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* Kelly Kraft of the governor’s budget office went on Fox Business News because somebody had said on the channel last week that Gov. Pat Quinn had asked for a federal bailout. The interview was at times pretty contentious, with host Stuart Varney regularly interrupting.
Varney offered up what he claimed was a simple solution to the state’s pension problems: All new hires should be put into 401(k) plans. “I know how this works, I know how this works,” Varney said. What he didn’t know, though, was that Illinois would have to start making Social Security payments for tens of thousands of workers if the state followed Varney’s advice.
Varney also claimed the state’s income tax hike didn’t bring in the amount of money that was expected. Wrong.
And Varney flatly stated than long term municipal bonds paid lower interest rates than short-term bonds. He made that claim while arguing that a ten-year California bond’s interest rate which is much lower than that for a recently sold 25-year Illinois bond meant Illinois’ credit problems are worse than California’s. Um.
* Watch part of the exchange…
For whatever reason, I couldn’t download the whole video, so the rest is here. That’s where it gets really fun.
And some people wonder why I refuse to appear on cable TV.
* Meanwhile, the Decatur Herald & Review is hot under the collar…
An interest rate of 300 percent is usually associated with lenders who threaten kneecaps if payments aren’t made.
But in Illinois that interest rate is allowable, and it appears it will remain so after a House committee last week refused to consider legislation that would have imposed new regulations on car title lenders.
Currently, the interest rate that can be charged by car title lenders is capped at 300 percent, if you can call that a cap.
The House Consumer Protection Committee, a misnamed group if there ever was one, was asked last week to consider a bill that would have capped that interest rate at 36 percent. Only five of the 21 members of the committee voted “yes,” putting the legislation in turmoil. The legislation had been supported by many groups, including the Decatur City Council, which had approved supporting the cap. […]
(T)he state has a role in regulating such loans. In this instance, the House Consumer Protection Committee acted more like a predatory loan protection committee.
I can see their point.
* Phil Kadner is right to be upset that local legislators aren’t returning his calls to talk about a very important issue…
I’ve been waiting for an outcry from Southland legislators about a plan being discussed in Springfield to shift the state’s obligation to pay teacher pensions onto the backs of homeowners.
I haven’t heard a word.
I’ve called state senators Toi Hutchinson (D-Olympia Fields), Maggie Crotty (D-Oak Forest) and James Meeks (D-Chicago) and have yet to get a return call.
I ran into Crotty at a charity fundraising event, and she apologized for not returning the call. She told me that legislative leaders are discussing all options on pension reform, and rumors about a “done deal” when it comes to shifting the pension payments to school districts are inaccurate.
But representatives of the Illinois Education Association, the state’s largest teachers union, have told me that such shifting is the one proposal they’ve heard that would be constitutional.
* Let’s end this on an up note. Toronto Star travel editor Jim Byers attended a tourism briefing held by Gov. Pat Quinn this week and filed a long report about our state’s wondrous beauty, including this…
The state also is home to more bald eagles than any other state in the U.S. except Alaska, and, according to Quinn, is an excellent place for bird-watching. (Actually, Quinn made this point several times in an entertaining speech that made me think the guy is quite smart but likes playing up the image of a good old boy hunkering for a tasty snack at the Bar-B-Q Barn in Harrisburg, complete with a country fried steak and a big old Coke)
Welcome to our world, Jim.
posted by Rich Miller
Tuesday, Mar 6, 12 @ 1:12 pm
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We think everybody already knows that Varney is dumber the a box of roxx. If it isn’t on his cheat sheet it doesn’t compute
Comment by CircularFiringSquad Tuesday, Mar 6, 12 @ 1:29 pm
Rich,
You have to admit the Bar-B-Q Barn has some quite tasty food.
Comment by Downstate Illinois Tuesday, Mar 6, 12 @ 1:30 pm
Kelly Kraft does not need me to defend her, but the exchange calls to mind most of my debates with my kids, in which I say, “Are you gonna LISTEN … or are you gonna YAK?”
Comment by Dave Dahl Tuesday, Mar 6, 12 @ 1:31 pm
I saw the interview yesterday and checked out the clip to see if I missed something.
