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The Tribune’s editorial board makes an excellent point in today’s edition.
Last June, the state’s five pension systems had $58 billion in assets but $97 billion in accrued liabilities. That 60 percent funding ratio is one of the worst in the nation for state systems.
The liabilities will keep growing quickly. Even after all the borrowing and raiding, the state has to come up with $1.37 billion for pension funds in the next year, according to a bipartisan legislative panel that monitors state finances. That’s $437 million more than this year. And that difference is about half of all the new revenue the state expects to rake in next year.
That doesn’t leave a lot for new spending on schools, universities, health care, child welfare, law enforcement, prisons and everything else.
It gets much worse. In 2008, the state has to put $1.98 billion into the pensions. In 2010 that soars to $3.4 billion. And it keeps going up from there.
So no one–not the governor, not his opponents, not the 177 members of the House and Senate–should be allowed to talk about flashy new ideas that cost money. They don’t have the money. It’s going to be soaked up by the pensions.
I hope the Trib’s reporters (and everyone else) keep this in mind during the upcoming campaign. No ethereal billion-dollar “corruption tax” will take care of that problem. Small cuts in the bureaucracy won’t do it either. Tax cuts will make the problem worse.
posted by Rich Miller
Tuesday, Feb 7, 06 @ 7:54 am
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look for a big tax increase in the future to fund the previously unfunded pensions. the problem with public pensions is they are rich in benefits. not only is the percentage of the pension retirement pay to income high, but things like going on disability and receiving a pension and short term qualification for a pension are way out of whack with private pension plans. most govenmental entities are experiencing financial problems because of the lucrative pensions for employees. public employess in general receive some of the most lucrative and rich benefits of any wage earner group.
Comment by Ron Tuesday, Feb 7, 06 @ 8:10 am
Illinois state pensions are in the middle of the pack in regards to pension benefits. Many states offer more generous pension packages. The problem in a revenue problem not a spending problem.
The state must increase funding now in orber to avoid draconian tax increases in the future in order to meet its obligations to its past, present, and future employees.
Comment by Bill Tuesday, Feb 7, 06 @ 8:46 am
You guys are nuts. We don’t need a tax increase. Rich’s comment about tax cuts making the problem worse is irresponsible.
The pensions are bloated because the state government payroll is WAYYY too big. Rich is right about small bureaucracy cuts being ineffective. We need BIG bureaucracy cuts.
The way to reduce state pensions is to reduce state employees, plain and simple. Have you every taken a look at the Illinois Government web page (www.illinois.gov)? Just think about all of the people behind these departments, bureaus, commissions, etc., all sponging off of YOUR hard-earned tax dollars. It’s enough to make you choke on your egg mcmuffin.
Hey Illinois voters, WHAT ARE YOU GOING TO DO ABOUT THIS? I say, vote for anyone in favor of reducing the size of government. Get the damn politicians hands out of your pocket. Let’s try to see if we can produce a little fiscal responsibility around here.
Comment by Southern Illinoisian Tuesday, Feb 7, 06 @ 8:47 am
MORE MORE MORE TAXES.Plus he wants to borrow 3.2 BILLION more for an election year give away.Borrow and spend hey this guy must be trying to go to Washington.
Comment by DOWNSTATE Tuesday, Feb 7, 06 @ 9:04 am
I have participated in a number of IEA Lobby Days going back to the 1970’s. Each time, we kept telling the General Assembly that they were not keeping up with the state’s portion of the pension fundng. Too often that money was put back in the general revenue to pay for other things. One time it was the new White Sox park so the team wouldn’t go to Florida.
Each time, we were patted on the head like little anxious children and told, “there, there, everything will be all right. The money will be there.”
Well, it isn’t there. The state had not kept up with its obligations all those long years. The state cannot be trusted to be fiscally prudent.
If you want a great, well-funded pension system, become a member of the General Assembly. No problems there with money. Hmmm?
Comment by Nearly Normal Tuesday, Feb 7, 06 @ 9:20 am
bill you don’t think pensions are to generous. tell me another job the average person can work at for five years and then retire with 85% of your last years salary as your pension. you can do that in Illinois. pensions and benfits for public employees are the problem. spending is the problem.
