. ==

    If the payments were made as required by law, the state would’ve sent less money to the school districts all along. That money that is used for operating expenses. Operating expenses include salaries.

    Take any middle/upper middle class school district. Remove 50% of their state funding. Repeat every year. How does the remaining gap get filled? Property tax hike or cuts? Probably both. Even if it’s 90/10, there is an impact to salaries. Over time, that small percentage adds up.

    If you’re arguing hundreds of school districts would’ve all raised property taxes to fill that budget shortfall without one impact to staff salaries or hiring, I need to play your number on the roulette wheel.

    The pension debt is not the fault of the employees. The funds that were previously diverted to other things did not become part of their compensation package==

    Never said it was their fault. Money for education is every aspect of the education experience, from chalkboards to teacher pensions.

    Every year, the state allotted “X” for education. A larger portion of “X” went to today’s expenses instead of pensions. Not the employees’ fault, but they certainly did benefit.

    If you’re trying to separate pension costs from education, ask yourself, if we removed the pension today, would that teacher come back tomorrow? If not, the pension cost is the cost of education. The pension debt is partly of a result of choosing a raise years ago over the pension payment.

    ==Why not 70% All these numbers are arbitrary since the state cannot go out of business.==

    The solvency of the employer has absolutely nothing to do with the funding level. It is directed related to the rate assumptions used by the pension plan.


  62. - Six Degrees of Separation - Wednesday, Feb 13, 19 @ 1:59 pm:

    ===Pension legislation should include a freeze on improving benefits===

    A laudable goal; however, just like funding the pension ramp itself, “legislation” can and will change from year to year at the whim of the GA and governor. One session of the GA can’t control every one that follows, only the state constitution can do that to an extent, and even then it is subject to judicial interpretation when push comes to shove.


  63. - Jibba - Wednesday, Feb 13, 19 @ 2:23 pm:

    CZ, Rate assumptions, while necessary for financial projections, do not determine the dollars available to pay pensions. That is determined by actual income from contributions and investment returns. If income does not meet projections, changes may be needed. If pension outlays cannot be changed, then contributions or returns need to increase. That is what we’re talking about here. We project we will need more funds based on the funding level, so the state better be sound enough to be able to contribute more. The state is sovereign and unable to go out of business, so it is assumed to be able to generate as much revenue as needed. Therefore, funding level is most interesting to politicians who want to throw stones. 70%, 80%, or 90% are all just steps on the way to 100% funding that should be the ultimate goal. Timetable is relatively unimportant.

    Whether the state can actually levy a sufficient tax to fund the pensions is of concern, but we’re talking perhaps 2-3% income tax here to pay the ramp even at maximum, so the sky will not fall. If that much is too a big pill to swallow, then extend the payment schedule. Truly not rocket science.


  64. - Joe M - Wednesday, Feb 13, 19 @ 2:31 pm:

    ==Hynes also said that the “best place to start” when looking to consolidate pension funds was the 600-plus Downstate police and fire pension systems.==

    I’m not clear how that would save substantial money? The pension obligations would still be there.


  65. - Anon - Wednesday, Feb 13, 19 @ 2:38 pm:

    The scary part is the budget situation is this dire in the midst of the biggest market run in history.

    Just imagine what the state’s finances are going to look like if we have a good recession as is bound to happen at some point.

    I also don’t think the effect of the SALT cap has gotten any attention, but will likely play a big role in our future going forward.

    Plenty of people are in for a nasty surprise when they file their taxes this year.

    What will the appetite be for even more tax increases on top of the one most people don’t realize has already happened?


  66. - JS Mill - Wednesday, Feb 13, 19 @ 2:43 pm:

    =If the payments were made as required by law, the state would’ve sent less money to the school districts all along.=

    And you have what evidence to support that? Zero is the answer. Costs for schools would have been the same.

    The pension was put in place by the legislature not the schools. The same goes for the rate the schools must pay.

    While it may be popular to says schools would get less funding it does not hold up. As the state continues to pay $6 billion, $7 billion, and even $8 billion a year into the pension system school funding is increasing not decreasing.

    Pretty much contradicts your argument. If you have some evidence besides increasing funds please share.

    = The pension debt is partly of a result of choosing a raise years ago over the pension payment.=

    I like to think you are smarter than that.

    The debt is the state choosing not to fund something they created because of the ability to pass that cost on and not risk votes for raising taxes.

    The state has never had “X for education”, it has changed year to year almost every year.


  67. - City Zen - Wednesday, Feb 13, 19 @ 2:44 pm:

    Jibba - The rate assumptions are used to determine the plan assets needed to fund the plan liabilities. That’s it.
    The target rates, whether 70%/80%/90%, are merely products of the assumed rates used by the pension plan.

    This is the primary source of confusion in target pension funding levels. That “80% target” is derived from businesses that use different rates for the discount rate and expected rate of return. And I don’t mean lower rate assumptions, I mean different rate assumptions. The reason their 80% funding level is safe is because of the math, not some esoteric goal.

    Can the state use a 70% target level? Absolutely. But the math requires we use much different discount rates than we do today. The math would also require much larger payments today.