Varney struck me as a rude ideologue when I watched the interview. Besides dismissing the legitimate constitutional issue regarding reduction of pension benefits for current employees that Kraft raised — as also raised by numerous legal scholars, judges and law school professors who teach constitutional law – Varney was also dismissing fundamental economics.
Varney would apparently be amazed to discover there is something referred to in muni bond markets called the YIELD CURVE. Go look it up Varney and you’ll find yield curves are upward sloping reflecting inflation risk as well as default risk, which means interest rates increase as maturity increases.
Kraft was absolutely correct theoretically, empirically and in today’s interest rate environment.
Varney absolutely demonstrates that as the interruptions and volume increase, logic and veracity decrease.
Bottom Line: Rich is absolutely correct in refusing to appear on cable TV!
Comment by Fiscal Conservative Tuesday, Mar 6, 12 @ 1:35 pm
Could somebody flesh out the 401(k) issue a bit?
I’m not following why asking new employees to fund their own pensions would cause the state’s expenses to go up. This is a serious question. I’ve seen this discussed in both the blog and the comments, but I’ve never quite gotten what is going on. Hope this doesn’t derail any discussion.
Comment by Skeeter Tuesday, Mar 6, 12 @ 1:40 pm
(snark) And we wonder why in this age of massive media, the public is so ill informed!
Comment by D.P. Gumby Tuesday, Mar 6, 12 @ 1:43 pm
One way it would go up is that contrary to popular belief, there are thousands of State Workers who make the total contribution to their pension and the state makes none for them. To put these people into a 401k where the state would match the Employees contributions would increase the cost for their pensions.
Also, what the state owes in back payments that were pushed down the road and are now being repaid make a large part of the pension payment now. The State would still owe that money.
Comment by SO IL M Tuesday, Mar 6, 12 @ 1:47 pm
==Varney absolutely demonstrates that as the interruptions and volume increase, logic and veracity decrease.==
Varney also demonstates that if you want a fair and balanced view of the news, your ability to obtain said view decreases with the amount of time you stay tuned to Fox…regardless of their slogan.
Comment by PublicServant Tuesday, Mar 6, 12 @ 1:51 pm
As Ron White says…
Comment by steve schnorf Tuesday, Mar 6, 12 @ 2:08 pm
Wholesale switching of new state and local government employees to 401K-like plans would likely percipitate an accelerated decline in government finances.
The switchover would trigger requiring payment of an employer’s portion of the Social Security Tax, which the state possibly could handle, but many local communities could not. If they can’t fund current pension contributions, how could they fund Social Security? I think the base for 2012 is 6.2%. Result: Increased taxes and decreased government services.
Also, the Ponzi aspect of government employee pension plans in a down market would accelerate plan defaults. That is, as the older worker pool retires and draws pensions with 3% annual increases, the incoming contributions to pension plans by new employees, in those plans where gov employees contribute, helps fund retired employees. Pull this away, and the inevitable gov employee train wreck gets closer.
And then there’s the practical aspect of sending the SSA contribution to Washington. State and local government pension plan contributions can have a benficial local effect, besides acting as a piggy bank for local politicians and their patrons. The over 600 government employee pension plans in Illinois can use their funds constructively in the state. Send the money to Washington, and its incinerated.
The whole thing is a disaster, with no easy answers.
Comment by Cook County Commoner Tuesday, Mar 6, 12 @ 2:16 pm
Outside of the Social Security payments argument, if no new employees join the sytem it will be broke in the next 20-30 years.
Comment by James the Intolerant Tuesday, Mar 6, 12 @ 2:25 pm
CCC,
So under Social Security the required payment would be 6.2% plus any matching?
What is the percentage being paid under the current system?
Comment by Skeeter Tuesday, Mar 6, 12 @ 2:33 pm
CCC
I believe the employees covered by IMRF and SERS are already in the Social Security system . The TRS and possibly the SURS are not. As for Judges, I think Associate Judges are covered by Social Security, do not know if it is currently paid. Do not think Circuit Judges and Legislators are covered by Social Security.
Comment by Bigtwitch Tuesday, Mar 6, 12 @ 2:37 pm
The TRS and possibly the SURS are covered by Social Security but it is not paid due to a wavier.
