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* Not to diminish the problem with Illinois’ pension debt, but this is an apples to oranges comparison from the Illinois Policy Institute’s news service…
In one year, Illinois’ pensions added more debt than 25 U.S. states’ entire budgets.
The Illinois Department of Insurance released its two-year report on every public pension in the state. From 2015 to 2016, Illinois’ 671 pension funds added $17 billion in additional unfunded liabilities, bringing it up to $185 billion. That’s larger than 25 state budgets in fiscal year 2016.
The pension debt is long-term. Those are one-year budgets.
* More…
The Teachers’ Retirement Fund is the state’s largest pension. At an estimated $71.4 billion in unfunded liabilities, it also carries the most debt. Director Dick Ingram said that his fund’s main issue is that the older, more generous pensions cost too much.
“The albatross that’s still out there is the Tier 1 unfunded,” he said.
Yep. And that debt can pretty much only be reduced by making the payments. Actually, it’s the only way unless somebody comes up with a brilliant plan that hasn’t yet been devised or tried.
* Moody’s recently issued a rating for the state’s upcoming bond issue to pay off part of the bill backlog. Check out the number one way Moody’s says Illinois can improve its credit rating…
Factors that Could Lead to an Upgrade
- Adoption of a realistic, long-term plan to provide funding for pension obligations
- Progress in reducing the state’s massive payment backlog, and formulation of a legal or policy framework to prevent renewed build-up of late bills
- Enactment of recurring fiscal measures that support the expectation of sustainable, structural balance
And check out the number two factor that could lead to a downgrade into junk bond status…
Factors that Could Lead to a Downgrade
- Structural imbalance that leads to renewed build-up of unpaid bills following issuance of debt to pay down backlog
- Efforts to obtain near-term fiscal relief by reducing pension contributions in a way that exacerbates the state’s long-term funding burden or indicates a lack of long-term sustainability
- Difficulty managing the impacts of adverse exogenous factors, such as a national recession or a reduction in federal Medicaid funding
*** UPDATE *** Dave Urbanek at TRS…
Rich:
The Illinois News Network story you highlighted today misquoted Dick. We saw it late in the morning and asked them for a correction. They complied and changed the story in the afternoon. You ran the original version.
The problem was that in the lead up to Dick’s quote in the original version, they wrote that he said that older pension benefits “cost too much.” That’s not what he said in the interview with them. The “albatross” he was referring to in his quote is the unfunded liability.
No one at TRS would ever give an opinion on the nature of benefits, and especially the cost of those benefits. Benefits are enacted exclusively by legislators and the governor. The job of TRS is strictly to administer those benefits, whatever they may be. We have to stay detached from the creation of benefits. We will talk about whether we have the proper resources and tools to do the job and keep the fund financially healthy, but commenting on the nature or cost of the benefits would violate the System’s fiduciary duty to its members.
Just wanted to keep the record straight.
Thanks,
Dave
posted by Rich Miller
Thursday, Oct 12, 17 @ 11:22 am
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I really want to believe IPI, but they’re as unbiased a news source as Cannabist recommending pot legalization.
Or a wino recommending a bottle of gutter wine.
Comment by VanillaMan Thursday, Oct 12, 17 @ 11:30 am
Tier 2 pensions pay in more then they cost, so they are paying down the tier 1 debt.
Other revenue sources are needed. Here are two that cost nothing. The state is currently paying on 10 billion bond for pensions. When that bond is paid redirect the annual payment to the debt.
2. Add a Chicago casino, slots at airport and maybe a couple more casinos. Auction the licenses and put the fee against the pension. Then direct that 75% of the States take from those casinos go to the pension.
3. Legalize marijuana, use tax revenue to pay down pensions.
It’s not unsolvable, just need to shift from robbing state workers to actually providing the money
Comment by Ghost Thursday, Oct 12, 17 @ 11:31 am
You know what happens to retirees after 20 years? They move to heaven.
I think honoring our constitution and contract laws are worth the wait, right?
Comment by VanillaMan Thursday, Oct 12, 17 @ 11:34 am
So Moody’s is saying the same two words the ISC said 3-1/2 years ago: “Pay up.”
Comment by Skeptic Thursday, Oct 12, 17 @ 11:34 am
This is one reason why Rauner is actively trying to destroy the state workforce.
You don’t have to pay a pension to a worker who quits before they are fully vested.
So cold
So callous
So incredibly unwise
I truly believe the big assault comes on December
Using today’s Trump insurance market destabilization
As pretext
Get the 4th district Appelate to vacate the stay
Implement the contract with new insurance
Groin stomp AFSCME
Claim savings
Anyone who can quit will
Anyone who can retire will
Cower all state workers
But the workforce
Wil
Collapse
Comment by Honeybear Thursday, Oct 12, 17 @ 11:35 am
After the Grim Reaper solves this problem, what new excuse will IPI have left to whine about?
Comment by VanillaMan Thursday, Oct 12, 17 @ 11:36 am
I imagine the pension music is much like the song “Easy Street” from The Walking Dead…played non-stop over and over at high volume while locked in a windowless room.
Comment by City Zen Thursday, Oct 12, 17 @ 11:37 am
This is the granddaddy of all issues, and it just won’t go away. At least until all those pensioners die off. I don’t suppose any of them are willing to take one for the team and drive off a cliff.
I don’t want to debate the topic. Just take a minute and think about the next 10, 20 and 30 years. With property taxes and sales taxes already high, how much blood can you squeeze out of the taxpayer before they pick up and move to a friendlier environment? And what will that leave you? A smaller business and resident population means that taxes only have to go up on those that remain.
Think Detroit, only bigger because the ISSC has ruled that pensions must be paid, and public employees that came in under the old plan keep earning it forevermore. No surprise there given their affiliations.
All caused by greed and stupidity. Don’t feel bad, that combination has killed off a few groups over the course of time.
Comment by Lucky Louciano Thursday, Oct 12, 17 @ 11:42 am
Honeybear — you are either vested or not
All Tear 1 employees will be vested by the end of 2018 if they stay
The longer you stay the bigger the Pension. I do not know if I can last until retirement. It is tough being a State Worker
Comment by Anonymous Thursday, Oct 12, 17 @ 11:46 am
Ingrahm at TRS honestly admitted what no one else ever acknowledges TRS benefits are overly generous and too costly. Not that the Stste can do anything but it’s refreshing since we always hear that the pension benefits for the average recipient are meager and not the problem.