    My apologies, but it’s a hard concept to explain without prattling on even more so than I already have. But the point is these assumptions, whatever they are, need to be grounded in mathematical facts. In other words, pick your poison.

    All that said, the pension plans don’t have to be funded at all to pay pensions. That money could come entirely out of the current operating budget, much like retiree health benefits. Of course, that would be expensive.


  68. - Anonymous - Wednesday, Feb 13, 19 @ 2:52 pm:

    People can talk all they want about doing away with DB pensions and offering 401ks type retirement plans. That would work for those beginning their career.

    The whole point of the problem is the debt owed to those who would not be in that retirement plan. No one who paid into the plan (involuntarily, you know, no choice) should be asked to sacrifice a penny for the malfeasance of our politicians. Hard for some to believe, I know, but teachers just teach kids and enhance their instructional capabilities. Most are not even attuned to the political/financial management of their funds. They are not complicit in any way to the problems now being dumped on them. Not any more than all those in social security or collecting should have to give it up because someone says it’s going broke. What was your part in that?


  69. - City Zen - Wednesday, Feb 13, 19 @ 2:56 pm:

    == If you have some evidence besides increasing funds please share.==

    My evidence is math. You’re spinning a roulette wheel and hitting the same number every time. A multi-million dollar hole blown in a school district’s budget year after year without even a hint of a smaller raise one year or one less employee hired?

    ==The debt is the state choosing not to fund something they created because of the ability to pass that cost on and not risk votes for raising taxes.==

    That is indeed part of it. But if what if we paid the true cost all these years? That might’ve sped up the creation of a Tier 2. Anyway you look at it, employee benefits would’ve been negatively impacted.

    ==The state has never had “X for education”, it has changed year to year almost every year.==

    Yes, but whatever “X” is, a portion of it should be the full ARC pension payment.


  70. - RNUG - Wednesday, Feb 13, 19 @ 2:59 pm:

    == I’m not clear how that would save substantial money? The pension obligations would still be there. ==

    Those 600 or 700 funds (not the 5, technically 3, state retirement systems) all pay management fees, etc. And because they are relatively small, the fees are a greater percentage of available funds, leaving less money to actually invest. In theory, combining those funds into 2 or 3 or so large funds would result in a bigger pot to invest from being able to pay out a smaller percentage in management and transaction fees. It could also be argued that 2 or 3 large funds could attract better financial advisors which might also result in better investment returns.

    Note: they are not talking about the township / city / county funds already included in IMRF. In fact, an easy way to think about this is an IMRF like combined fund for all police pensions (IPRF?), another one for all fire pensions (IFRF?), and a third one for Misc. government pensions (IMRF2 or rolled into IMRF?) not already covered by IMRF.

    I’m not sure the savings would be “substantial”. But it might make a 5% to 10% difference for a lot of those small funds.


  71. - RNUG - Wednesday, Feb 13, 19 @ 3:01 pm:

    Rich, I think a couple of my comments got trapped for some reason.


  72. - Jibba - Wednesday, Feb 13, 19 @ 3:15 pm:

    CZ, As you say, the state can pay the entire cost of the pensions out of the annual budget, but that would be very expensive, so funding in advance is used to great benefit. This seems to be at odds with your comment at 12:12 ===It’s 90%, not 100%. Why is 80% the magical goal? Why not 50% or 20%?===

    The discussion was whether tax revenues were available to continue the ramp as is, or whether a less lofty funding goal would be sufficient (or a longer payoff period). Given your comments at 2:44, and your previous objections to higher taxes in any form, it seems like you should not object to a lower funding level that may be achievable with lower taxes. The only other path is higher taxes needed to continue the ramp payments, even if it might affect the economy. As you say, choose your poison.


  73. - Nonbeleiver - Wednesday, Feb 13, 19 @ 3:15 pm:

    Until a tax increase is implemented and set aside to specifically pay off back bills this ‘conversation’ will go on forever.

    Service tax? Betting? legal pot? Whatever.

    The overall budget must be held to the CPI,such tax increases to pay off back bills and have this law sunset after 4 years with any renewal requiring 2/3 vote.

    Never, ever mentioned by our political leasers or pundits as a rational. Instead, it is complain, raise taxes and jumble the money in one big pot to be ’spent’.


  74. - Sue - Wednesday, Feb 13, 19 @ 4:03 pm:

    I have in the past advocated that the State legislatively prohibit all employer pick up pension contributions forcing the employees to make their own contribution. To increase pension funding the State would then require every employer who previously made the pick up contribution to continue making payments into the applicable pension system for at least 10 years producing billions in added pension payments. The taxpayers won’t have any added burden with the exception of taxpayers who today might be having their pension contributions paid for them by Public employers


  75. - Back to the Future - Wednesday, Feb 13, 19 @ 4:11 pm:

    Convincing police and firefighters to turn over thier pensions to
    the state is going to be of heck of a hard sell. Most are happy with the current local based system.

    Also why have a study if Hynes has already made up his mind.