Comment by Bigtwitch Tuesday, Mar 6, 12 @ 2:41 pm
CCC,
“If they can’t fund current pension contributions, how could they fund Social Security?”
The municipalities would have to use adult thinking skills and make tradeoffs between high salaries with early retirement vs. market salaries and working till age 67.
JBP
Comment by JP Tuesday, Mar 6, 12 @ 2:42 pm
Can’t Fox find some moronic wanker from the United States to spread the stupid on its shows? Seriously, why a Brit yabbo?
Comment by wordslinger Tuesday, Mar 6, 12 @ 2:52 pm
Skeeter @ 1:40,
I’ll try to explain it, but I’m going to have to make a few assumptions. Apologize in advance for the length and possible repetition in some areas.
The vast majority of so-called State pensions are actually for teachers of the various school districts. The TRS system is certified by the IRS as being as good as or better retirement plan than Social Security, thus allowing the State to opt out of Social Security for those employees. Since the State chose to opt out, it currently does not pay the employer contribution of 6.2% on the first $110,000 of salary.
For TRS, the employee pays 9.2%. From TRS documentation: “This contribution is allocated as follows: 7.5 percent for retirement benefits, 0.5 percent for post-retirement increases, 1.0 percent for survivor benefits, and 0.4 percent to fund the Early Retirement Option.” (As an aside, that is part of why you can’t change things like the COLA because they are paying for that benefit.) The State is also supposed to make a contribution but there is no fixed percentage I could find in the the TRS document I checked; it just mentioned the ramp-up / catch-up process.
So we’re going to have to make an assumption of what the State is contributing. Let’s assume it is the same as the employee: 9.2%.
As far as I know, a 401K will not be certified as a Social Security alternative; it’s supposed to be a supplement to either a traditional pension or Social Security. So that means if teachers are switched from the current State only pension system to a 401K, they have to start contributing to Social Security … that’s IRS rules. So the State will have to start paying 6.2% to the feds, and they have to pay it every month, it’s not something they can defer. Also, the teachers will have to pay 4.2% (normally 6.2% but reduced the past couple of years as part of various “stimulus” plans).
In a 401K plan the employer usually contributes something, either a dollar for dollar match (100%) or some lesser level. Since the State is theoretically matching the current employee contribution, let’s assume dollar for dollar (100%). Plus, again, this is an immediate payment every month that has to be made … no deferring part of it.
Now some math:
Teacher currently pays 9.2%. If 4.2% of that is diverted to Social Security, then 5% is left to go to a 401K.
State is assumed to currently pay 9.2% (but actually pays less). The State will have to pay 6.2% to Social Security plus 5% to the 401K match, which is a total of 11.2%. If you assumed the 401K match would be at half of the employee contribution, the math for that combination would be 6.2% to Social Security plus 2.5% to the 401K which is a total of 8.7% (a bit less that the current 9.2%).
If, however, you assume the State is only putting in the 7.5% towards retirement today and not contributing to the various “extras”, then in both the about scenarios the State would be paying more than today, either 7.5% versus 11.2% or 7.5% versus 8.7%.
And the State would still have to be paying on the backlog of the unfunded liability on top of those payments.
The bottom line is that every proposed plan (except redoing the ramp-up) actually costs the State more in the short term, one way or the other. Because you can’t change things for current employees (except in some very specific cases where additional benefits are provided for extra payments or other benefit reductions and each individual employee gets to chose to stay with old or new), the savings don’t kick in until 15 to 30 years down the road. That was true even for the “tier 2″ changes the past year; the short term costs the next several years actually went up. In the short term, the best way to “save” money on the pensions is to either do nothing or make larger than required payments into the pension system(s).
Note: the above does not apply to the actual state employees (SERS) because most of them participate in both SERS and SS and, because of dual participation, have a lower State contribution level and get a lower State pension.
Comment by Retired Non-Union Guy Tuesday, Mar 6, 12 @ 2:56 pm
Skeeter, I’ll give it a shot.
So you switch everyone to a 401K system. OK. You still owe $80 billion for all the previous underfunding, unless you’re going to actually retroactively take benefits away from employees and retirees, and I don’t think anyone has the stones for that.
The $80 billion is the money we owe looking back, not ahead, so we still gotta pay it.