Comment by Sue Thursday, Oct 12, 17 @ 11:49 am
Since when has Illinois addressed any issue “long term” or with a “plan?”
It’s all about the next brushfire or election.
The agency I used to work for only did long term plans when the federal government required them to be eligible for federal funds. The agency’s executive staff never participated in the planning and ignored the plans when completed.
Comment by Sir Reel Thursday, Oct 12, 17 @ 11:53 am
= Yep. And that debt can pretty much only be reduced by making the payments. Actually, it’s the only way unless somebody comes up with a brilliant plan that hasn’t yet been devised or tried. =
Rich, the pensions are guaranteed by the constitution. Is it too simple to think then that a constitutional amendment could be put to the voters to remove this protection under the constitution, wherein future benefits could be reduced for current employees? I don’t think we could reduce benefits for past service, but certainly a reduction of future benefits could be done.
Comment by Smalls Thursday, Oct 12, 17 @ 11:56 am
Pension debt increase so much last year mostly because the biggest system TRS reduced their actuarial investment return assumption. No change in reality.
Benefits are too rich, that’s on past GAs and Governors, but ILSC has already told everyone it is too late to change it. Maybe constitution can be amended to reduce future Tier 1 accruals, but many seem to think even that won’t hold up.
So seems like only choice is to pay down the debts.
Comment by Name/Nickname/Anon Thursday, Oct 12, 17 @ 11:58 am
Honeybear. ‘Perfidy’. There. It’s not a Honeybear proem without it. Plus it’s a tough one to rhyme. 😎
Comment by Anonymous Thursday, Oct 12, 17 @ 12:03 pm
Things are going to get crazy in Illinois whenever the next recession comes.
The pension obligations don’t care about whether there is an economic downturn or not. They go up big time every year for the forseeable future whether times are good or bad.
The real problem is going to be when legislators have to keep raising taxes while simultaneously aggressively cutting back services because the increasing pension obligations suffocate the general fund.
We could hold state spending totally constant for a decade and yet still need to come up with billions in new taxes just because of the nature of the pension problem. That is a catastrophe, because we all know that there is no way to have spending be flat for a decade.
I still think there is a level of denial about just how bad things are going to get in Illinois in the next 10-20 years.
Comment by Anon Thursday, Oct 12, 17 @ 12:04 pm
Maybe the “brilliant plan” to reduce the pension debt would be for the House to pass Senator Cullerton’s consideration pension bill and the Supreme Court could rule whether it is constitutional.
The Speaker’s intransigence to allow a vote on this issue, which he admits is unsustainable, for political reasons only will further stain his legacy.
Comment by Lucky Pierre Thursday, Oct 12, 17 @ 12:05 pm
== TRS reduced their actuarial investment return assumption. No change in reality.==
Wasn’t that the point of the reduction, to more properly reflect reality?
Comment by City Zen Thursday, Oct 12, 17 @ 12:10 pm
Now that Moody’s has weighed in, saying the same thing the unions told Quinn and Madigan’s when the pension cutting started in 2010, when will folks acknowledge the unions were right and start listening to them.
Three-quarters of the pension payments are to pay off the old debt. Only one-quarter are for benefits currently being earned. The problem is not rich benefits
Comment by Truthteller Thursday, Oct 12, 17 @ 12:15 pm
== Maybe constitution can be amended to reduce future Tier 1 accruals, but many seem to think even that won’t hold up. ==
It won’t. The ruling was rules in place at hiring plus enhancements granted by the General Assembly.
Comment by RNUG Thursday, Oct 12, 17 @ 12:16 pm
== Tier 2 pensions pay in more then they cost, so they are paying down the tier 1 debt. ==
Slowly. That “excess” is throwing pennies at a problem that requires dollars.
As noted, the most painless path is to keep paying the money currently going to the pension bonds. And new “sin tax” revenue as suggested.
Comment by RNUG Thursday, Oct 12, 17 @ 12:19 pm
== Maybe the “brilliant plan” to reduce the pension debt would be for the House to pass Senator Cullerton’s consideration pension bill and the Supreme Court could rule whether it is constitutional ==
Only if the bill makes the choice 100% voluntary, which would be constitutional. Anything coerced would be a waste of time.
Comment by RNUG Thursday, Oct 12, 17 @ 12:23 pm
I think a combination of Ghost’s and Lucky Pierre’s “solutions” is where we are at.
1. New revenue is available, and creatively in a way from “voluntary” sources that wouldn’t affect the base tax load on the taxpayer, which is politically about the only way additional pension payoff funding is gonna fly.
2. The returns from Cullerton’s consideration pension bill probably have a 50% chance at best of passing ILSC muster, and every year that goes by reduces the pool of Tier 1 active workers from whom future pension savings could be achieved. But some savings is better than none.
Comment by Six Degrees of Separation Thursday, Oct 12, 17 @ 12:25 pm
Maybe we shouldn’t have reduced payments to systems by nearly $1 billion this year.
Comment by Anonymous Thursday, Oct 12, 17 @ 12:25 pm
I understand that the IRS in October published new mortality tables for private sector, single employer defined benefit plans which commentators estimate will increase funding costs for these plans by 5%.
Assuming the tables correctly predict longer life spans, The costs to government employee pensions should also increase based on plan members and their spouses living longer.
I realize government pension plans dance to their own forecasts, but I’m curious if the mortality tables they rely on, especially in Illinois, are as cooked as the rate of return on investment they publish.
Comment by Cook County Commoner Thursday, Oct 12, 17 @ 12:28 pm
==Wasn’t that the point of the reduction, to more properly reflect reality?==
Yes, but it is not a true increase over last year, it was just that they changed the methodology for estimating the total liability.
It is dishonest to use it as the headline making it appear that the problem somehow worsened since last year.
Comment by Name/Nickname/Anon Thursday, Oct 12, 17 @ 12:32 pm
== I’m curious if the mortality tables they rely on, especially in Illinois, are as cooked as the rate of return on investment they publish. ==
A lot of places use the Met Life tables as an unbiased source. Don’t know about the State.
Comment by RNUG Thursday, Oct 12, 17 @ 12:33 pm
Rauner’s already run up a 10 billion dollar tab and the ILGOP screams bloody murder every time anyone hints at increasing taxes. Do you really think either of them are looking to settle up?
