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* Subscribers know a bit more about this, but suffice it to say that things are moving forward…
Illinois House leaders say they still are working on legislation that would ease the state’s crushing pension burden, although they are closed-mouthed about what those changes will be and when the General Assembly will be asked to consider them. […]
Madigan and Cross co-sponsored Senate Bill 512 in the House, which gives state employees three options for their pensions: Keep the same level of benefits but pay more. Accept the reduced benefits approved last year for new employees. Choose a defined-contribution plan commonly known as a 401(k). […]
[Tyrone Fahner, president of the Civic Committee of the Commercial Club of Chicago] has been meeting with organizations and lawmakers to explain SB512, which is “kind of at the bottom line of what would be fiscally feasible” for fixing the state’s pension debt.
“The Civic Committee and I are still trying to push 512,” he said Friday. “Putting it bluntly, they are the legislators. They tell me what’s going on, I give them suggestions. (Cross and Madigan) have both been terrific in working it hard. I can’t be sure it will pass in the veto session, but we’re going to bring it in the veto session. Speaker Madigan has told me that we were.”
Thoughts?
posted by Rich Miller
Monday, Aug 15, 11 @ 5:45 am
Sorry, comments are closed at this time.
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Speaking of pensions, as he’s so big on taking them away when appropriate:
Is Kirk being unethical in his support of Russian Pointe, Growing Through Arts, and The Russian Foundation of Chicago by allowing his face to be plastered all over their websites? There might be all sorts of applicable clauses, including those contained in the section dealing with “Support for Commericial Enterprises”:
“…care should be exercised never to ‘discriminate unfairly by the dispensing of special favors.’ Thus, Members and employees should undertake for one individual or business no more than they would be willing to do for others similarly situated. Members and staff should also avoid becoming too closely affiliated with a particular enterprise, to prevent any appearance that they are accruing benefits ‘by virtue of influence improperly exerted from [their] position in Congress.’
I can’t seem to find any other instances where he allows members of his advisory boards to plaster his photographs and related “news” on their “commercial” websites, let alone allowing them to plaster his image and quotes related to activities with the businesses’ owners beneath “Shopping Cart” and “Checkout” buttons and right next to “Gift Cards Available” buttons. Or, in the case of the Russian Foundation, “Donate Now”.
Comment by Anonymous Monday, Aug 15, 11 @ 6:35 am
…Russian Culture Now…/”Support Us”….
Comment by Anonymous Monday, Aug 15, 11 @ 6:40 am
Illinois is a “Sink Hole State”
More than $110.6 billion of state employees’
retirement and other costs have been
pushed into the future, and thus onto our
children’s and grandchildren’s backs. Each
taxpayer’s share of the financial burden is
$26,800.
http://www.truthinaccounting.org/state-of-states/statereport_illinois.pdf
Comment by Quinn T. Sential Monday, Aug 15, 11 @ 6:42 am
So House leadership is breaking its word that it would negotiate following the total rejection of the Civic Committee’s pension slashing bill in the spring? Rank and file lawmakers hated the bill then–and for good reason, it was unfair to workers who always paid their share, unconstitutional and failed to fix the real problem of politicians out on their own payments–why should they like it any better now, with all the same flaws, and after a broken promise to negotiate?
Comment by Reality Check Monday, Aug 15, 11 @ 6:45 am
That’s “politicians SKIPPING out on their own payments”.
As anyone paying attention knows, the problem is not the $32,000 average pension for teachers, caregivers, nurses and other public employees, 80 percent of who don’t even have Social Security to fall back on, just their modest pension. The problem is not workers’ contribution, 8 or 9 percent from every check. As last week’s rating report noted, the problem is the state’s lack of a long-term plan to pay what it already owes. Yet the failed 512 slashed benefits or jacked up workers’ payments but was silent on making politicians finally fix the problem they created. Bad politics, worse policy.
Comment by Reality Check Monday, Aug 15, 11 @ 6:51 am
I have been a state employee for almost 20 years, and during that time I’ve paid every cent of what I owe. It’s disturbing that Madigan and Cross (and in all likelihood Quinn) find it important to keep their promises to everyone but the employees who run the state. Now don’t get me wrong - at this point I think they will have to do something to save the system. I just wish they’d cared enough about doing their jobs all along so those of us retiring in the next few years wouldn’t have to bear the entire burden.
Comment by Loyal_Employee Monday, Aug 15, 11 @ 6:52 am
It is probably an option that has already been explored or offered to current state employees but, has Cross and others ever approached current state employees about taking early retirement packages? I ask because I have a friend who is a state employee (making a 6-figure income) if he has ever been approached about retiring early in return for for a sweetened retirement package? He told me that it has never been offered to him. He said that if he was asked, he probably would consider retiring since he is in his late 50s. Otherwise, he plans on continuing to feed at the state trough for another 7-10 years. He said that he and many of his fellow state employees would probably take the taxpayers up on an early retirement option. He said that they all know that the free beer spigot is about to be twisted counter-clockwise.