But now you also have to pay social security’s payroll contribution of 6.6 percent for all the TRS employees and others who currently are not eligible for Social Security because of their pensions and therefore neither they nor their employer — state or school district — has to pay the employer portion.
AND we haven’t even gotten into whether there would be a state contribution to the 401K system or if the state would formally abandon all contributions to employees retirements.
Not sure if that clarified anything, but I tried.
Comment by Michelle Flaherty Tuesday, Mar 6, 12 @ 3:19 pm
Michelle,
And what about retiring at a normal age, rather than 49+ that is currently allowed for State Pensioners.
Do you think the 18 year difference might change the finances a bit?
JBP
Comment by JP Tuesday, Mar 6, 12 @ 3:24 pm
There are different levels of employee contribution throughout the state system. It depends on the department/agency and the position the employee occupies. For instance in my union position at Historic Preservation, I pay 4% towards my retirement, plus 6 1/2 % to social security. My manager, who is not union, pays the same social security, but pays 8% for her retirement. What many people do not think about when they say employees should be put into a 401 program is this: 1) The state would not have the option of delaying or not making the payment - they would have to put in their matching share 2) Where would they get the money to do that? Ummm… you?
Comment by Anonymous Tuesday, Mar 6, 12 @ 3:25 pm
So, according to Varney, if I take out a 30 year mortgage, my interest rate should be lower than if I take out a 10 year? Wish he was running my bank. Then again, with his grasp of math and honesty, maybe not.
That said, I’m glad to see Vaught and crew getting fired up and not rolling over for these critics. They have the hardest job in state government, and I love seeing them taking it on like happy warriors. Many kudos to Kelly.
Comment by Small Town Liberal Tuesday, Mar 6, 12 @ 3:26 pm
JP, again, is the GA going to wipe out all pensions and switch everyone into a 401K retroactively? Or is it just from, say, Jan. 1 going forward. And if you are going to keep people on payroll for 18 more years, keep in mind you’ll be paying 6.6 percent of their upper end salaries for those 18 years. Over the course if a decade, I bet it would result in dramatic savings. But the first few years, I think the start up costs would be extremely prohibitive because you CANNOT skip social security contributions.
Comment by Michelle Flaherty Tuesday, Mar 6, 12 @ 3:28 pm
My prediction is that most people won’t stay on the payroll. They will quit if they realize the gig is up on early retirement.
I think the early retirement perk is a real hard sell to the general public, who have to work till age 67 to get SS.
Comment by JP Tuesday, Mar 6, 12 @ 3:32 pm
JP, OK, what exactly will they then do for the next 20 some years? If they live off their pensions, they won’t be paying taxes.
Comment by Michelle Flaherty Tuesday, Mar 6, 12 @ 3:34 pm
Not sure which “they” you are referring to Michelle, but if you quit your job at most employers, in years past you would try to get a job somewhere else.
It’s way past the time that one set of Illinois residents gets to retire 15 years before another set. At least it should be 59.5 as a start.
JBP
Comment by JP Tuesday, Mar 6, 12 @ 3:46 pm
Illinois’ credit problems are worse than California’s. Maybe you didn’t notice that Moody’s Investors Services, one of the three giant credit ratings agencies, downgraded the state of Illinois last month because of its failure to address its massive budget deficit and debt, making Illinois the worst-rated state in the nation.
Specifically, Moody’s lowered the Illinois’ general obligation bond rating to A2 from A1. Moody’s also attached the lower rating to an $800 million general obligation January bond offering that is intended to finance school and transportation projects. That will drive the cost of borrowing for those bonds to 3.1 percent, rather than 2 percent other states get with better ratings. The move gives Illinois an even worse rating than California, and it reflects what everybody realizes is a dire economic situation. According to the nonpartisan research group, the Civic Federation, the state will owe $9.2 billion at the end of this fiscal year, and, unless serious reforms are undertaken, that will balloon to $34.8 billion by 2017. In addition, at the end of fiscal year 2011, the state pension fund had total unfunded liabilities of $83.1 billion and a funded ratio of 43.3 percent, also worst in the nation. Here, read it for yourself: http://www.lakelandtimes.com/main.asp?SectionID=9&SubSectionID=9&ArticleID=14695
Comment by Frank Tuesday, Mar 6, 12 @ 3:48 pm
Hmm… so you seriously believe that a large number of state employees would retire immediately if their pensions were changed? And that they would then take different jobs in the private sector? Zactly what jobs are there to get in the private (or public) sector right now that pay well enough to take? You may not want to believe this, but state employees are just like anyone else with a family to support - they can’t just walk out because they don’t like the new rules! And, by the way, if a person who began working for the state at age 20 retires at age 55, they would still not receive full benefits of 75% of salary. You have to work 45 years to get that.