Comment by Jocko Thursday, Oct 12, 17 @ 12:43 pm
Appropriate to bash IPI. But the pension debt really is there. Hoping this issue will get more coverage. Governor candidates have not voiced adequate time to this issue.
Comment by Anonymous Thursday, Oct 12, 17 @ 12:49 pm
==Yes, but it is not a true increase over last year, it was just that they changed the methodology for estimating the total liability.==
That report cites 671 pension systems across all levels of government. I highly doubt all of them changed their assumption rates.
Either the pension systems can say this year liability’s is $X higher or last year’s liability was understated by $X.
Comment by City Zen Thursday, Oct 12, 17 @ 12:54 pm
The pay outs end when the pensioners spouse passes away. Imo they are waiting for a state bankruptcy amendment to the US constitution
Comment by Foster brooks Thursday, Oct 12, 17 @ 1:02 pm
Pay freezes for all tier 1 immediately.
Comment by Anonymous Thursday, Oct 12, 17 @ 1:09 pm
I don’t think the finance sector is going to support a state bankruptcy amendment and they have a big say on what laws get passed.
Comment by NoGifts Thursday, Oct 12, 17 @ 1:11 pm
You want tier 1 pension? Fine, no pay raise. Ever.
Comment by Ron Thursday, Oct 12, 17 @ 1:11 pm
Funny, the “just pay up” folks are universally those who do not comprehend the severity of the problem.
Comment by Anonymous Thursday, Oct 12, 17 @ 1:16 pm
Every Tier 1 member of TRS should be outraged at Mr.Ingrams remarks. It is this kind of hyperbole that calls into question his fiduciary viability. The “albatross” is the debt not the benefits.
Comment by Obama’s Puppy Thursday, Oct 12, 17 @ 1:16 pm
What pay raise? I haven’t had one in the last 6 years as it is.
Comment by anonime Thursday, Oct 12, 17 @ 1:21 pm
Smalls, is this OK for you?
To me, this is the same as the bank saying after 30 years… Yah know, dat house you were paying for is worth a lot more now than it was when you got it. Now that the mortgage is over, you are going to owe us another $200K if you want it.
Or going to dinner, eating the meal, then finding out after you ate it, hey, because you liked it, you owe us another $50 above the price we had on the menu. Each.
The amendment was put in place to stop this sort of nonsense. Stripping retirees (who have no Social Security to fall back on) should not be part of the discussion.
Comment by Anonymouse Thursday, Oct 12, 17 @ 1:27 pm
Well, now nobody is using the pop tax. /s
Comment by a drop in Thursday, Oct 12, 17 @ 1:30 pm
==The “albatross” is the debt not the benefits.==
It’s both. If the benefits were not some sort of albatross to begin with, there would be no debt. If the pension payments were affordable all these years, they would’ve been paid.
If the state made the pension payments first, then distributed operating funds for compensation with whatever money was left, every Tier 1 salary would have been lower, but we’d have fully funded pensions. But that’s a moot point as the courts decreed we must pay…twice.
Comment by City Zen Thursday, Oct 12, 17 @ 1:31 pm
==A lot of places use the Met Life tables as an unbiased source. Don’t know about the State.==
Seems the mortality tables relied upon by gov pension actuaries may be another area of abuse. See,
http://www.truthinaccounting.org/news/detail/who-lives-longer-teachers-in-chicago-or-teachers-in-the-rest-of-illinois
Comment by Anonymous Thursday, Oct 12, 17 @ 1:31 pm
Raise? Indeed. My wife hasn’t gotten a raise in the ten years she’s been at her agency. By the time she gets to retirement she’ll be earning the equivalent of minimum wage. All that with her law degree.
Comment by TwoFeetThick Thursday, Oct 12, 17 @ 1:33 pm
==Pay freezes for all tier 1 immediately.==
This would be followed by the departure of the majority of University of Illinois faculty to peer institutions with rational salary programs, and the destruction of one of the few economic engines run by the State of Illinois.
Not a good idea.
Comment by OldIllini Thursday, Oct 12, 17 @ 1:35 pm
Somewhere around 2040, nearly 100% of Tier 1 employees will be “already retired” where accrued benefits will be locked in and little opportunity to save from any kind of pension change to the “still working” Tier 1s. We have probably lost the opportunity to knock down the accrued liability already, given that the Cullerton plan could have been tested at the ILSC years ago. At some point the savings will be minuscule even if there is a constitutionally acceptable reduction of benefits going forward.
Comment by Six Degrees of Separation Thursday, Oct 12, 17 @ 1:39 pm
=You know what happens to retirees after 20 years? They move to heaven.=
And a bunch of other Tier 1s will still have 10 years until retirement. Far from over in 20 years.
Comment by Robert the 1st Thursday, Oct 12, 17 @ 1:44 pm
==And that debt can pretty much only be reduced by making the payments==
If our legislature had any moral backbone in past history, they’d have made the payments each year and there wouldn’t be any monstrous debt.
Let’s take a look at IMRF. NOt allowed to skip payments. Funded at 96%. See what happens when you pay your bills?
Comment by Anonymous Thursday, Oct 12, 17 @ 1:46 pm
No Gifts, not only will the finance sector oppose it but every other State as well as unit of local government will also. Why would they agree to a constitutional amendment that would drive up their borrowing costs because Illinois could not properly manage its pension debt? The sooner this administration as well as select posters accept the reality that shedding the debt via bankruptcy is not an option the better.
Comment by Original Rambler Thursday, Oct 12, 17 @ 1:49 pm
=== NOt allowed to skip payments. Funded at 96%===
And no 3 percent compounding COLA either.
Comment by Rich Miller Thursday, Oct 12, 17 @ 1:51 pm
===You know what happens to retirees after 20 years? They move to heaven.==
I thought they moved to AZ or FL.
==And a bunch of other Tier 1s will still have 10 years until retirement. Far from over in 20 years.==
The final Tier 1’s will still be collecting checks through the 2040’s, but by then they’ll be outnumbered by Tier 9’s.