Comment by Ron Tuesday, Feb 7, 06 @ 9:25 am
Ron,
Your statement of the benefits is inaccurate. In fact, it’s not even close. For most employees, five years would get you 8.5% (5 x 1.667%) not 85% of the average salary for your last 48 contiuous months of service. Please try a little less to be so imflammatory.
Comment by Budget watcher Tuesday, Feb 7, 06 @ 9:32 am
Thanks, Budget Watcher, for stepping in on this one.
Comment by Rich Miller Tuesday, Feb 7, 06 @ 9:39 am
Southern Illinoisian has it right….the state’s payroll is bloated, mainly with middle to upper managers. From the time I started working for the state, it appears that hiring political hacks for manager positions has evolved into an art form. It’s been especially disconcerting to see those who had lost a political race get state jobs, kind of like a consolation prize. That’s where the majority of the bloat is.
Comment by Walking Wounded Tuesday, Feb 7, 06 @ 9:51 am
budget watcher- i will clarify my statement. elected and appointd officials at all levels of government qualified for the 85% rule. it didn’t make any difference what your pay was for a number of years, it was only the last few years that were used to determine the 85% benefit amount. an number of officials in madison county illinois was appointed to these type of positions. the st. louis post dispatch has run a number of stories on the abuse of pension in madison and st. clair county and throughout the state.
Comment by Ron Tuesday, Feb 7, 06 @ 10:34 am
Can’t agree tax cuts will make the problem worse, they can only help.
http://backyardconservative.blogspot.com/
2006/02/illinois-pension-trap.html
Comment by BackyardConservative Tuesday, Feb 7, 06 @ 10:42 am
Ron,
In order to get 80% of the four year average an employee would have to work 36.4 years. Anybody who could stand to work for this state all those years deserves that plus a bonus. Don’t believe everything you read, especially in the St.L PD. But even they don’t inflate the facts and figures like you just did.
Comment by Bill Tuesday, Feb 7, 06 @ 10:43 am
So, 45 other states know how to do this? Did you also know that Illinois has one of the lowest percentage of state workers to citizens in the US?
So, it appears that 45 other states have a better way of providing citizens with public support, staff to handle their needs, and paying as good or better wages and benefits without stiffing either the state workers or citizens with monstrous tax hikes, or deficits?
Illinois ignored this problem for decades. Illinois’ workers have taken IOUs instead of real money for so long, there are now too many IOUs to pay off. What kind of ungrateful slugs would say that it is the worker’s fault for this situation?
Stop blaming the folks holding the IOUs. You sent them out, pay them off!
Comment by VanillaMan Tuesday, Feb 7, 06 @ 10:44 am
I believe that in 2007 the state will also be required, via new governmental accounting rules, to disclose its total liability for retiree medical care, and a plan to pay the costs. Government entities who have already performed the calculations have often revealed shockingly large sums in forthcoming liabilities.
Raising taxes should absolutely not be an option.
Leaving aside the issue of state government management overstaffing, it is critical that all state employees begin paying substantially more than they currently do for their benefits, now including almost-free medical coverage and pension coverage, life insurance, up to six weeks off a year excluding compensatory time and six time, lifetime job security regardless of performance, and so on. The imbalance between these individuals, most of whom were hired as patronage employees or for related political reasons, not because of education or ability, and private sector employees is becoming far to wide for Illinois taxpayers to reasonably tolerate.
Comment by Anonymous Tuesday, Feb 7, 06 @ 10:49 am
Anon 10:49, you have absolutely no idea of the real world. Your description of employee benefits and their careers is so incorrect it is almost criminal! Please do not contribute to this story if you have no clue what you are talking about.
Comment by Anonymous Tuesday, Feb 7, 06 @ 11:07 am
The Teachers’ Retirement System’s unfunded pension liability has grown from $11.4 billion at the end of FY2000 to $19.4 billion at the end of FY2004 (latest available from TRS). During that time, teachers contributed $2.80 billion and taxpayers contributed $8.24 billion! End-of-career salary bonuses and the resulting huge under-funded pensions are further bankrupting the system.