Comment by Wilson Pickett Monday, Aug 15, 11 @ 6:57 am
No state employees have been presented any info on this plan. I’d be interested. However, if we’re willing to pay more for the same benefits, what guarantee will we get that the money will be there in another 10, 20 years? It kind of sounds like the same old mess!
Comment by AFSCME Guy Monday, Aug 15, 11 @ 7:15 am
Are any of the state employees on this site going to express any outrage about being lied to in the first place? There was no way these pension promises were going to work out. So now would be the time to start salvaging something from the mess left all of us by dishonest politicians long gone.
Comment by Confused Monday, Aug 15, 11 @ 7:35 am
The $26,800 figure is a red herring. If all state employees retired today, and received their entire remaining lifetime’s worth of benefits today, then the 26K figure would be realistic, since that is not going to happen, the figure is quite misleading, and should not be used. The pensions will be payable over the next 30-40 years, and it’s taken the state 30+ years of it’s borrowing of its share of the pension payments to run up the pension debt to current levels.
Let’s be clear about the problem in order to arrive at an equitable solution. Modest state employee pensions in place of social security are not the problem. The state’s “borrowing” of its portion of the pension payment to use for state programs that we, as taxpayers, all benefited from is the problem.
SB512 essentially said “Dear employees,we know we havent made our payments to the pension plan that you have been paying your share of all along, so we’re going to have you make up that shortfall through additional salary deductions of 10%. You will bear the entire burden of our failure to pay the state’s share.”
That bill failed because it was inheirently unfair, placing the entire burden of the state’s failure to pay on the backs of its employees. Lawmakers saw it for what it was, and the votes weren’t there for it.
A starter would be to give the employees a 10% raise, and deduct that 10% from their pay towards paying down the pension debt. That way, the state couldn’t avoid making its pension payment, and everyone would share the pain, including the employees.
Comment by PublicServant Monday, Aug 15, 11 @ 7:44 am
@Confused, the pension would be fully funded today if the state had made its actuarily required payments on time.
Comment by PublicServant Monday, Aug 15, 11 @ 7:51 am
@PublicServant, I agree with that statement because there isn’t much to argue with. That would be true even if the employees were each scheduled to get $1 million a year for life. The questions is whether they promised pensions were something that could be funded, not whether an actuarial schedule could be calculated. I would submit that pension plan participants are just the latest in a long line of citizens that have been lied to. The way forward is to figure out a reasonable, fair (to everyone) retirement plan and move forward. Actuary science does not have a solution for lies and magical thinking.
Comment by Confused Monday, Aug 15, 11 @ 8:12 am
==There was no way these pension promises were going to work out.==
Except if the legislature made the required payments instead of using the money to buy votes. Any changes need to include an ironclad guarantee that the state will make its required payments in the future, every year, no matter what, without kicking the can down the road.
Comment by Excessively Rabid Monday, Aug 15, 11 @ 8:14 am
@Confused - The point I’m making is that the pension promise with the state paying approximately 10% of the employee’s salary per year towards the pension was not unrealistic.
The lie was that “we’re just borrowing our share of the payment”.
Comment by PublicServant Monday, Aug 15, 11 @ 8:17 am
Our mostly do-nothing state lawmakers would have a little more credibility on this issue if they would give up the Cadillac pensions they receive on their part time jobs, part time jobs where they have mostly done nothing while the state has gone down the tubes.
Too bad all the incumbents can’t be remapped away and replaced with new blood.
Comment by just sayin' Monday, Aug 15, 11 @ 8:18 am
While it is definitely true that the major part of the current problem was created by politicians not fully funding the system in the past it is an undeniable fact that they aren’t going to make up for it now or in the future. Therefore the complaning about the injustice will not solve anything.
What is past is past and AFSCME and state employees need to think forward about what needs to be done for the future so that current and already retired employees will receive what is due “up to this point”.
If this involves paying more now, no matter how unjust that is, then so be it.
AFSCME and the other unions digging in their heals about unsustainable positions is no different then the Tea Party anti-tax folks holding on to unviable positions.
Comment by Fed up Democrat Monday, Aug 15, 11 @ 8:46 am
Does the plan at the 401(k) level involve a state match? Anyone know the proposal being bandied about? A “deferred comp” plan already exists, so wondering if this is what is being discussed or an actual state contribution and match.
Honestly, I am not an employee with decades of service under my belt and dont trust the contributions of future legislatures and governors… I’d gladly take a 6% match now and have the $ in my control.
Comment by Peter Snarker Monday, Aug 15, 11 @ 9:06 am
Perhaps those who took the first early retirement package should be required to reduce their pension some and those taking the subsequent package, reduce their pension amount a bit also.
Then, we can talk about new plans for the future.
I would personally like to visit the pensions of all legislators who were part of the ‘borrowing from the pension plan’ and reduce their pensions as well.