Comment by lincolnlover Tuesday, Mar 6, 12 @ 3:52 pm
JP @ 3:24 pm:
No SERS employee can retire at 49 except, maybe, a few veterans with credit for their military service. If you are talking about a legislator, they have their own “special” rules …
I can only think of three circumstances that come close. And none of them get a “full” pension, which generally requires 44 years and 9 months of service time. In every early retirement case, the actual “reduced” pension is based on the years of service.
First case is the “alternate formula” which is a life safety category, i.e., dangerous jobs. That includes state police, corrections officers and highway construction workers. All of them actually pay a higher contribution rate in exchange for this “benefit”. They can retire with a “reduced” pension at age 50 or 55 depending on their years of service.
The second possibility for “early” retirement is the “Rule of 85″ where age plus service years has to equal 85. Let’s assume a employee started right out of high school at age 18 and worked until age 52; he would have 52+34=86. Again, he would only get paid for the 34 years of service. And this isn’t a very likely scenario these days since it seems the State wants a college degree form every job title. So the more likely starting age would be 23 and the soonest he could retire with a “reduced” pension would be age 54 or 55.
The last case that comes to mind was the special 2002 Early Retirement Incentive where you had to be at least 50 years old. That was a one time exception created by the Legislature and, even then, the retiring employee had to pay some extra money into the system.
Comment by Retired Non-Union Guy Tuesday, Mar 6, 12 @ 3:56 pm
“large number of state employees would retire immediately” no but the attrition rate would go up.
“but state employees are just like anyone else with a family to support - they can’t just walk out” welcome to the good life that everyone else in the State lives with.
JBP
Comment by JP Tuesday, Mar 6, 12 @ 4:02 pm
Can we bill you for the court costs, JP? If they change the pension benefits post employment, it’s going to get challenged in court, and as others have said, while that’ll give pols cover for having voted for pension “reform”, nothing will change. Pensions are a benefit of state employment that employees accepted when they agreed to work for the state. They’re earned, not a handout. Talk is cheap, JP. Passing unconstitutional laws isn’t. I’d check out IGPA’s website for a compromise that has a chance of being acceptable with the people that you have to negotiate with. Otherwise, head on over to the IR website where your views have a chance of going unchallenged with pesky legal details.
Comment by PublicServant Tuesday, Mar 6, 12 @ 4:04 pm
JP,
A lot of them may not retire early.
If they don’t retire early, then they will retire later at even higher salaries, resulting in even higher pension costs. It would be a rational decision to stay; in this age of the race to the bottom on pension benefits in the private sector, staying at a job with State pension is one of the best investments you could make.
If they do retire early, pension changes won’t be the major factor. It will be because the work environment is actively hostile to the worker. Doing more with less (or nothing) is the norm today for the union State worker.
It’s even worse for the “merit comp” people; they catch it from both the politico upper management and the union worker below them; no raises, forced cuts via furlough days, double and triple workloads because retiring staff is not being replaced, the worry of a worker going postal from the stress, etc. The MC people I know are working 60+ hour weeks just to try to get each week’s work done.
If anyone retires early, it will be the MC people. Most those today are career employees, often professionals … but you can bet their replacements will be political hacks that will just make the problems even worse.
Comment by Retired Non-Union Guy Tuesday, Mar 6, 12 @ 4:16 pm
JP:
You are so full of it, it isn’t even funny. I know plenty of people in the private sector who get paid far more generous salaries than in the public sector that have access to their retirement income at age 55. By the way, there already is an age limit for full benefits (age 60 unless you have 20 years of service then it is at age 55). If you leave earlier you are penalized.