A $90,000 per year self-employed individual pays 12.4 percent of their salary to Social Security and receives (at age 62) a MAXIMUM Social Security benefit of $17,300 per year. A $90,000 per year teacher pays 9 percent of their salary to the Teachers’ Retirement System and may retire at 55 (with 34 years of service, worked or purchased)with a pension of $67,500 per year! Why do teachers pay less, and receive so much more?
Mr. James Hintz (Adlai Stevenson High School business manager) saw his salary more than triple during his last 6 years of employment ($118,688 in 1999 to $361,146 in 2005). Without the end-of-career salary bonuses, his calculated pension would have been about $125,000 per year. He retired with a pension of $194,878 per year. The bonuses added $70,000 per year to his pension! The $125,000 pension may have been partially funded during his career, but the extra $70,000 per year is almost totally unfunded.
Illinois is one of the few states that do not tax pension benefits. You’ve heard of the windfall profits tax on oil companies; perhaps its time for a windfall pensions tax. An 80 percent tax on all pension income above $50,000 per year would affect very few retirees (maximum Social Security benefit is $17,300 at age 62 and the average TRS pension was $34,104 in FY2004); but it would reasonably limit the state’s pension liability from huge bonus-inflated pensions. Leaving Mr. Hintz four times the maximum social security benefit.
Comment by uncle Tuesday, Feb 7, 06 @ 11:32 am
Anon 11:07 hey your right on.I know a guy that works for the state.His comp time he takes is days he works overtime but does not take pay.He got a 4% raise and gave 2% back toward his pension.Some of these guys went almost 4 years without a raise and then got 4%.If they tell you to work you are mandated no matter what.There is a lot of jobs that are paying as much if not more than the state.Nothing is free anymore.There a lot of professionals that 5 or 6 years ago looked to the state for jobs and have went elsewhere.The only freeloaders are the ones that helped get out the vote out for Blago.
Comment by DOWNSTATE Tuesday, Feb 7, 06 @ 11:44 am
“I believe that in 2007 the state will also be required, via new governmental accounting rules, to disclose its total liability for retiree medical care, and a plan to pay the costs. Government entities who have already performed the calculations have often revealed shockingly large sums in forthcoming liabilities.”
Actually, 10:49 has this part of the post dead to rights. It’s called GASB45, and requires that government entities with over $100 mil a year in revenue must account for all non pension related retiree benefits as part of the fiscal balance sheet (read: account for retiree non pension benefits in the budget). This has to kick in for the 2006/2007 fiscal year, so they better be including the numbers for the next state budget.
Short take on GASB45:
1. if over $100 mil in revenues, for budget year beginning in 2006.
2. If less than $100 mil, but more than $10 mil in revenues, for budget year beginning in 2007.
3. If less than $10 mil in revenues, for budget year beginning in 2008.
If what’s being said in the fiscal officers grapevine is any indication, the jurisidictions which are the ‘early predictors’ are comming up with some flat out scary results.
Watch out for this one. This is going to be the motivator for government pension cuts, because there’s just no way the public is going to be willing to fund this stuff once they really get a handle on the associated costs.
Comment by Making The Wheels Turn Tuesday, Feb 7, 06 @ 11:44 am
I think you fellas are mixing up apples, oranges, and kiwi here. Let’s get the facts straight.
A couple comments-
1)What 10:49 and “Wheels” are writing is absolutely correct, but is indirectly related to pensions. What folks should be asking Messrs. Hynes and Filan is where are the estimates and what is your plan to fund the liability? Don’t hold your breath waiting for the answer. It’s the healthcare that’s going to get whacked because of GASB 45, not the pensions.
2)Uncle, tell the whole story about TRS, and the other systems. The members of the funds have always paid their full contribution, and it’s gone up several times over the years, without the option of taking a holiday, only paying half for two years, or giving an IOU like the State has. As far as the 4-year period you pick there, it happens to include $4.4 billion of Pension Obligation Bonds that TRS has to pay back. An additional $1.3 billion was also borrowed money. Finally, a longer view of TRS’s financials will show that this period is the first time in recent history that State contributions consistently outpaced member contributions. WHy is that? Not because of Hintz’s pension, which is an aberration-even the Director of TRS said so. The contributions are going up to pay the ballooning unfunded liability, not because of higher benefits.
