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* The reforms of the teacher pension system were bigger than many figured…
While the state won’t catch up on the debt it has incurred for existing teachers’ pensions for at least three decades, by 2036, it will basically stop having to pay for pensions for teachers hired after Jan. 1.
An actuary’s report for the state Teachers’ Retirement System projects that as more teachers come into the system under the second tier of benefits approved by the General Assembly in 2009, the new teachers will pay a big chunk of the debt owed by the state.
“The tier 2 members are really paying more than the benefits are worth,” said Kathleen Farney, TRS’s director of research. “So not only are they paying for their own benefits, but they’re actually helping reduce the unfunded liability that was accrued before they were even hired.”
While the legislature’s intent in creating second-tier benefits for new teachers, state workers, university employees, legislators and judges was to reduce the state’s costs, “they kind of overshot” in the case of teachers, Farney said.
I asked about this topic a couple of weeks ago, and was not informed of the audit, which was completed in early December. Instead, I was told this by TRS, among other things…
The real rub for Tier II members is the “cap” on how much of a Tier II teacher’s salary can be counted toward their pension. Right now the cap is $106,800. It doesn’t affect that many people…now. But over time as the cap increases with inflation, so will salaries…and salaries will probably increase faster than the cap.
In time more teachers than not will have a portion of their salaries not counted toward their pension and that portion will increase every year. And over time as the cap hinders the ultimate size of a person’s pension, it’s expected by our actuaries that the benefit will not be large enough to meet the minimum standards of Social Security for a stand-alone pension plan. At that point it’s expected that the federal government will force teachers into Social Security, which increases school district costs.
So, the budgetary news isn’t all good.
* Ralph Martire argues for using a higher revenue number for next fiscal year…
Overstating projected revenue would lead to irresponsible deficit spending, but understating revenue would lead to irresponsible spending cuts that hurt everyone from school kids to seniors, while causing job loss in the private sector.
The Senate used revenue estimates developed by the nonpartisan Commission on Government Forecasting and Analysis. COGFA is staffed by professionals whose sole job is to forecast and analyze fiscal matters. Over the last decade, COGFA’s revenue forecast has averaged being within 1.4 percent of the actual revenue generated in those years. The last decade includes the Great Recession, making COGFA’s miniscule margin of error that much more impressive.
The House revenue projection is primarily a political compromise reached between some House Republicans and Democrats, who are concerned about overspending. Given the stakes, this is no time for political concerns to get in the way of accuracy. Even using the highly accurate projections made by COGFA, some painful cuts may still be required. Making matters worse in the name of political compromise is not fiscally — or morally — responsible.
But, as I’ve explained before, putting too much into next year’s spending base could have a disastrous impact down the road, when the tax hike is set to expire. Dismissing that very real problem by focusing in on one spending year is not a good idea.
* James Warren totals up the amount of money paid out by Chicago for Shakman Decree violations since 2005…
*Claimants: nearly $12 million
*The monitor and her firm’s attorneys: just over $5 million
*The monitor’s consultants: nearly $2 million
*Plaintiff Michael Shakman and his attorneys: about $4.5 million
*The city’s primary outside law firm, Laner, Muchin, Dombrow, Becker, Levin and Tominberg, Ltd.: just over $1 million.
Shakman’s firm is doing a pretty brisk business.
* More numbers…
* Quinn grants 85 clemency requests, denies 189
* Rutherford to address Menard County Republicans: “I’ve always been told, if you don’t get 20 percent of the city of Chicago, you don’t win, and we got 22 percent and we won,” he said of the 2010 treasurer race in which he defeated Democratic opponent Robin Kelly with 50 percent of the popular vote.
* Taking great pleasure at small savings: One line-item that caught my eye was “Reduction in mobile phone usage — $14,000.” Rutherford asked his employees with state-paid cellphones to turn them in if they couldn’t justify the need, and 26 out of 36 subsequently surrendered their phones.
* Illinois to start tracking bicycle ‘dooring’ collisions
* Hundreds of Cook County Health Patients Caught Off-Guard By Furlough Day
* Jobe tops in down year for Springfield aldermanic fundraising
* Commissioner John Fritchey owes over $24,000 for property taxes: “My wife acted upon advice from her attorney and ceased payment on the property taxes, as well as the mortgage,” he says. “While I questioned the advice from her lawyer, I have no choice but to accept the decisions she made. Divorce brings a number of hardships. These are among them.”… He says their house is now under contract, and the taxes will be paid when the sale is completed. “They will be paid in full at the closing of the house, which is scheduled to take place in approximately 60 days,” Fritchey says.
posted by Rich Miller
Monday, Apr 25, 11 @ 11:56 am
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It sounds like Fritchey is in a no-win situation, but is handling this as well as anyone possibly can. Hang tough John, you’ve got a lot of friends wishing you the best. This will all be in the rear view mirror soon.