I think you are just another in a long line of people who have nothing better to do than bash state employees. Your SS argument has no merit, by the way, either. Nobody views SS anymore as any legitimate retirement. The SS age is completely irrelevant in talks of retirement.
Comment by Demoralized Tuesday, Mar 6, 12 @ 4:18 pm
JP,
If you want to truly understand why most the proposed pension changes are unconstitutional, check out this paper. It covers all the issues in minute detail and specifically rebuts all the Civic Club nonsense. It’s a bit of heavy reading at 76 pages, including footnotes:
http://www.niu.edu/statebudget/pension_reform/_pdf/Pension%20Clause%20Article%20Final.pdf
Comment by Retired Non-Union Guy Tuesday, Mar 6, 12 @ 4:23 pm
Retired, Check out the IGPA site. They’ve got video’s posted of a pension panel that discusses, in that case, the SURS pension, but it’s really applicable to all. Here’s the link:
http://go.uic.edu/webcast_pensions_Chicago
Comment by PublicServant Tuesday, Mar 6, 12 @ 4:31 pm
You can find more than just about anyone would ever want about both sides of the pension reform debate here:
http://www.illinoissenatedemocrats.com/index.php/component/content/article/108-public-information-brochures/1517-pension-debate
Comment by Michelle Flaherty Tuesday, Mar 6, 12 @ 4:39 pm
Michelle Flaherty @ 4:39 pm:
Same document I referenced .. different site
Comment by Retired Non-Union Guy Tuesday, Mar 6, 12 @ 4:45 pm
“…It’s even worse for the “merit comp” people; they catch it from both the politico upper management and the union worker below them; no raises, forced cuts via furlough days, double and triple workloads because retiring staff is not being replaced… If anyone retires early, it will be the MC people. Most those today are career employees, often professionals … but you can bet their replacements will be political hacks that will just make the problems even worse.”
I won’t lay claim to a 60+ hour work week, but this is exactly why I left the state to go private a couple of years back. Losing the pension benefits was a tough pill to swallow, but I could not see it getting any better at the state over time.
Comment by Anonymous Tuesday, Mar 6, 12 @ 4:46 pm
wrt: “…Varney also claimed the state’s income tax hike didn’t bring in the amount of money that was expected. Wrong…”
————-
Really?
So what am I missing?
I’m looking at the Illinois Dept. of Revenue’s January FY2012 report.
http://www.revenue.state.il.us/AboutIdor/TaxResearch/JanuaryFY2012RevenueReport.pdf
In spite of all those so-called NEW Illinois jobs that the politico’s are claiming, the individual income tax revenues are $20.9 million dollars below forecast it says.
While the individual income tax rates were increased by 66.6% the FYTD comparisons year over year only show a 64.2% revenue increase.
I find that interesting from the perspective that if you back out the tax rate hike we are losing revenue IN SPITE Of all the so-called NEW Illinois jobs.
Makes you wonder what they are paying these people eh? Oh and didn’t anyone get a raise in Illinois that would of caused a corresponding increase in individual income tax revenues?
Of course on the other hand the corporate income tax revenue was above estimates by $26.7 million and so I guess it depends on what your definition of “is” — is.
The corporate tax rates where raised by 30% if I’m not mistaken yet the FYTD corporate income tax revenue shows only 19.3% increase.
I have a problem with all this job hype and unemployment in Illinois falling. Why isn’t the individual income tax revenues growing by over 66% if we are creating jobs, living wage jobs? Looks more like we are churning the jobs to a lower wage scale. How else would you explain it?
And in a related report for March that reports Food Stamp Caseloads for Dec 2011 Illinois was number two on the list for adding people to the Food Stamp dole behind Alaska which was number one.
Illinois
Nov. 2011 — 1,850,593
Dec. 2011 — 1,879,585
A 1.6% increase. 29,000 people added to food stamps in Illinois in Dec. 2011. If we’re adding NEW living wage jobs why isn’t the number stable or going down?
The facts don’t match the Springfield and City hall b.s. Looking forward we have mass layoffs from the USPS, from the public sector and soaring energy prices that makes the future even more dimmer.
Don’t even get me started on the Euro zone, Greece and the Spain, Italy, Portugal, the dominoes that may soon drop. That’s another story for another post.