3) in reality, it’s investment income, not contributions, that keep the funds alive. Fortunately, the funds, especially TRS and SURS, have done well.
Comment by NumbersGuy Tuesday, Feb 7, 06 @ 1:28 pm
budget watcher and bill- i stand corrected. go to the illinois imrf web site pension calculator. calculate - elected county official retirement age 50- years of service 20- monthly final rate of pay $6500 per month, for calculation purposes,( monthly pay does not have to be while individual was an elected official)based on the monthly average of the highest 48 months of out of the last 10 years. press calculate. viola! 80% benefit rate. the benefit increases by $156 per month each january 1st thereafter. sorry, i errored about the 85%. of course, 80% ain’t bad with the increase built in. there are thousands of elected officials who retire and get appointed to high paying jobs to take advantage of this. the average worker suffers. don’t believe the st. louis post or don’t believe it if you don’t want to, but those are the FACTS.
Comment by Ron Tuesday, Feb 7, 06 @ 1:30 pm
When will the Tribune get all huffy about the corporations like United dumping their pensions on the federal government. That was billion dollar hustle. That makes Illinois pensions loook like small time stuff?
Comment by Reddbyrd Tuesday, Feb 7, 06 @ 1:34 pm
HELLO.
Anybody wish to comment that a great deal of the “borrowing and raiding” has occured in the past 3 years? It was stated in the editorial that since Blago took office in 2003 the state’s bond obligation has risen from 7.6 to 20.3 billion dollars.
Now is that responsible governing?
Comment by Papa Legba Tuesday, Feb 7, 06 @ 2:00 pm
Ron,
That’s 80% for 50 years of service, not 5.
Comment by Budget watcher Tuesday, Feb 7, 06 @ 3:06 pm
budget watcher- retirement age 50 and 20 years of service gets you 80%. do the calculation on the imrf web site. my goodness, it’s not that difficult to operate the web site.
Comment by Ron Tuesday, Feb 7, 06 @ 3:44 pm
Why worry? all benefits are paid as we go. If the actuarial liability was the same standard that IDFPR enforces for Insurance companies then yes, the state system is insolvent. SERS has billions in assets. It will be a long time time until the well runs dry. Then there is the power to tax.
Comment by Mr. Ethics Tuesday, Feb 7, 06 @ 3:48 pm
numbers guy
I haven’t studied the other pension systems as well as the TRS and I am aware of the borrowing — but it is still the taxpayers’ money.
Since 1998 (earliest year published) the taxpayers have outcontributed the employee contribution every year except 1999 (when employee contributions spiked to $866 million for some reason). Employee contributions have risen from $441 million in 1998 to $768 million in 2004; while employer contributions have risen from $503 million in 1998 to $1.159 billion in 2004 plus the $4.33 billion in pension obligation bonds.
As far as Mr. Hintz’s pension being an aberration. Mr. Hintz’s pension doesn’t even rank in the top 10 public pensions in Illinois. The state’s employees have found a way to legally defraud the state’s taxpayers to further inflate their more than generous pensions. The state’s taxpayers were not represented when these huge salary bonuses were negotiated — but they are still legally obligated to pay for the grossly inflated pensions. That amounts to taxation without representation.
How many teachers and administrators have retired with end-of-career bonus-inflated pensions? Are you honestly going to tell me that all of these inflated pensions are not affecting the unfunded liablitiy of the state’s pension funds?
Comment by uncle Tuesday, Feb 7, 06 @ 3:55 pm
OK, we’re mixing apples and oranges - pension formulas for elected county officials and pension formulas for state employees (the original post) are not the same. I’ll concede that. If you want to reform the pension formula for elected county officials, go ahead. That’s such an miniscule amount in the pension debate as to be insignificant. The formula for state employees is 1.67% or 2.2% per year of service.