Comment by City Zen Thursday, Oct 12, 17 @ 1:53 pm
The AAI is not a COLA. When inflation was 14% in the 70’s, the AAI was 3%. GO figure. Besides the AAI is paid for with each pay check along the way by the employee while working. So employees actually pay for their future pension. It’s the state that hasn’t
Comment by Anonymous Thursday, Oct 12, 17 @ 1:55 pm
==And no 3 percent compounding COLA either.==
IMRF has a “13th Payment” that is kinda like a compounded COLA. It’s not as expensive over the long-term as 3% compounded COLA though.
Comment by City Zen Thursday, Oct 12, 17 @ 1:55 pm
I know a couple Tier ones who are 29 now. So we’ll be paying those pensions at least until the 2070s.
LOL one the Tier 9 remark…
Comment by Robert the 1st Thursday, Oct 12, 17 @ 1:56 pm
City Zen, your post makes no sense. The normal cost of the benefits, after the teachers pay their half, is about 9.5 percent of the active teacher payroll. Pick a year, from the 1970s to today, and that amount was affordable. The contribution blew out because the State was never (and still isn’t) paying down the unfunded liability at an actuarially sound rate.
Further, since the State doesn’t pay teachers, your second graph is well, uh, inoperative.
I’m choosing to assume that Director Ingram was misunderstood in his comments.
Finally, let’s not blame TRS if CTPF is using outdated mortality tables. RNUG, I know the State systems don’t use MetLife but I can’t recall the ones they do use.
Comment by Arthur Andersen Thursday, Oct 12, 17 @ 1:57 pm
Tier 9
LOL
I think that is 40 acres and a mule, right?
Comment by VanillaMan Thursday, Oct 12, 17 @ 2:00 pm
=== Adoption of a realistic, long-term plan to provide funding for pension obligations === Does realistic also mean that it will be constitutionally legal?
Comment by forwhatitsworth Thursday, Oct 12, 17 @ 2:01 pm
== When inflation was 14% in the 70’s, the AAI was 3%. GO figure.==
Simple interest, not compounded.
==Besides the AAI is paid for with each pay check along the way by the employee while working.==
They paid for 1.5% simple AAI, not 3% compounded AAI. Nothing was ever given in exchange for the AAI increases over the years. If you went to an insurance agent and asked to switch your life insurance plan from simple to compounded interest, he’d raise your monthly payments.
You can have your 1.5% simple AAI, the original bargained-for agreement.
Comment by City Zen Thursday, Oct 12, 17 @ 2:01 pm
Since this topic is such a popular one, with so many opinions, I’d like to know what some solutions are. For the 70 year old who is collecting a pension, what do you propose? Cutting it in half? Two-thirds? Taxing it at 50%? If people already receiving a pension, do we just let that alone, but restructure current workers’ future pensions? We’ve already done that with Tier 2 and 3. So is the moaning just about how to get money back from those already collecting? How would that work?
Comment by Anonymous Thursday, Oct 12, 17 @ 2:02 pm
Anonymous - Your question isn’t as much about finances as it is inter-generational equity. We like to brag that Tier 2 solves the problem, but the truth is that Tier 2 person is a human being with a lesser benefit than his predecessor for no other reason other than being born later. Is that fair? Hardly.
This is all a moot conversation anyway because…the courts.
Comment by City Zen Thursday, Oct 12, 17 @ 2:16 pm
For the various state retirement systems or all of them as a whole, is/has the actuarially required, _normal_ operating cost being/been covered by the stated employee/employer contribution rate(s), whether the state’s portions were actually made or not?
If not, then a case can be made to adjust the contribution rate up to the required amount.
Comment by Hieronymus Thursday, Oct 12, 17 @ 2:24 pm
Hey Obie Puppy- enlightened ghtenbys as to what is fiduciary viability? Is that a new term in this pension code. No one should be castigated for his honesty
Comment by Sue Thursday, Oct 12, 17 @ 2:27 pm
==that tier 2 person is a human being with a lesser benefit…….==
Something to speak to your children about when they say they want to be a teacher. Mine knew they wanted a better paycheck ……….
Comment by Anonymous Thursday, Oct 12, 17 @ 2:29 pm
==9.5 percent of the active teacher payroll”==
But what’s the actual payroll? Everyone making 15/hr? Then 9.5% isn’t much.
==Further, since the State doesn’t pay teachers, your second graph is well, uh, inoperative.==
The state provides funds to my school district. If that was lower due to pension payments, it would indeed impact salaries. Or property taxes. Probably both.
Comment by City Zen Thursday, Oct 12, 17 @ 2:37 pm
40 acres and a mule is a fair amount of change but not enough. The unfunded liability on the state pensions is roughly equal in value to half the tillable farmland in Illinois. (14 million acres at $7000 per acre.
Comment by Last Bull Moose Thursday, Oct 12, 17 @ 2:39 pm
THe state has contracts with private businesses….to make trucks, to supply food……are these places state facilities?
Comment by Anonymous Thursday, Oct 12, 17 @ 2:39 pm
==That report cites 671 pension systems across all levels of government. I highly doubt all of them changed their assumption rates.==
But look at the report, TRS and SERS represent about 75% of the $17B change, I think they both change their assumptions.
Comment by Name/Nickname/Anon Thursday, Oct 12, 17 @ 2:44 pm
So, in summation: Make a plan to pay your bills and don’t continue to figure out ways to not pay your bills.
Comment by Harvest76 Thursday, Oct 12, 17 @ 3:00 pm
So, IPI likes breaking contracts - just public workers or bondholders, too? I thought they were so big on “property rights.”
I love the way they divide and conquer - Tier 1 vs Tier 2, private workers vs. public workers. They just don’t want to pay…..anyone.
This isn’t about public workers. Its about reallocating resources by stiffing workers. It all started in the private sector:
https://www.c-span.org/video/?301767-1/retirement-heist
Comment by TinyDancer(FKASue) Thursday, Oct 12, 17 @ 3:06 pm
It’s not an issue for today but none of you want to accept the undeniable fact- the State will never be able to tax its declining population enough to pay the current unfunded liability absent allowing every other State program to wither. The hole is too deep.
Comment by Sue Thursday, Oct 12, 17 @ 3:06 pm
“….If the pension payments were affordable all these years, they would’ve been paid………”
These 13 words succinctly explain the problem.
Comment by CapnCrunch Thursday, Oct 12, 17 @ 3:10 pm
Rich, can you please post the link to the Moody’s rating report? Thanks.