Fed Up…I am not a member of the Tea Party but too believe we should stop tax increases on the Federal level. I am, however, fascinated to see that the Tea Party is somehow responsible for our pension mess? That is certainly news to me.
Comment by Justice Monday, Aug 15, 11 @ 9:07 am
I left state employment years ago, with about 12 years. Any word on the guarantee of access to health insurance? It is the reason I left my money in. If that is taken away, I will be taking my money out.
Comment by Curious Monday, Aug 15, 11 @ 9:09 am
Fed Up - No one is saying there isn’t a problem that needs to be solved, or simply crying about the injustice of it all. Your assertion that its a fact “that they aren’t going to make up for it now or in the future” is not a fact, it’s your opinion, and the details of what is meant by “up to this point” is where the devil is.
I can tell you that SB512, a bill created by the Civic Committee of the Commercial Club of Chicago, is a non-starter. There was no attempt to talk to state employees, and I’m not, nor have I ever been, in a union. If we come at this undeniable problem from a position of shared sacrifice, it can be solved.
Comment by PublicServant Monday, Aug 15, 11 @ 9:16 am
Here we are, roped again into an intractable debate. The Madigan/Cross plan provides three potential options, none of which will go over too well with the state employees and their union. I agree that it is the past spending of the pension funds that got us into this mess. Taxpayers are now part of the solution, shouldering the new tax increases. Given Quinn’s various positions on state employees and employment, what now do the state employees and their union propose above and beyond the proposals in SB512?
Comment by Cincinnatus Monday, Aug 15, 11 @ 9:21 am
@FedUp you are severely misinformed or deliberately lying about the relative positions in this debate. Neither side believes the status quo is acceptable. In reality, everyone recognizes the fundin crisis.
One view, of the rich corporate elite of the Civic Committee and the government-haters of the Illinois Policy Institute, is the needed change is slashing pensions earned by current teachers, caregivers, police etc, or forcing them to pay twice as much for their existing modest pension.
Another view, articulated by unions such as AFSCME and others, is that a funding crisis must be solved by FUNDING. The state must treat the debt it owes current and retired public employees as seriously as it does debt owed to wealthy bondholders. Pay that debt off the top every year like servicing a bond. And do so with a dedicated revenue stream, ideally from closing loopholes exploited by corporations and by instituting a fair tax on the rich.
The latter option is the better policy and by far the more popular politics. No one believes the status quo, of teachers and police paying their share as politicians ducking theirs, is in your words “sustainable”.
Comment by Reality Check Monday, Aug 15, 11 @ 9:24 am
Instead of raising taxes to pay for programs that benefited all state residents, legislators raided the pension fund. Now - all these years later - legislators want to, essentially, “raise taxes” only on those contributing to the pension funds to make up the difference. Tell me, how is that fair? How is that not un-constitutional?
Comment by Deep South Monday, Aug 15, 11 @ 9:25 am
Cincy, what part of the new tax increases being shouldered by taxpayers, including state employees, is being given to the pensions?
Comment by PublicServant Monday, Aug 15, 11 @ 9:29 am
I am a state retiree who receives $16,200 a year, certainly not enough to live on. There are many dedicated state employees who stay at the state with the expectation that they will have their retirement someday. I am all for reform but I think those people it most impacts should be included in the conversation.
Comment by Lulabell Monday, Aug 15, 11 @ 9:41 am
Remember that not all state employees are even covereds by a union. State’s Attorneys, Assistant State’s Attorneys, Public Defenders, Assistant Public Defenders and Judges in almost every instance are not represented by unions. Who will speak up for them? Will they be represented at the table?
Comment by Tommydanger Monday, Aug 15, 11 @ 9:42 am
Look who the members are and ask yourself if we could live without their business.
Apparently, they don’t want people in the middle and lower classes buying services and products from them.
http://www.civiccommittee.org/members/index.html
Comment by mydealisnotsweet Monday, Aug 15, 11 @ 10:18 am
Cincy:
Myself and others I don’t think would be opposed to paying more for our pensions. However, the levels they are proposing are astronomical and would cut into net pay so much that we would become the working poor. If you want to raise my contribution rate that is fine but I had better get a salary increase to go along with that. With years of no increases and furlough days I think I have done enough “shared sacrifice.” The Civic Club has one agenda and that is to stick it to public employees. Somewhere along the line we have become the whipping boys and the public takes their economic anger out on us. Perhaps the esteemed members of the Civic Club might consider their obscene salaries and retirement packages and perhaps we should tax the crap out of those obscene amounts and bring in some more revenue to the state.
Comment by Demoralized Monday, Aug 15, 11 @ 10:20 am
Demoralized,
How does raising your salary to cover your increased pension costs save money? I’m not saying it isn’t the right thing to do, but isn’t this about cost savings, or is there another agenda afloat?
Comment by Cincinnatus Monday, Aug 15, 11 @ 10:26 am
Keep talking Ty.
Comment by Obamas Puppy Monday, Aug 15, 11 @ 10:29 am
Cincinatus -
The “other agenda afloat” would perhaps be to steer the conversation as far away from a progressive/graduated income tax as possible, if you happened to be someone making $10M a year.
