Pritzker on ‘Fix Tier 2′
Friday, Apr 19, 2024 - Posted by Rich Miller
* Setup…
* Governor’s quote…
Look, I think we ought to consider all the proposals out there. But let’s be clear: I have a sign on the other side of that wall that l’ve kept up ever since the very first credit upgrade that we got for the state. And the reason that we’ve gotten so many credit upgrades is we’ve been very careful about how we’re managing the fiscal condition of the state and our pensions, which are of deep concern to investors in our bonds. So when we consider sweeteners, we just need to be exceedingly careful about whether or not they really make sense from a fiscal perspective — and a fairness perspective too.
But from my perspective, let me just say that we’ve been going in the right direction; the percent funded of state pensions has gone up since I took office and it will continue that trajectory. We need, obviously, to make some changes to Tier 2 to make sure that we’re meeting the Social Security Safe Harbor. We don’t yet really know what that’s going to cost.
So that, in a way, is a sweetener in the sense that it’s going to cost taxpayers something. But we have to do it because the alternative would cost the taxpayers much more.
Not quite sure what that all means.
- Ducky LaMoore - Friday, Apr 19, 24 @ 1:32 pm:
It means he understands tier 2 peoples’ problems. And he isn’t doing anything about it except for teachers, ‘cause there ain’t no money for it.
- Donnie Elgin - Friday, Apr 19, 24 @ 1:47 pm:
JB just laid down a non-answer that gives him political cover. Next election cycle He can say that he has been and will continue to be worried about tier 2, it will cost money but just not today.
- Annonin' - Friday, Apr 19, 24 @ 1:52 pm:
Now let’s ask about retiree health care
- Glengarry - Friday, Apr 19, 24 @ 1:59 pm:
Word salad for “I feel sorry for Tier 2 participants. Should have started working for the government prior to 1/1/2011.”
- TNR - Friday, Apr 19, 24 @ 2:00 pm:
There are two kinds of tier 2 fixes. One fixes tier 2’s noncompliance with Social Security safe harbor rules. The other fixes the complaint from tier 2 employees that their pension benefits stink.
Those credit rating upgrade the governor cherishes can probably survive the safe harbor fix because to do nothing could cost the state even more in the long run. But the folks at Moody’s and Fitch are going to go nuts over any expansion of benefits outside of that.
- JS Mill - Friday, Apr 19, 24 @ 2:01 pm:
It means he knows that it needs to be addressed and that it will be addressed but only so much so that it satisfies Safe Harbor.
- Pot calling kettle - Friday, Apr 19, 24 @ 2:03 pm:
The part about the Social Security Safe Harbor is huge, and I’m glad the Gov understands the implications. Most of the people I have talked to about this feel that the Tier 2 pensions do not meet the safe harbor threshold. At some point, the Feds will send a bill to the state and every Tier 2 employee for Social Security. That would be a big bill (6.2% tax on payroll) for the employer (state, local school, community college) and a 6.2% pay cut for every employee. The employees would want to be made whole. That would be 12.4% - significantly more than improving Tier 2 to meet the safe harbor. And, the feds would not allow that bill to be paid at some time in the future.
- english - Friday, Apr 19, 24 @ 2:08 pm:
Bringing a pension system into compliance with Social Security is not a “sweetener.” He really needs to stop using that term. There’s nothing sweet about any changes to broken systems that greatly decreased benefits but didn’t decrease the required employee contribution.
- Dupage - Friday, Apr 19, 24 @ 2:25 pm:
He should ask the feds for money for the shelter expenses which are substantial and growing. The money will have to come from somewhere. After the rainy day fund and other reserves are used up, taxes will have to be raised, or other things will have to be cut. Pension contributions will probably be shorted once again. Good luck finding qualified applicants to fill vacant positions for teachers, police, and other public employees.
- RNUG - Friday, Apr 19, 24 @ 2:26 pm:
== feel that the Tier 2 pensions do not meet the safe harbor threshold. At some point, the Feds will ==
It would be more accurate to say that Tier 2 for teachers are expected to not meet Safe Harbor at some (,currently unidentified) point in the future. It’s going to depend on the size of future SS COLA’s.
- RNUG - Friday, Apr 19, 24 @ 2:30 pm:
== Not quite sure what that all means ==
I read as
a) I know it will be a problem at some point in the future
b) it’s not in the planned budget(s)
c) if we get the school funding up high enough, maybe can tap some of those funds to use towards a fix
d) if inflation stays low, I may be gone before the State has to deal with it
- Homebody - Friday, Apr 19, 24 @ 3:10 pm:
Can someone explain to me like I’m an idiot (or point me to such an explanation) what the social security issue is?
- H-W - Friday, Apr 19, 24 @ 3:36 pm:
@Homebody
I think the issue is an employer (the state) must guarantee that it will provide for its employees’ retirements as well as or better than they would get from our National retirement insurance (SS). If they cannot do do, then the employer must contribute to SS on behalf of the employees, and withhold / submit the employees shares.
- Excessively Rabid - Friday, Apr 19, 24 @ 3:39 pm:
Homebody, you’re not allowed to hold your employees out of Social Security coverage and put them in a system that pays less than Social Security benefits alone. As I understand it.
- RNUG - Friday, Apr 19, 24 @ 3:51 pm:
@Homebody
H-W pretty much nailed it. But it only applies to so called non-coordinated employees (ones that don’t pay into SS) which is generally just teachers. Most other State / government employees pay in both the applicable government pension system and SS.
- Jane - Friday, Apr 19, 24 @ 4:00 pm:
One of the proposals says, “the Tier 2 benefit will be redefined to have as a minimum benefit, the Social Security benefit the person would have earned, plus $1.”
- Gravitas - Friday, Apr 19, 24 @ 4:15 pm:
Is a new Indian Casino to open in DeKalb soon? Tribal lands are different.
- Garfield Ridge Guy - Friday, Apr 19, 24 @ 4:59 pm:
==But let’s be clear: I have a sign on the other side of that wall that l’ve kept up ever since the very first credit upgrade that we got for the state. ==
Feel free to tell me if I’m just being obtuse, but what sign is the Governor referring to?
- Dirty Red - Friday, Apr 19, 24 @ 5:11 pm:
Fourteen years later, the tier two amendment starting in the House and making it to the Governor in one day continues to be one of the most impressive bits of legislative maneuvering.
But that’s where the novelty ends. They at least need to bring it up to snuff with SSA, but I doubt that will happen as long as the rating agencies are happy and the revenue shortfalls continue. It’ll take a concentrated effort by labor or a federal court order.
- 3 years teaching - Tuesday, Apr 23, 24 @ 12:41 pm:
I think what gets lost on all of this is that the tier 1 pension system would have been fine if politicians made their payments on time.
They didn’t, so now teachers are paying the price for a politically created crisis.
I’ll also add that it can’t be called a sweetener if that pension is worth less than social security. At this point I probably would’ve just opted to take social security instead of the pension.
Add in the complexity of a ten year vesting period, that means countless of teachers have left the profession before 10 years and made 0 contributions to social security. Smells like a class action lawsuit waiting to happen.
I’ll be leaving the profession or switching states unless the pension looks to be heavily modified.