Comment by Budget watcher Tuesday, Feb 7, 06 @ 4:11 pm
Budget watcher is correct for state employees. It also takes eight years to be vested in the employee plan. And 10:49 - maximum vacation time is 5 weeks after 25 years of service. State employees do contibute 4% (a Blago pay cut). It also takes 30 years of service to get over 50% of salary as a benefit. This really isn’t that great of a plan. Get off the state worker’s backs. Yhey have not created this mess and should not have to lose anything.
Comment by Mr. Ethics Tuesday, Feb 7, 06 @ 4:34 pm
Ron,
I want to know the position for getting 80% for 20 years work at age 50. I must have applied for the wrong job.
In the SERS Alternative Formula, an employee can collect 75% with 25 years service at age 55. As far as I’m concerned, anyone who has stayed in the Alternative Formula that long has earned their retirement.
Comment by Walking Wounded Tuesday, Feb 7, 06 @ 5:03 pm
Originally posted by Numbers Guy:
“What 10:49 and “Wheels†are writing is absolutely correct, but is indirectly related to pensions. What folks should be asking Messrs. Hynes and Filan is where are the estimates and what is your plan to fund the liability? Don’t hold your breath waiting for the answer. It’s the healthcare that’s going to get whacked because of GASB 45, not the pensions.”
Well, I’m not sure that’s any better, and probably actually worse, because if that’s the case, the money for those retiree non-pension related costs (primarily retiree healthcare) has to come out of the State’s General Fund, and that has the potential to be a real budget hit starting with this next 2006-2007 budget year.
Btw, if the early returns from other local/state governments are correct on GASB45 impacts, one of the first steps taken is that for all new hires, there will be NO retiree healthcare benefits offered by the units of government.
Maybe this will lead our current governor to create an all new, 100% taxpayer funded “All Retirees” Healthcare program (since it can’t be “for the children”, how about for the “young at heart”)…..
Comment by Making The Wheels Turn Tuesday, Feb 7, 06 @ 5:14 pm
For those state employees who are not on the alternate system, State police, prison guards, IDOT maintenance workers, the pension rate is 1.67 times the number of years of service times the average of the last 48 months salary. There is something called the Rule of 85 which allows a state employee to retire without loss of benefits when his/her age + years worked = 85. So a state employee with 30 years of service can retire at age 48 without getting dinged for retiring early. (started right out of high school.)
This poor slob will take home as a pension 50.1% of the average salary from the previous 48 months for a dedicated 30 years of service. There used to be a system where an employee could retire with 75% of his/her salary, but they didn’t pay into social security. There are not that many of those people still working for the state.
So between social security and a pension from the state, it looks like I will be eating oat meal and living out of a card board box because neither of these old age funding systems are going to be available because the feds are going broke and the state wants to cut my pensions. So I guess that all of the money that I and my fellow employees are paying into for our pensions and social security is going into a deep dark hole from which it will never return.
Comment by "B Team" Tuesday, Feb 7, 06 @ 5:55 pm
I, too, wish commenters would not lump all state employees together. I have two degrees and was hired for what I know, not who I knew, since I didn’t know anyone. I also do the work for two state wide programs, plus I back up 4 other people in the office. In essence, I have to know 6 different jobs which they get for the price of one. I also get the special assignments from our bureau chief because I can be counted on to get it done. I’ve only been in state govt. for 5 years and have only gotten two raises, which didn’t amount to much, before the current Gov. took command and raise were cut. Since I have university service time that can count towards state service, I can retire sooner but combined with my salary and no chance in my current agency for promotion (no jobs), it certainly won’t be like the ones you’ve mentioned. Luckily, I’m socking away as much as I can in deferred comp because that’s what will sustain me in retirement. I certainly don’t trust the employees’ pension to keep me afloat.
Comment by Anonymous Tuesday, Feb 7, 06 @ 6:08 pm
Uncle, might I suggest that you study TRS and the other funds a bit more before you write misinformation about them.
First of all, let’s keep the facts straight. Few, if any “state employees” as you write receive end of career bonuses. The people getting those are members of TRS and SURS. Were there abuses? Absolutely.
Are these increases pushing the unfunded liabilities higher? Not nearly as much as the cost of past underfunding. That’s why the annual State contribution is supposed to keep going up; to pay a little bigger piece of the interest on the unfunded liability every year. The actual State cost of current benefits for TRS and its fellow systems is relatively stable over time, and is less than the member contribution.