I am not saying that is the agenda. The group of rich guys wants a cut. The group of state employees wants… well, it hasnt been well -articulated how they would solve the problem, other than stating time and again about the inherrent “unfairness” - but one actual solution could be… gasp… a progressive income tax structure. That conversation is not taking place b/c we’re too busy with the “agenda” put forth by the Civic Club - cuts.
Comment by Peter Snarker Monday, Aug 15, 11 @ 10:34 am
The “other agenda” as far as I’m concerned is to raise revenues to pay for the pension. That is the solution I would offer and I would agree with the graduated income tax idea. That takes a Constitutional amendment, though, so I recognize the difficulty of doing so. My agenda is that these rich guys at the Civic Club should be shouldering a heck of a lot more burden than 3% of their income. Dedicate this new revenue stream to the pensions and be done with it.
Comment by Demoralized Monday, Aug 15, 11 @ 11:37 am
Cincy:
My “other agenda” is also that you and the rest of the taxpayers do not get a free pass on the solution to this problem. I will not bear the entire burden of this problem, nor should I have to. You should have to contribute to the solution in some form (higher taxes or some other revenue generating idea).
Comment by Demoralized Monday, Aug 15, 11 @ 11:40 am
Even madigan can’t get enough votes to pass this garbage. 512 is just an excuse for not working together to find real solutions. As long as the state continues to fund its legal pension obligation the funds will be fine and pensions will be paid. Sure, the staate needs more revenue but its not because of public employee pensions which are neither lavish nor too expensive nor unsustainable. In fact, they are cheaper for the state than SS + 401K. The new tier pensions have a cost to the state of $0 over time.
Comment by Bill Monday, Aug 15, 11 @ 11:43 am
Off topic, but an interesting article in this months Esquire mag predicting the demise of Sears Corp. The company is gem bleeding money. Author writes the only people making money involving sears will be the ones shorting the stock. Just hope Quinn isn’t giving away state money to a dying company. Heck the way things are in Illinois he probably is investing pension money in sears.
Comment by Fed up Monday, Aug 15, 11 @ 11:46 am
“As anyone paying attention knows, the problem is not the $32,000 average pension for teachers, caregivers, nurses and other public employees, 80 percent of who don’t even have Social Security to fall back on” And that $32,000 figure, if accurate, doesn’t mean the average person who worked 30 years is living off a $32,000 retirement. I can be vested, move to the private sector or out of state and still collect my pension at retirement age, or I can work in the private sector, work the last 10 years for the gov’t and still collect a pension, either of which lowers the average. I don’t know any 30 year full time teacher or nurse in the state is even capable of making a pension that small based on wage scales for seniority. Second of all, public employees can still invest their earnings in public plans like 457s to aid their retirement.
All I see on this topic is, “we have to do something!” followed by “but we can’t do anything!”
Comment by Shemp Monday, Aug 15, 11 @ 11:49 am
@Justice 9:07: Regarding your suggestion that a certain class of retirees have their pensions involuntarily reduced…The state constitution is pretty clear on benefits to existing retirees - even the Civic Club’s “genius” advisors wouldn’t touch such a proposal. Absent a state constitutional amendment, it would be laughed out of court faster than a state legislator driving home on the last day of session.
And no previously enacted belt-tightening scheme penalized the existing employee more than about 4% a year…any court challenge is likely to find an employee burden greater than that range to be unreasonable, IMHO, even if they buy the “future benefits” loophole touted by the Civic Club.
So these are the parameters I think are within grasp of a “shared sacrifice” solution. Current retirees, no change to pension…maybe increased health insurance costs. Future pensioners, no more than 4-5% increase in co-payment to keep your current plan, and maybe phased in over a few years…maybe increased health insurance costs, too.
And I think the state’s taxpayers will still be on the hook somehow, even after the recent state income tax increase that went to this debt.
Comment by Six Degrees of Separation Monday, Aug 15, 11 @ 11:55 am
How about the something we can do is Quinn signs the gambling bill and we use the money earned to help the pension funds.
Comment by Fed up Monday, Aug 15, 11 @ 11:56 am
According to the Illinois Dept of Insurance, which issues a report every two years on all government employee pensions in Illinois, there are close to 700 of these plans in Illinois. Their terms, conditions and fiscal health vary. The one thing that voters are going to ask when the plan failures begin or taxes begin spiking to accomodate their needs, is why private sector employees are left to the vicissitudes of an uncertain investment market and required to sustain their losses while government employees are essentially insured against market losses by taxpayers. Also, if the markets and the economy go on a long term downward trend and private sector employees must work longer before retirement, lose their jobs, reduce their spending and life style, they will be required to foot the bill for government worker pensions which presumably will be tanking for the same reasons. If and when then happens, I’d like to see how the politicians explain the additional suffering and deprivation the private workers will be asked to sustain to support government employee pensioneers.