Comment by anon Thursday, Oct 12, 17 @ 3:11 pm
–It’s not an issue for today but none of you want to accept the undeniable fact- the State will never be able to tax its declining population enough to pay the current unfunded liability absent allowing every other State program to wither. The hole is too deep.–
Show your work.
It’s arithmetic, not talking-point tantrums.
Comment by wordslinger Thursday, Oct 12, 17 @ 3:15 pm
== If not, then a case can be made to adjust the contribution rate up to the required amount. ==
Courts have previously ruled any change in the contribution rate requires changed (normally increased) benefit and must be a voluntary choice by each employee.
Comment by RNUG Thursday, Oct 12, 17 @ 3:22 pm
TinyDancer at 3:06 hit the nail on the head. Everyone begrudges paying anyone anything but they want it all. Where has this attitude come from?
Comment by Anonymous Thursday, Oct 12, 17 @ 3:25 pm
“where accrued benefits will be locked” Just to be clear, pension benefits are not accrued, they are guaranteed on the date of first hire. The actual dollar amount paid over the person’s lifetime will vary depending on the salary, but that has nothing to do with “accrual.”
Comment by Skeptic Thursday, Oct 12, 17 @ 3:26 pm
== “….If the pension payments were affordable all these years, they would’ve been paid………”
These 13 words succinctly explain the problem. ==
Not really. The pension funding was affordable but it was a choice back then to:
a) make pension payments, and cut services to match revenue
b) maintain / expand services, and cut pension payments to match revenue (and worry about it sometime in the future)
c) maintain / expand services, make pension payments, and increase revenue (raise taxes) to match expenses
Most years the choice was (b) …
Comment by RNUG Thursday, Oct 12, 17 @ 3:27 pm
Word- exactly right- it’s arithmetic. Ask Toni. Ask Metra- pensions already absorb available revenues generated by the recent tax pop. The State will be unable to afford its existing pension promises even with the Big mans dream of a progressive tax scheme. You just are in denial
Comment by Sue Thursday, Oct 12, 17 @ 3:33 pm
Sue, you’re still not showing your work.
Certainly you’ve done the math before making your unambiguous claims.
Comment by wordslinger Thursday, Oct 12, 17 @ 3:38 pm
@RNUG
I thought you were the numbers guy around here?
The state’s *accrued* liabilities have grown nearly 11 fold since 1987. Please explain the “affordable” scenario where revenues grow fast enough to cover that.
Comment by Anonymous Thursday, Oct 12, 17 @ 3:43 pm
“…..The pension funding was affordable but it was a choice back then to……”
When pension legislation was passed it didn’t say the State would make the required payments if it had enough revenue. On the other hand, the word “if” is not in the pension clause of the Constitution. Our legislators may think payments into the pension system are optional. The Supreme Court has said the payouts are not.
Comment by CapnCrunch Thursday, Oct 12, 17 @ 3:48 pm
The general fund’s revenue is going to go increasingly to pension benefits and crowd everything else out.
Once the boomers start retiring en mass (who are pension eligible) and moving out of state it is a double whammy because we lose the income taxes they were paying on high salaries as well as now being responsible for sending a big check every month out of state that is no longer circulating in our economy or being taxed.
As taxes keep being increased to meet the demand of the pension obligations more people will leave the state, and the death spiral will get worse.
Smaller population means higher taxes to meet the mandatory payments that don’t change no matter how many people are in the state.
Businesses know they have the biggest target on their back as the most likely “easy” source of tax increases, which is why we don’t see them flocking to Chicago. They all know the math, and know it is a matter of “when” and not “if” more big tax increases are coming.
We already pay some of the highest “all in” tax rates in the country when you look at income/sales/property and we only funded something like 40% of the pension liability.
Doesn’t take a math whiz to see how that equation doesn’t work much longer as there is not much more room to raise taxes but there is an insatiable need for revenue now and even more so in the future.
It’s one big giant ponzi scheme right now and there will come a day when money on hand doesn’t match what is going to be needed to pay for all the promises the state has made.
Comment by Anon Thursday, Oct 12, 17 @ 4:02 pm
==When pension legislation was passed…==
…The state should have immediately created Tier 2 (or 1.x). Even back in 1970, the state already had decades of proof that showed they could never fully fund pension promises as-is. They codified their bad math then continued practicing it. Their #1 failure was using retirement assumptions and calculations that dated back to the Great Depression up through the recent Great Recession.
Many states enacted new tiers of benefits decades before Illinois. Minnesota Tier 2 dates back to 1989. NY Tier 2 dates back to 1973 and they’re on Tier 6 now.
One tier or 10 tiers, they must be paid.
Comment by City Zen Thursday, Oct 12, 17 @ 4:05 pm
–Doesn’t take a math whiz–
According to you, it doesn’t take any math at all. You yammered on for eight paragraphs without referencing one number.
If you’re going to make a budget and actuarial argument, make an effort, do the work, then show the work.
Comment by wordslinger Thursday, Oct 12, 17 @ 4:07 pm
The gist of the comments seems to be that the pension liability cannot be paid down, ever. Frankly, that’s a non-starter.
Moody’s disagrees, and I’m assuming they have numbers guys and gals who’ve crunched a few billion in their time. And there are pension actuaries who’ve looked at Illinois’s pension debt as well.
This is not the road to be walking down - even for conservatives, who seem to enjoy walking it. The idea that Illinois is going broke could lead to the state’s entering some (new) form of federal receivership and being overseen by the Midwestern equivalent of Puerto Rico’s Financial Oversight Board. I guarantee that financial austerity isn’t nearly as much fun as some may think - not to mention that it doesn’t work.
RNUG @3:27 is correct: in most cases, solution b) (keep and expand the goodies and worry about pension obligations later) was unfortunately the option chosen. IMRF is proof that there was another eminently sustainable solution (it’s about the best-funded public pension plan in the country, and last I checked it was in the same state as TRS).
The debt has to be paid down, that’s it. I like Ghost’s suggestions of essentially “cost-less” new sources of income, and there are other ways of stimulating Illinois’s economy; they’re Keynesian, though, so we won’t talk about them.
It could probably be fully paid down in 30-40 years (by the time the Tier 1 employees are all retired/gone), but repayment has to be locked into the budget in such a way that no legislature could avoid payment, ever.
The Dem candidates should all be grilled and asked to present detailed, long-term plans for paying down the debt.