Comment by 47th Ward Monday, Apr 25, 11 @ 12:01 pm
I thought Fritchey was a partner at a big fancy law firm too?
Comment by Meanderthal Monday, Apr 25, 11 @ 12:10 pm
Meanderthal, you thought wrong.
Comment by Rich Miller Monday, Apr 25, 11 @ 12:11 pm
I don’t think it’s a bad idea to use the lowball revenue figure. It’s not like the state has been keeping spending in line with projected revenues, anyway. Plus, any gravy beyond projections can pay off old bills.
Comment by wordslinger Monday, Apr 25, 11 @ 12:25 pm
Tough break for Fritchey … could all of his problems also come into play when the 36th Ward didn’t carry him the last few times? Possible?
Gotta feel for the guy when it affects your credit, and your reputation … I am sure there are 2 sides to the story too, as there always is …
Comment by Oswego Willy Monday, Apr 25, 11 @ 12:43 pm
It appears Fritchey is handling this well. It did seem odd to me that yesterday he posted on Facebook about the lavish brunch he had at a high end expensive Chicago eatery and today we learn he can’t afford to pay his taxes.
Comment by Billie Monday, Apr 25, 11 @ 12:54 pm
The social security angle is interesting. Anybody know if adding all the teachers to SS (and then providing then with a 401(k) option) would cost more or less than the current system?
Comment by Skeeter Monday, Apr 25, 11 @ 12:59 pm
Billie, are you on the silly sauce or something? I looked it up and he said he had brunch with his daughter at a Chinese place. Back off or go away.
Comment by Rich Miller Monday, Apr 25, 11 @ 12:59 pm
Fritchey is going through a divorce, and this kind of crap happens when you dissolve a family’s financial bonds. As he has made very clear, this situation has nothing to do with his brunch decisions; it has to do with his wife’s financial decisions, made under advice of counsel. sheesh.
Comment by soccermom Monday, Apr 25, 11 @ 1:09 pm
Not paying mortgage and and taxes is frequent in divorce. Mostly because the party that pays them rarely gets credit. If you pay taxes and most of the mortgage payment is interest, so there is nothing to really give you back. Easier to just put it on hold and split what is left after proceeds.
I wonder how those new teachers feel about the IEA writting checks out of their dues money to the democrats who just took part of their pension?
Comment by the Patriot Monday, Apr 25, 11 @ 1:11 pm
Skeeter, a combined SS and 401K plan by the state for it’s employees would cost the state more, and provides it’s employees with much less of a benefit. Since employees look at the total package when deciding whether to accept a position, if you lower backend benefits, then higher salaries will be demanded upfront.
Comment by PublicServant Monday, Apr 25, 11 @ 1:15 pm
its
Comment by PublicServant Monday, Apr 25, 11 @ 1:16 pm
Nobody who is paying attention to the teacher pension problem is suprised by the numbers. This was overkill by Madigan, Kevin McCarthy, and a few other House Dems. Everybody knew it. This wasn’t done for financial reasons.
Comment by Bill Monday, Apr 25, 11 @ 1:21 pm
I remember back in the early 90’s when a 24-year old Corey Jobe ran against Chuck Hartke for state rep. I bet Corey raised more money for this alderman seat than the state rep. seat where he got destroyed. Still, it is nice to see Corey back on a ballot, and this time winning. I always thought he was a nice guy. I hope he does well.
Comment by I don't want to know, I already gave up Monday, Apr 25, 11 @ 1:23 pm
I find this story about the TRS plan approaching the threshold for SS contributions interesting. The follow up question I would have is when does that happen, or given the variables in the assumptions what window is that likely to happen? Is this a 2-5 year issue, a 5-10 yr issue, a 25-30 year issue, etc?
Comment by The Captain Monday, Apr 25, 11 @ 2:02 pm
By virtue of his public office, John Fritchey is going through an incredibly painful experience without the privacy afforded most who must deal with the emotional and financial trauma of divorce. I feel terrible for him, his wife, and their daughter.
Having worked on countless community projects with MANY elected officials, I can say that I wish they were half the stand-up guy that John Fritchey has always been.
Hang in there, John. This, too, shall pass.
Comment by A Good Man Monday, Apr 25, 11 @ 2:30 pm
Unfortunately, nothing prepares you for the fury of divorce. It’s truly “an ill wind that blows nobody any good.” That’s why I love “War of the Roses”…”when trouble begins it comes at you from directions you never expect…Fitchey was a sitting duck.”
Comment by Louis Howe Monday, Apr 25, 11 @ 2:50 pm
Chicago City Employees are disciplined for several days if they are late on parking tickets, water bill, of anything late bills. As much As John is a nice guy, he spends a pile on clothes and cars. To blame the divorce is unfair. You have bills pay em! Try that excuse if you work for the city and see how far you get! Pay up.
Comment by Patrick McDonough Monday, Apr 25, 11 @ 6:17 pm