Comment by Cook County Commoner Monday, Aug 15, 11 @ 12:00 pm
Here is my question: If they choose a 401K plan, would the employee and the State have to contribute to Social Security? I have been told that if the State eliminates pensions, which State employees don’t have to play social security,and goes a different way then both the employee and the State will have to pay their share into Social Security. Anyone know the answer?
Comment by Paul S. Monday, Aug 15, 11 @ 12:00 pm
Cook County Commoner…the simple response…”b/c that’s what the law says.”
Comment by Six Degrees of Separation Monday, Aug 15, 11 @ 12:02 pm
I wonder how U of I President Michael Hogan reconciles his membership on the Civic Committee with his representation of the best interests of his employees, all of whom receive no Social Security and are in State SURS plan?
Comment by chefjeff Monday, Aug 15, 11 @ 12:08 pm
Cook co.commoner. The answer to why Illinois taxpayers are on the hook is we keep electing these politicians that then make deals for short term political gain that hurt the whole state long term. Madigan, Blago/Quinn, Cullerton,Jones and even Cross and past GOP leaders didn’t care about the future just cared about getting votes. Well now the bills are coming due all I can say is thankfully we have a competent leader who won’t lie to voters as Gov.
Comment by Fed up Monday, Aug 15, 11 @ 12:13 pm
Paul S -
The state will be on the hook for IMMEDIATE SS contributions (rather than whoops-no-money-for-it-this-year pension contributions) - however, many, if not the outright majority, state employees outside of teachers do in fact participate in SS now.
But you are getting at what I was getting at above - if the state has a 401(k) match program, like SS, that $ will be “real $” due now, not an “obligation” for the next generation of politicians to worry about.
Comment by Peter Snarker Monday, Aug 15, 11 @ 12:17 pm
To Six Degrees: Article XIII, Sec. 5, IL Constitution: Membership in any pension or retirement system of the State, any unit of local government or school district, or any agency or instrumentality thereof, shall be an enforceable contractual relationship, the benefits of which
shall not be diminished or impaired.
Nothing here about a court, state or federal, being empowered to force the separate and equal legislature of a state to raise taxes when it decides to breach a contractual obligation to pay pensioneers. The state and federal court systems are full of breach of contract cases. The court in a breach case can enter judgements and garnish assets, but it cannot force anyone to go to work to pay a contractual debt. This an similar clauses which were injected into state constitutions in the early seventies have yet to be tested in the face of a meltdown. Even before the courts get to the issue of enforcement, it seems all the state judges are in an inextricable conflict of interest precluding ruling on pensions in an extreme up or down scenario because they all are in state pension plan. Yes. Self interest politics will get an interesting airing when and if these plans implode.
Comment by Cook County Commoner Monday, Aug 15, 11 @ 12:31 pm
@Shemp 11:49, who points out that the average $32,000 pension figure for Illinois public employees includes those who worked long careers and those who worked only a short time: Well, duh. It is an average, of everyone collecting the pension they earned, not a subgroup of people who worked either a lot or a little.
If you want to get more specific, look at state employees only. The typical state employee who retired on the standard formula in the most recent year for which data is available was about 61 years old and had worked 25 years for the state - yielding a pension worth about 40% of final average salary, on average $22k. (All numbers approx, I don’t have the SERS report right in front of me.)
Comment by Reality Check Monday, Aug 15, 11 @ 12:38 pm
“Well now the bills are coming due all I can say is thankfully we have a competent leader who won’t lie to voters as Gov.”
And who in the world would that be? Surely not Governor Sunshine, a man totally incapable of making the tough decisions needed to deal with the pension issue. And I am a Democrat.
Comment by wishbone Monday, Aug 15, 11 @ 12:46 pm
Cook Co. Commoner: A truly tortured exegesis. Constitutionally mandated bills will always go to the front of the line, and the state is always “at work” collecting tax receipts; the only question is prioritization of outlays, for which the state constitution is the trump card. And there is always the US Constitution’s contracts language, which would apply to the self-named enforceable state contract, in case it goes to the SC.
Comment by Six Degrees of Separation Monday, Aug 15, 11 @ 12:59 pm
If the GA is going to continue with a system that “requires” a GA pay into the pension systems, but they don’t make those payments (the reason for the existing problem withthe system), then the so-called “fix” or “reform” isn’t any solution at all.
Comment by titan Monday, Aug 15, 11 @ 1:19 pm
The Supreme Court ruled on language like this already. We tried not giving the judges their raises which were covered by similiar language. The court held this language protected pay while they are in office. Should be the same outcome here, same langage same outcome.
I like the lets do it anyway and get a ruling people. They are saying they dont wnat to work on a real solution, but just kick the the can down the road with a token law which looks like activity on a solution but is a smoke screen to not adressing the real problem. How to pay.
Comment by Ghost Monday, Aug 15, 11 @ 1:24 pm
Will anyone be able to share the formula used to determine what a state employee pension will be? Teachers, I beleive, get about 70% of the average of the four highest earnings years in the last ten years of service.