  76. - RNUG - Wednesday, Feb 13, 19 @ 4:45 pm:

    == I have in the past advocated that the State legislatively prohibit all employer pick up pension contributions forcing the employees to make their own contribution. To increase pension funding the State would then require every employer who previously made the pick up contribution to continue making payments into the applicable pension system for at least 10 years producing billions in added pension payments. ==

    That would help fix TRS and would be legal with the qualification that the current union contracts specifying employer pickup would have to be honored until they expire. Of course, the teachers would object to that and try to get a raise in their next contract equal to the amount of pension pickup they would be losing.


  77. - Union Thug Gramma - Wednesday, Feb 13, 19 @ 4:58 pm:

    First, we have been reducing spending at least since 1980, which is part of the problem–when it comes to state employee per capita, we are 50th, even tho our population is in the top 10. Our state and university employees have been contributing at least 8-16% of each and every paycheck to pension funding. We gave up raises, benefits to have a pension…and now we have to suffer because the citizens of Illinois weren’t paying attention? Didn’t care if pension payments were made? Kinda like vacationing in Europe instead of paying the mortgage. The 95 ramp caused this problem. AFSCME, at that time raised the alarm bells, but no one paid attention.


  78. - Anonymous - Wednesday, Feb 13, 19 @ 5:06 pm:

    And yet people praise Edgar.


  79. - Sue - Wednesday, Feb 13, 19 @ 5:17 pm:

    RNUG- would be priceless if either the IEA or IFT opposed something which would improve the funding levels of their precious pensions


  80. - Anonymous - Wednesday, Feb 13, 19 @ 6:39 pm:

    Sue has pension envy


  81. - City Zen - Wednesday, Feb 13, 19 @ 6:50 pm:

    ==The 95 ramp caused this problem. AFSCME, at that time raised the alarm bells, but no one paid attention.==

    Bet they were happy with the state picking up the employee portion of the pension payment back then.


  82. - Harvest76 - Wednesday, Feb 13, 19 @ 6:57 pm:

    ==Bet they were happy with the state picking up the employee portion of the pension payment back then.==

    Yeah, since that was negotiated in lieu of raises, I’m sure they were. Clearly you will never understand or agree with the idea of the working-class having a seat at the table with management. You must be a blast to hang out with.


  83. - City Zen - Wednesday, Feb 13, 19 @ 7:06 pm:

    ==Yeah, since that was negotiated in lieu of raises, I’m sure they were.==

    Care to provide the details of that so-called “freeze”? I know. Curious if you do.


  84. - Rose - Wednesday, Feb 13, 19 @ 7:42 pm:

    Does anyone know about the state of Illinois paying the Teamster’s Union 300 million dollars over the last 4 years for free health insurance for their members


  85. - Demoralized - Wednesday, Feb 13, 19 @ 7:42 pm:

    Harvest

    CZ loves to play this sport when it comes to pensions. He’s always too cute by half on this topic.


  86. - Anonymous - Wednesday, Feb 13, 19 @ 7:48 pm:

    Rose
    The state pays the medical funds to the teamsters for their members health insurance. Just happens to be managed by the teamsters

    No different than the state paying towards employees health insurance like they do for afscme members


  87. - Rose - Wednesday, Feb 13, 19 @ 8:01 pm:

    Yes but the state is not paying afscme in negotiating a contract are the teamsters working for the state or do they have the best interests of their members?


  88. - Anonymous - Wednesday, Feb 13, 19 @ 8:03 pm:

    What’s your point
    Of course they have their members interest
    It’s been a cheaper deal for the state overall


  89. - Harvest76 - Wednesday, Feb 13, 19 @ 8:15 pm:

    CZ- nobody said freeze, I said negotiated. In a negotiation, two or more stakeholders deliberate to an agreement in which all sides get some things and all sides give some things up. In this case, the members do not get raises for some specified period, and the employer agrees to pick up a portion of current employee pension cost. So the member gets the benefit of a little more money in their pocket, and the employer has controlled for future pension costs because they did not have to increase pensionable wages. Try to keep up.


  90. - Anonymous - Wednesday, Feb 13, 19 @ 8:19 pm:

    The point is the members on the step system that were frozen by a vote from the teamsters to get that insurance money will they get their steps back


  91. - Rose - Wednesday, Feb 13, 19 @ 8:31 pm:

    That should say members on the step system that was thrown under the bus by the Teamster Union to get that money will they get their steps back


  92. - Anonymous - Wednesday, Feb 13, 19 @ 8:42 pm:

    Money-teamsters-managemnet=dumpsterfire


  93. - Odysseus - Wednesday, Feb 13, 19 @ 10:13 pm:

    Anon @ 2:38 “What will the appetite be for even more tax increases on top of the one most people don’t realize has already happened?”

    Things cost what they cost. Lying about the cost doesn’t help anyone.


  94. - Anonymous - Thursday, Feb 14, 19 @ 5:26 am:

    So your saying it’s the teamster union fault that afscme steps were frozen ??


  95. - City Zen - Thursday, Feb 14, 19 @ 8:19 am:

    ==Things cost what they cost. Lying about the cost doesn’t help anyone.==

    They don’t call it a pension lie-ability for nothing.


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