(Source: TRS 2005 actuarial data in TRS CAFR.)
Let’s keep in mind that there are a hell of a lot more schoolteachers that retire after a full career and get about $3 grand a month and no Social Security than there are Top Ten connivers that could pull a fast one on a school board and cash in. Like the thousands that paid extra contributions in 1999 as part of an agreement to increase TRS’s benefit formula when the member contributions “spiked.”
It will be interesting to see the changes over time now that these “incentives” are on the school board’s dime.
Back to the thread-I think this is the first time Bill and I have agreed on anything.
Bring it on!
Comment by NumbersGuy Tuesday, Feb 7, 06 @ 7:03 pm
I think if 80% of the state employees were laid off tomorrow, and the GA passed and the Gov signed a constitutional amendment repealing the pension protection provision, there would be cheering in some segments of the state. Not that this would be a good thing.
So IL and Budget watcher, there may be some agencies with mid-manager bloat, but as a whole IL and CA routinely score #1 and #2 in lowest # of state employees per 10,000 population. If other states are having more employees, and are having less pension funding liability, how are they doing it? The answers to this issue seem to lie elsewhere, not within.
Comment by 6 Degrees of Separation Tuesday, Feb 7, 06 @ 8:27 pm
Sorry…I meant to address So IL and Walking Wounded, not Budget Watcher. I agree political bloat is not a good thing.
Comment by 6 Degrees of Separation Tuesday, Feb 7, 06 @ 8:30 pm
It was Thompson who began raiding the employee pension fund to balance the state budget. And, for those of you who are not state employees, we’ve always made our own pension contributions except for a few years under Edgar when the state picked up the pension contribution in lieu of a raise. At my agency, we are vested after 8 years. Our pension is calculated at 1.67% of the highest 4 years of the last 10 years. We’ve had this pension formula since May, 1997 (I still have my handout) and it was one of the best things AFSCME ever did. It meant retiring with around 50% of my salary instead of 33%. Altho it’s in the State Constitution, I wouldn’t be surprised if there was no pension by the time I retire. Blagoyevich has no interest in administration.
Comment by Emily Booth Tuesday, Feb 7, 06 @ 8:39 pm
I forgot to include this link to Dan Hyne’s page on the pension:
http://www.ioc.state.il.us/FiscalFocus/current/article.cfm?ID=138
Comment by Emily Booth Tuesday, Feb 7, 06 @ 8:42 pm
Amen to Mister Ethics and the others that have explained our “over-generous” pension compensation as state workers!
We bought into the Social Contract, put in our effort as promised, and we demand it be enforced: since you can’t give us back the years we put in, we damn well deserve every penny of the agreed pension and more.
If you cut more workers off the payroll, it doesn’t really change the amount of existing pension debt anyway, it only further reduces the quality and effectiveness of state services.
There is no way to magically target only the underserving clock-watching political hacks when you cut more and more state jobs: you lose as much or more muscle and bone as “fat” with each cut. You lose more good people than bad, because the bad usually have an “in” somewhere to give them shelter in a transfer or even promotion. That’s how they got “in” in the first place.
You lose institutional memory, you lose continuity, you lose the focus of what has to be done and how best to do it. You reward the hardworking by demoralizing them and short-changing them. Yiu replace career civil servants with transient seat-fillers that have no vested interest in the success or failure of the work; they don’t plan to be around long enough to claim any legacy from it.
But you still want those services, and you want them faster and cheaper, don’t you? No problem, if we who are left just work a *little* harder, make some more concessions, just until the current crisis is past… You saw how that worked for my namesake in Orwell’s book.
I got that “please take one for the team” speech every year for 25 years, and you know what? They never made good on it, not in four-five administrations. You want good work, you have to pay for it, and pay what it’s worth.
Comment by Boxer the Horse Tuesday, Feb 7, 06 @ 9:59 pm
Boxer - when they want good work, they pay the consultants! Not that they always get what they pay for, though.
Comment by 6 Degrees of Separation Tuesday, Feb 7, 06 @ 11:07 pm