Comment by Truth Seeker Monday, Aug 15, 11 @ 1:26 pm
Another position: The issue is being laid at the feet of retirees and their pension fund which is underfunded….not because they didn’t pay in their fair share, but because those funds were diverted to pay for other State goods and services. Therein lies the crux of the problem.
We the People of Illinois, not just State Employees, were using those funds. So, We The People of Illinois are responsible to repay them, and not through sacrifice of the employees who upheld their end of the bargain.
If we are not held accountable then it is likely that we will not hold our legislators accountable. They will try and place the burden on the State Employees and duck their responsibilities and accountability.
Until we start watching the coffers and those with the keys, we’ll continue to be robbing Peter to pay Paul. Problem now is that Peter no longer has the money either.
I say make everyone feel the pain so everyone will finally start paying attention to who has their hands on money collected for one purpose but used for another. Imagine that….accountability?
Comment by Justice Monday, Aug 15, 11 @ 1:34 pm
To six degrees: And don’t forget due process guaranteed under Amendment XIV. The Contract Clause at Art I of the US constitution and Due Process were the brass rings that the state constitution’s language to protect gov pensions was intended to snare, although, in my opinion, it was unecessary. But the early architects of the fiscal debacle wanted as much protection as they could engineer because the future sustainability of gov pension was questioned in the early seventies. Back then were the early rumblings of Social Security issues beginning with the baby boomers. But you’re probably right as to the governemt jamming the cost down everyone’s throat. I’m still trying to figure out how the feds got around the previous rock solid prioritiies in bankruptcy to favor the auto worker pensions over bond holders.
Comment by Cook County Commoner Monday, Aug 15, 11 @ 1:34 pm
@Truth Seeker, teachers earn a pension equal to 2.2% of final average salary per year of service. They pay 9.4% of every check toward that pension and do not receive Social Security.
In comparison, a state employee earns a pension equal to 1.67% of final average salary per year of service. They pay 4% of every check to their pension and 6.2% to Social Security.
Revealingly, a municipal employee in the IMRF system earns a pension worth 1.67% per year for the first 15 years and 2% per year after that - the same or a bit better than state employees.
But despite providing the same benefit, the IMRF is fully funded while the SERS is not. Why? Because IMRF employers pay their actuarially required contributions each and every year. Proof positive that neither the benefit is too generous or the employer contribution too costly, it just has to be paid on time and in full. Period.
Comment by Reality Check Monday, Aug 15, 11 @ 2:03 pm
=== In comparison, a state employee earns a pension equal to 1.67% of final average salary per year of service. They pay 4% of every check to their pension and 6.2% to Social Security. ===
To flush that out. There is to be a payment of 14% per employee per year, the employee pays 4%, the State is supposed to contribute 10% and the employee pays an additional 6% to social security. The State employees payment recieved from the State is reduced by the amount the recieve from SS. So the State employee does not collect SS on top of their State benefit, SS reduces the State obligation.
The State has re-routed its 10% payment for decades, this is the shortfall. Not the cost of the benefit, but the failure to cover its end. interestingly most 401K plans pay 6-10 by the employer anyway. The problem is the State not paying its side, not that the totla payment is overly high.
the State Employee formula is based on the 4 highest years of pay out of the last 10. The general Assembly gets their last day of pay regardless of piror salaries.
So if the Avergae State employee is able to recieve 35k a year from retirement, and SS pays you 24k a year, then the State is only paying 11k a year for the employee.
One major issue, if you switch to a 401K style plan will the State kick in its 10% contribution per year for all the years you have in, plus the fair increase or gain on that total, to e moved into the new 401k style plan?
After all, changing plans does not releice the State of having to fill in its prior obligations, which is the hwole flaw in the plan. The shortfall is a past due bill that will need to be paid/covered regardlessof what they do going forward. If going forward the State does a 6% contribution per employee in a 401k match the State will pay almost what it is currently required to pay saving it very little. if hat you want is a State contribution rate of 6% then keep the current plan and have the employees kick up to 8%.
None of this addresses the already incurred debt from not paying its share, whcih is the real elephant in the room these bills are distracting from and never addressing.
Comment by Ghost Monday, Aug 15, 11 @ 2:24 pm
Would someone please tell me if the Civic Committee of the Commercial Club of Chicago has ever weighed in on any other Illinois political areas the way they are weighing in on the Pension problem? And, for this down stater at least, could someone please tell me where the Civic Committee of the Commercial Club of Chicago gets this much clout with the Illinois Legislature? Why, you’d think they were the Fourth Branch of Illinois Government when it comes to re-defining the Illinois Pension System.
Would someone please help me out here?
Comment by Jechislo Monday, Aug 15, 11 @ 2:36 pm
Ghost said:
“The State employees payment recieved from the State is reduced by the amount the recieve from SS. So the State employee does not collect SS on top of their State benefit, SS reduces the State obligation.”