Comment by dbk Thursday, Oct 12, 17 @ 4:12 pm
== “….If the pension payments were affordable all these years, they would’ve been paid………”
Think of it this way.
Couple A buys a house for $200,000 and makes all the payments on time, and makes wise decisions with the remainder of their monthly income, forgoing some wants but always making sure their basic obligations are met. At the end of their payment obligation, they burn their mortgage and enjoy a happy retirement.
Couple B buys a house for $200,000, but decides they would also like a sailboat, take vacations they can’t afford, go to sports games and concerts, etc. They make their payments most of the time, but take advantage of “skip a payment”, and refinance their house every few years to get a little more cash for their playthings. At the end of their original mortgage term, they have not knocked down the principal at all, and face another 15 or 30 years of working to try and pay down their house.
IL is like Couple B.
Comment by Six Degrees of Separation Thursday, Oct 12, 17 @ 4:17 pm
Public employees have been shafted by the government that 1) they served and 2) the government that was supposed to acting with fiduciary responsibility to deliver on consitutionally protected retirement benefits.
Since no one has missed a pension check yet, there is plenty of legal fodder for malfeasance, should there be any violation of what our Supreme Court has ruled on-paying what is due.
The state chose repeatedly to abandon their fiduciary responsibility and instead, serve every citizen in the state other than those they held retirement funds for in that fiduciary role.
Comment by Anonymous Thursday, Oct 12, 17 @ 4:24 pm
>The Dem candidates should all be grilled and asked to present detailed, long-term plans for paying down the debt.
Amen. And Rauner should be grilled about spending like crazy during his tenure, piling up debt we’ll all have to pay off, spending tons of non-allocated monies and promising more spending like business incubators wile saying the current budget is $1.7 billion out of balance but he won’t cut anything. He embodies the worst of Illinois spend-above-revenue politics that has gotten us into this financial mess. Will any candidates of any party give us some honest numbers and plans?
Comment by Earnest Thursday, Oct 12, 17 @ 4:25 pm
Couple A and Couple B were in collusion with one another. Couple B took Couple A on those fancy vacations and sail boat rides.
State workers would have never had the generous raises and contracts over the years if the state was paying the pensions in full. Pensioners double benefited from the negligence.
Comment by Robert the 1st Thursday, Oct 12, 17 @ 4:25 pm
Too bad those wizards of smart in the legislature who brag about looking out for middle class families weren’t term limited back in the 70’s.
I am constantly amazed how most commenters rarely criticize those responsible for this mess. They have passed unbalanced budgets for decades. Somehow they find a way to blame all of the state’s problems on the Governor for the past 2 1/2 years
Comment by Lucky Pierre Thursday, Oct 12, 17 @ 4:25 pm
=serve every citizen in the state other than those they held retirement funds=
State workers didn’t enjoy low taxes too?
Comment by Robert the 1st Thursday, Oct 12, 17 @ 4:27 pm
===Somehow they find a way to blame all of the state’s problems on the Governor for the past 2 1/2 years===
Bruve Rauner has failed in these 2 1/2 years to address a myriad of issues, including pensions, always pointing a phony finger at people, “forces”, any number of alleged villains, but…
… in the end, what will be different in persons in a Rauner second term?
Right now, Rauner has no answers that he can turn to with a long term solution that also could be considered constitutional.
If you’re saying Rauner isn’t up to fixing pensions, I agree and we both should ask Rauner to just step aside.
Comment by Oswego Willy Thursday, Oct 12, 17 @ 4:31 pm
>Somehow they find a way to blame all of the state’s problems on the Governor for the past 2 1/2 years
I don’t blame the past on him, but I blame him for 2.5 years of spending lots more money that was coming in. It’s so bad that he has to campaign on increasing spending in a popular program (education) and has nothing to show in terms of cuts, elimination of fraud, or increasing efficiency. Take away his rhetoric and he is one of the worst not-tax-but-spend-anyway governors we’ve ever had.
Comment by Earnest Thursday, Oct 12, 17 @ 4:36 pm
=…If the pension payments were affordable all these years, they would’ve been paid…=
Yeah, when the laws of human nature are repealed.
It’s a case of I’ll be gone, you’ll be gone.
It’s easier to short a pension fund because the fund covers everyone but doesn’t pay anyone until they retire. It’s not like shorting the universities or state troopers - they need the money today.
And remember that when you calculate the health of the fund - some calculations assume that everyone is retiring today - that’s not how it works.
Comment by TinyDancer(FKASue) Thursday, Oct 12, 17 @ 4:38 pm
==Couple A and Couple B were in collusion with one another. Couple B took Couple A on those fancy vacations and sail boat rides.==
Don’t forget Couple C, paying a mortgage on a house they never lived in.
Comment by City Zen Thursday, Oct 12, 17 @ 4:54 pm
In the spirit of Halloween,
“Perfidy”, quoth the Raven.
( apologies for leaving it out of my post)
Comment by Honeybear Thursday, Oct 12, 17 @ 4:58 pm
Robert the 1st
Big of you to finally acknowledge that public employees are taxpayers too. Comes in handy sometimes to leave them out of that group sometimes, tho, eh?
Comment by Anonymous Thursday, Oct 12, 17 @ 4:59 pm
City Zen, your precious taxes pay for DoC too. Would you like to spend a weekend in the joint to feel like you got some ROI?
word, the infamous “Edgar ramp plan” is almost halfway done. 27 years left. If the GA and Governors follow the plan, the funds will be at a comfortable 90% level in 2045. The ramp is gone. It’s an imperfect plan, but it’s more than any of the armchair actuaries here today have come up with.
Comment by Arthur Andersen Thursday, Oct 12, 17 @ 5:30 pm
OW you are a riot, no matter what the issue, it is Rainer’s fault.
A Republican Governor agrees on a compromise pension bill sponsored by the Democratic Senate President. The bill passes the Senate with bi partisan votes and the Governor promises to sign it.
Your hero, Speaker Madigan, who admits the pensions are unsustainable , refuses to call the bill and relies on sychophants like you to peddle the nonsense that the Rauner isn’t up for fixing pensions.
Perhaps you can reconsider who is to blame for the lack of resolution on pensions. It isn’t your fellow “Republican”.
As far as the spending for the past two and a half years, how much of the spending is controllable by the Governor?
Consent decrees and other mandatory payments eat up the majority of the spending and leave little flexibility. The budget can only be cut with bipartisan cooperation.