Comment by Oz Tuesday, Mar 6, 12 @ 6:47 pm
Um, we already raised the retirement age to 67.
Illinois currently has the highest retirement age in the country.
Comment by Yellow Dog Democrat Tuesday, Mar 6, 12 @ 6:53 pm
YDD,
Yes, we did with “tier 2″. But you have to wait about 45 years to see the results (employee starting this year @ age 22 + 45 years = age 67).
And while nobody apparently thought about it, the current State employee “refresh” period is now between 33 years (assuming age 55 at retirement) and when the tier 2 system fully kicks in, the “refresh” cycle will be extended out to about 45 years. So from around 2045 until 2057 there may be not be anyone retiring. Better hope there isn’t a recession during that period because the lack of State hiring won’t help those unemployment numbers.
Comment by Retired Non-Union Guy Tuesday, Mar 6, 12 @ 7:41 pm
I generally like Fox News, but I agree that Varney doesn’t let facts or good research get in the way of his opinions. The whole pension and budget thing for Illinois is too complicated to be reasonably covered in a sound-bite interview. The spokesperson should probably just issued a statement and declined to appear.
One thing that does not seem to get mentioned in the pension funding discussion is the substitution of consultants and others for state workers even though they cost more and will have inefficiencies of repeated learning curves. This is done to claim reduced “headcount”, but it does not really reduce staffing costs, and the payments to the firms supplying these personnel include profit and mark-up for benefits…exceeding the fringe costs for the state workers they replace. And the pension funding is hurt by less people paying into the fund. So how does that make things better?
Comment by JustaJoe Tuesday, Mar 6, 12 @ 9:42 pm
JJ,
That is an excellent point.
Would you have some numbers on total employee costs for contractors vs the people they replaced?
Seems like food service in Prisons went to Sodexo or something a while ago, which has to be a large headcount.
JBP
Comment by JP Wednesday, Mar 7, 12 @ 7:08 am
JP,
I don’t have the stats in the way you request them, but there are numbers to compare. Engineering consultants, for example, get around 2.85 as a multiplier, often even when occupying and using state overhead resources. There is a multiplier for state employees that is much, much less…even factoring in the pension. My point is twofold. 1) some jobs should be done by dedicated public professionals whose focus is on the public interest, not profit, and 2) simply referring to “headcount” reductions is not good management - the bigger picture should be factored in.
Comment by JustaJoe Wednesday, Mar 7, 12 @ 8:29 am
It’s one thing for a clerical worker to work until he or she is 69. It’s another thing for a correctional officer to be working until he or she is 69.
I have no objection to raising the retirement age, but it means that there will be more people who physically cannot keep working who will seek to get on disability. We can pay one way or the other.
Comment by Aldyth Wednesday, Mar 7, 12 @ 8:35 am
@Oz =In spite of all those so-called NEW Illinois jobs that the politico’s are claiming, the individual income tax revenues are $20.9 million dollars below forecast it says. While the individual income tax rates were increased by 66.6% the FYTD comparisons year over year only show a 64.2% revenue increase.=
Oz, this is pretty simple…..you assumption assumes no economic growth. Actually negative growth was projected……so while the income tax rate did grow by 66.7%, its wasn’t never expected it to generate 66.7% more revenue because negative growth of the economy.
Comment by TCB Wednesday, Mar 7, 12 @ 8:39 am
JP / JustaJoe,
In my professional specialty, the ratio for consulting is about 3.1 times the State employee salary and benefits (SS tax, retirement, health ins.) … and that is figuring against the top end of the State salary range for the title.
As I’ve said before, moving to consultants at the State creates a captive base of “voluntary” campaign contributors … and the consultants factor that in to their rates.
Comment by Retired Non-Union Guy Wednesday, Mar 7, 12 @ 8:49 am
RNUG
“No SERS employee can retire at 49 except”
There was a spree of early retirements at 49 or so around the end of George Ryan’s term and the beginning of Rod Blagojevich. I recall the comedy around the taverns at the time being “I can do nothing at my current job for 100% of my salary or retire for 50% of my salary. Decisions, Decisions…how about a Keystone Light”
Comment by JP Wednesday, Mar 7, 12 @ 10:12 am