This is only true if one takes the “level income” option when retiring. This option is only used for those retiring at a very young age. Other than that, full Social Security Benefits are paid in addition to full Illinois Pension Benefits for those employees earning the 1.67% per year of service.
Comment by Jechislo Monday, Aug 15, 11 @ 2:40 pm
I think the point is - the state cannot possibly be thinking of doing a “true” 401(k) style program with a match - they cant afford the 6% now - as evidenced by the underfunding, and in a 401(k) they’d be matching that money annually. They dont have the money to fund it - or should I say the will to fund it. If that 6 - 10 % towards retirement is in the “pension” category - the state has control of it and can just not pay it. If it is a 401(k), the state hands it over to private accounts, ie., must fund it on a pay-go basis. That makes me STRONGLY believe that the 401(k) option is either (a) deferred comp (ie., no match) or will have a contribution concurrent with salary decrease. Just a hunch.
The problem isnt that the state doesnt have money to pay all the pensions out the door right now (they dont, we call that unfunded liability), it’s that they dont have the money to even pay the, what, 10% contribution per employee now. Sooo, suddenly they are going to have the 6% to pay every paycheck/quarter/annually? Methinks this battle is about more than 4% on an average state salary of what, $41K or something?
Comment by Peter Snarker Monday, Aug 15, 11 @ 2:45 pm
Ghost - for state employees (SERS employees getting the flat 1.67% formula only, none of the others), they do get their pension *and* Social Security. The employee and the state (as the employer) both pay their full Social Security contributions in the same way as any other private employer. Even for those choosing the “level income” option, they still get their full SS. Their pension, however, is front-loaded, essentially, to give them more in the years prior to SS eligibility and less after. It evens out to the same amount, though.
Most other public employees (all of them, actually, except SERS and IMRF) do not participate in SS with respect to that position and their SS is offset by their public pension.
Comment by Katiedid Monday, Aug 15, 11 @ 4:23 pm
Reality Check
Thanks for your well informed posts today. It’s refreshing to hear from someone who knows what he’s talking about.
Comment by reformer Monday, Aug 15, 11 @ 6:53 pm
This article is @ The Dome. I say take the $$ & run. We are going to pay more for our retirement and health care and that’s just the way it is. We have 2 convicted governors.
Comment by Emily Booth Monday, Aug 15, 11 @ 7:07 pm
Curious @ 9:09,
Under the current rules as of today (subject to change by some pending legilation), with 12 years in you *are* eligible for health insurance from the State at the same time you start drawing your pension from the State, but you will have to pay a portion of it. I’m working from memory (instead of pulling up the actual statute), but I believe in your case you will be responsible for 5% of your health insurance premium for every year you are under 20 years of service. In other words, you should be able to get group health insurance coverage but will have to pay 40% (5% times 8 years) of the cost yourself. For exact numbers, contact your SERS representative.
Comment by Retired Non-Union Guy Monday, Aug 15, 11 @ 7:20 pm
So, if Illinois goes to a 401 (k) program, how long before Tom Cross (and others) decide the State can no longer afford to keep their word (he’s already on record as saying the State can’t be forced to keep its word) and match the employee’s 401 (k) contribution, and instead cancels it? Farfetched?
Happened in Utah, the shining beacon of switching state employees to 401 (k)s …
http://www.deseretnews.com/article/700008153/Utah-Legislature-State-workers-401k-could-be-cut.html
Comment by Smitty Irving Monday, Aug 15, 11 @ 8:26 pm
Like the majority of later state employees, I am looking forward to receiving around $23k per year from my state pension and I have to hold on another seven years just to do that. I am not even counting on affording to pay for the medical coverage copay that I will have to pay. What I want to know is this: If all retired and current state employees were limited to receiving a maximum yearly pension of $60k, would there be enough in the system to cover the pension cost at that level. In other words, if all the “fat cat” pensions received by mostly past retirees were rolled back would that not reduce the unfunded obligation big time?
Comment by alan Monday, Aug 15, 11 @ 8:40 pm
Alan,
Most the high dollar pensions being thrown around in the press are in systems other than SERS (the state employees system). You find they are former administrators in the school systems (TRS) and the universities (SURS), plus the full time pensions for part time work in the judicial and legislative systems.
As a former employee, I don’t think I got a “fat cat” pension. I got exactly what I contracted for, 1.67% times each year I worked and paid contributions on. Since I stuck around for almost 36 years of fully paid service credit, I get 59.7% of the “final average compensation” I had when working.
Comment by Retired Non-Union Guy Monday, Aug 15, 11 @ 9:29 pm
Alan,
Should have added those SURS & TRS pensions are higher because they don’t get Social Security …
Comment by Retired Non-Union Guy Monday, Aug 15, 11 @ 9:31 pm
Curious,
Should have added that, in the one case where there is a actual precedent on state employee health insurance coverage, when the legislature changed the rules for “free” health insurance from 8 years to 20 years, employees already receiving the benefit where not retro-actively affected. I know people who retired before the rule change who have less than 20 years and they still get their “free” insurance … probably because of that pesky constitutional clause. So while it is a guess, I’d guess, since you’ve already left state employment, you’ll still have access to the State group health plan.