The Speaker has not acted in a bipartisan manner in the past two and half years. The Governor and the Senate President have.
Comment by Lucky Pierre Thursday, Oct 12, 17 @ 5:37 pm
Lucky Pierre, I do blame all the legislators from the 1970s onward who voted on skipping pension payments and not making actuarially sound payments and I blame the voters who kept electing those legislators so they could enjoy artificially low taxes for decades and can now retire and pay no income taxes.
Since this is the IPI I would totally buy the writer, intentionally or otherwise, making it sound like Ingram said the Tier 1 benefits are the major problem and not the funding.
Comment by MyTwoCents Thursday, Oct 12, 17 @ 5:39 pm
CZ-
Couple C is Couple B’s kids, choosing to live in mom and Dad’s house after they died, and a 30 year mortgage to pay off that they wouldn’t have to if they were Couple A’s kids.
Comment by Six Degrees of Separation Thursday, Oct 12, 17 @ 5:45 pm
===you are a riot, no matter what the issue, it is Rainer’s fault.==
If you’d like, I’ll link to the last debate with Quinn when every single answer Rauner gave started…
“Pat Quinn failed”
Have you forgotten already.
A real savvy campaign would already have that last debate all cued up where Rauner blames “the governor” time and time and even time again.
According to you, Candidate Rauner would be wrong about Gov. Rauner, lol
===A Republican Governor agrees on a compromise pension bill sponsored by the Democratic Senate President. The bill passes the Senate with bi partisan votes and the Governor promises to sign it.===
Unlikely constitutional, but good try.
===Your hero, Speaker Madigan===
Nope. Good try.
Rauner isn’t a Republican. How you can still support Bruce Rauner after signing HB40, something you said was so liberal, it could get passed and signed in California. You still think Rauner is a Republican?
To the rest of that, Rauner can’t get anything passed to fix pensions, then he should just move on. Like Bret Baier said, what will be different in a Rauner second term?
===Perhaps you can reconsider who is to blame for the lack of resolution on pensions. It isn’t your fellow “Republican”.===
I said mavy times, read McKinney. He broke down who is to blame that Rauner is too inept to fix; Madigan, Edgar, Ryan, Pate, Lee…
===As far as the spending for the past two and a half years, how much of the spending is controllable by the Governor?===
1) Rauner has yet to sign a whole year budget. Again, what will be different in a second term.
2) Rauner himself said as Governor he can dictate what can be spent after a budget, an overriden vetoed budget, passes.
Do you not understand governing? Maybe you can take a lesson from Diana Rickert or Kristina Rasmussen.
===Consent decrees and other mandatory payments eat up the majority of the spending and leave little flexibility. The budget can only be cut with bipartisan cooperation===
How does Rauner know, he’s never signed a full year’s budget. A miserable failure, that Rauner.
===The Speaker has not acted in a bipartisan manner in the past two and half years. The Governor and the Senate President===
You keep forgetting, the Speaker and the Senate President acted in a bipartisan manner… to override the vetoes to save Illinois from Bruce Rauner, getting the state a budget.
You’re welcome.
Comment by Oswego Willy Thursday, Oct 12, 17 @ 6:03 pm
=Robert the 1st
Big of you=
Be a bigger man, pick a name.
Comment by Robert the 1st Thursday, Oct 12, 17 @ 6:17 pm
Unlikely constitutional ? Who made the Speaker and you a Supreme Court Justice.
The Speaker has never claimed the Senate Bill was unconstitional.
He pledged to work cooperatively and professionally on the budget deficit with the Governor. How would you grade him on that?
The biggest driver of the budget deficit is pensions. Claiming you want to solve the budget deficit but ignore pensions is absurd.
Contrary to your daily nonsense of regurgitated talking points, nothing will change in Illinois until Mike Madigan is no longer
Speaker
Comment by Lucky Pierre Thursday, Oct 12, 17 @ 6:22 pm
==A Republican Governor agrees on a compromise pension bill==
Are you talking about Thompson, Edgar, or Ryan?
Comment by Jocko Thursday, Oct 12, 17 @ 6:30 pm
To add insult to injury, the poor public pensioners won’t even have to pay state income tax on those egregiously generous pensions, even if they do decide to stay in the great state of Illinois after retiring. At least they won’t under current Illinois tax law.
Of course they would have to be crazy to stay, as over the coming years this state will continue to short change social services in order to avoid pension default. The cumulative impact of underfunding social services will make Illinois an undesirable place to call home.
And this underfunded pension problem, which was $83B short in 2012, well before Rauner, will grow after Rauner is gone. But you know, it’s still his fault.
Comment by Lucky Babalou Thursday, Oct 12, 17 @ 6:32 pm
===Unlikely constitutional ? Who made the Speaker and you a Supreme Court Justice.===
We’ve disburse this ad nauseum.
If you’d like to argue the merits with - RNUG - who arguably knows this pension bill as good, of not better than anyone, have at it. I trust - RNUG - and his take. If you’d like to go after it, I’d like to hear it.
===He pledged to work cooperatively and professionally on the budget deficit with the Governor. How would you grade him on that?===
“On the stuff the Speaker can control, I’d give him an A”
LOL
===The biggest driver of the budget deficit is pensions. Claiming you want to solve the budget deficit but ignore pensions is absurd.===
Rauner has yet to sign a budget, so you have nothing. You know that, it’s cute.
===nothing will change in Illinois until Mike Madigan is no longer Speaker===
Aw, that’s not true.
Why just a few weeks ago, Bruve Rauner signed a bill that has taxpayers paying for abortions.
Only Bruce Rauner can sign, as you described, a bill so liberal, it couldn’t get passed and signed in California.
That liberal Bruce Rauner got something changed in Illimois… it wasn’t pensions, but still…
Comment by Oswego Willy Thursday, Oct 12, 17 @ 6:34 pm
=Are you talking about…Edgar..?=
His pension legacy will live forever. He’ll be named on IL’s gravestone, no doubt.
Comment by Anonymous Thursday, Oct 12, 17 @ 6:39 pm
Just when I gave someone issues for no name. 6:39 was me.
Comment by Robert the 1st Thursday, Oct 12, 17 @ 6:40 pm
Hmmm. Not one mention of turnaround agenda items as factors that could lead to an upgrade.