Comment by Retired Non-Union Guy Monday, Aug 15, 11 @ 9:39 pm
Ghost, you said, “There is to be a payment of 14% per employee per year”. Where did you get that number? I’ve not heard it before, I don’t think.
Comment by steve schnorf Monday, Aug 15, 11 @ 11:30 pm
RNUG, thanks for the info. I was aware of the percent part, but didn’t know if it was still there.
Comment by Curious Tuesday, Aug 16, 11 @ 8:13 am
If the state stiffed the bondholders, the bondholders would strike, i.e. withhold future loans to the state, and everyone would agree they were right to do so.
Does everyone agree that State employees would be equally justified if the state were to stiff them and they withheld their services, or is it only obligations to bondholders which are sacrosanct?
Comment by truthteller Tuesday, Aug 16, 11 @ 8:21 am
Why is the Civic League allowed to be involved with decisions that affect my pension?? Who elected them? Not the taxpayers. Taxpayers are already respresented by those they elected. Employees are represented by both the General Assembly (since - SHOCK - we are taxpayers, too) and by our unions. The only ones who should be involved in this debate are the ones who have to pay for it - taxpayers and employees. Everybody else, Civic League especially, should butt out.
Comment by lincolnlover Tuesday, Aug 16, 11 @ 9:21 am
SURS moved all employees to a three-tiered system several years ago (maybe 1997?) with options for the traditional pension, a portable package and a 401(k)-style plan. Prior to that, all employees were part of the traditional pension system. At the time, state employees who were part of SURS were told their decisions would be irrevocable and could not be changed at any point in the future. Employees also contribute different amounts for each of the three options and those who chose the portable package must pay an an additional amount for survivor benefits for spouses. In effect, SURS participants already went through this nearly 15 years but now they’re going to be hit a second time. It seems like they’re taking more of the brunt of this than any other employee group.
Comment by Cubs Win Tuesday, Aug 16, 11 @ 9:34 am
SB512 Does nothing to solve the pension problem.
My contribution is collected out of every paycheck. However, the money collected from employees is lumped together with the State’s portion. When you read about the state’s pension payment, that amount includes employee contributions. When the State skips or underfunds the pension payment, they are basically stealing pension contributions from employees to spend as general revenue.
Setting the constitutional issue aside, if SB512 passes, it does nothing to guarantee future contributions by the State. Even if employee contributions are increased, what mechanism would be in place to prevent future general assemblies from stealing it. According to Tom Cross, there is nothing in the bill to prevent continued underfunding of the pension. So, even with SB512, we would still have a pension crisis. It would just kick the can down the road.
The real solution would be to pay the required amount every year. Others have mentioned some type of dedicated revenue stream for the pension. That would be better than SB512. The IMRF is fully funded because municipalities are required by law to make their contributions. The four other state pension systems have liabilities because the State is not required to make it’s payment. Until the funding is required, any changes to the pension system is just smoke and mirrors.
One other point, one of the Civic Committee’s criticism of the Union is that the Union stood by and did nothing when the State underfunded or skipped pension payments. That is misleading. There was little the union could do, but it did what it could. Every year the Union has pushed the General Assembly (GA) to fully fund the pensions. But, again, because there is no constitutional requirement for funding, the Union could not force the GA to fund the pensions at any specific level.
I don’t care which side of the issue you are on, everyone at least can acknowledge that, at best, it is immoral to take money from employees and not use that money for its intended purpose.
Comment by aStateEmployee Tuesday, Aug 16, 11 @ 9:50 am
OK here are my thoughts.
1st Rich posted an article from the 1950s about pensions not being fully funded. Teachers were like 23% funded? What did the state do then?
2nd Why can’t the pensions be funded at 50%? I mean 100% means they can pay everyone their pensions starting right now. But we know not every can retire right now at the same time.
Is there really a crisis? How much are employees putting in and local government (not state) every year? How much money was paid out? What are the projections of those monies coming in and what are the projections of the money going out?
Why did people distrust the legislature so much that in 1970 they put in the Constitution that pensions shall not be impaired or reduced? Do those words meaning anything?
If they pass the bill, will it be struck down and back to square one on how to fund it?
IMRF is fully funded because the employees an local government always made their payments. The real problem is the State never gave itself a bill every year and felt force to pay it. Non of the solutions solve the real problem; the state not paying their bill.
Comment by Union Tuesday, Aug 16, 11 @ 10:28 am
To me the situation is like this, the state robbed the employees and now the robber (the state) wants to force the employees who were robbed to pay for the robbery. The state (the robber) is willing to take the robbed employees to court to force them to pay for the robbery, even though the law says you shall not rob state employees (the Pension Clause in the Constitution).
Is this fair?
Comment by Union Tuesday, Aug 16, 11 @ 10:35 am