Comment by 37B Thursday, Oct 12, 17 @ 6:58 pm
===will grow after Rauner is gone===
That would be the ramp. It’ll eventually come down.
Comment by Rich Miller Thursday, Oct 12, 17 @ 7:03 pm
By all means let’s argue the merits amongst ourselves, anonymous bloggers and let a duly elected leader of the House and the leader of the Democratic Party in Illinois sit this one out.
The politics are too difficult for him to consider the good of Illinois if a powerful special interest group objects.
Comment by Lucky Pierre Thursday, Oct 12, 17 @ 7:09 pm
===By all means let’s argue the merits amongst ourselves, anonymous bloggers and let a duly elected leader of the House and the leader of the Democratic Party in Illinois sit this one out.===
If you’d like, I can pull up the multiple times - RNUG - went over the pension bill and you can just rip apart his analysis. I dunno, I wouldn’t call - RNUG - just your average commenter, given how many times - RNUG - expertise is called upon.
But, you go ahead.
If Rauner would like to put 71 House members on the stairs and “really-really” embarrass Madigan, boy, that’d be sumptin’, lol
You should suggest that.
Comment by Oswego Willy Thursday, Oct 12, 17 @ 7:14 pm
AA- you know that at the early years of the RAMP- pensions were absorbing 12 percent or less of all State Revenue- that number today is approaching 35 percent as growth just has never come close to the 1985 expectations. The State simply cannot throw 35 percent and more every year into pensions. Given the returns/ state revenue growth and actuarial projections- before very long the percentage required for pension contributions will exceed 40 percent and you know in two years- Illinois is on the hook for ten percent of the ACA Medicaid expansion. With all respect to Word- the money just won’t be there absent. Drastic cuts to every other program. Pensions are starving the beast
Comment by Sue Thursday, Oct 12, 17 @ 7:55 pm
1995
Comment by Sue Thursday, Oct 12, 17 @ 7:56 pm
All these posts, and no one has stated the obvious: If you don’t want to live in a state with rising taxes and falling services, simply sell your house, find a job in another state, and move. If you’re making a big salary or have so much Illinois property such that this is an undesirable option, quit squawking and simply pay up. Not sure what the folks who can’t afford to move or who are upside down on their homes will do, though. But forewarned is forearmed.
Comment by Anonymous Thursday, Oct 12, 17 @ 8:35 pm
Sue, show me a credible projection that has pensions consuming 35-40 percent of GRF spending. Of course, pension spending took a larger percentage as the ramp was climbed. That’s over.
Comment by Arthur Andersen Thursday, Oct 12, 17 @ 9:33 pm
=Not sure what the folks who can’t afford to move or who are upside down on their homes will do, though.=
Well said. Forget the peons. All that matters is wealthy interests who can flee and those cashing in on the system crushing everyone else.
Comment by Robert the 1st Thursday, Oct 12, 17 @ 10:19 pm
“Illinois lawmakers have been justifiably castigated for their failure, until recently, to pass a budget and an equitable school funding plan, and they still haven’t reformed the state’s antiquated tax system, eased the pension crisis or adopted pro-business reforms that facilitate job creation.”
Speaker Madigan and all of the Democratic candidates are against all efforts to reform pensions and adopt pro business reforms.
http://www.chicagobusiness.com/article/20171006/ISSUE07/171009911/wisconsin-redistricting-case-is-critical-for-illinois
Comment by Lucky Pierre Thursday, Oct 12, 17 @ 10:27 pm
- Lucky Pierre -
Also Crain’s…
===But Madigan is not the governor. Rauner is. And there’s no way to deny it: By nearly every measure, the state is worse off since Rauner took office. Pension liabilities now top $110 billion and are rising by the minute. The stack of unpaid bills is ballooning, turning Illinois into a notorious deadbeat. Vital social service agencies are being cut. Students are abandoning the state’s universities. Illinois’ credit rating hovers just above junk-bond range.===
“Pension liabilities now top $110 billion and are rising by the minute.”
You’re welcome.
Comment by Oswego Willy Thursday, Oct 12, 17 @ 10:56 pm
I am sure the Speaker will finally do his part to work cooperatively and professionally to do his part to solve this crisis.
Comment by Lucky Pierre Thursday, Oct 12, 17 @ 11:40 pm
===I am sure the Speaker will finally do his part to work cooperatively and professionally to do his part to solve this crisis.===
lol, I thought you wanted the Speaker retired.
Pick a lane already, work together or retire him.
Comment by Oswego Willy Friday, Oct 13, 17 @ 12:12 am
The IPI lying through their teeth? Say it isn’t so.
Comment by CEA Friday, Oct 13, 17 @ 12:58 am
Work together? The Speaker can’t even work together with Senator Cullerton or minority leader Durkin.
Your Pat Quinn failed argument is full of holes.
Pat Quinn failed to reform Springfield because he largely agreed with Speaker Madigan as does JB and the other candidiates.
Comment by Lucky Pierre Friday, Oct 13, 17 @ 7:30 am
the speaker and the govenor reformed abortion together
Comment by Rabid Friday, Oct 13, 17 @ 7:37 am
===Your Pat Quinn failed argument is full of holes.===
Not according to Bret Baier. He too wondered “what would be different in a Rauner second term?”.
Not the best way to seem like a successful governor, like Crain’s says, by nearly every measure… and these every measures, Illinois is worse off with Bruce Rauner.
===Pat Quinn failed to reform Springfield because he largely agreed with Speaker Madigan as does JB and the other candidiates===
Meh. Rauner is a solo failure. You think that’s better? lol
Bruce Rauner fails. What would be better in a second term?
Maybe Rauner could sign more liberal social agenda legislation?
Comment by Oswego Willy Friday, Oct 13, 17 @ 7:46 am
===the speaker and the governor reformed abortion together===
Ironically, is Speaker Madigan more socially conservative that Bruce Rauner?
That’s fun.
Comment by Oswego Willy Friday, Oct 13, 17 @ 7:48 am
governor and speaker together with historic Chicago bailout reform
Comment by Rabid Friday, Oct 13, 17 @ 7:57 am
===The Speaker can’t even work together with Senator Cullerton or minority leader Durkin===
Ask former Leader Radogno about working with Bruce Rauner, get back to all of us.
Comment by Oswego Willy Friday, Oct 13, 17 @ 8:07 am