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* From the Tribune editorial board…
Emanuel raised, and Quinn discussed, the best idea of the night: that Illinois consider pension changes that the similarly Democratic state of Rhode Island adopted in November.
Briefly: Politicians in that state — like Illinois, its pension obligations are among the nation’s worst-funded — risked their political futures to stabilize a sinking system. They raised retirement ages to Social Security thresholds, tied cost-of-living adjustments to investment returns and the funding level of the pension system, and replaced some guaranteed pension benefits with a 401(k)-style plan. […]
To achieve anything, they will have to be crusaders as forthright and resolute as Rhode Island’s Democratic treasurer, Gina Raimondo. Sit down with her — we had the opportunity a few weeks back — and she’ll soon offer the no-blame, no-histrionics mantra she voiced in hundreds of often hostile public meetings across her state: “This is about math, not politics.” She based her campaign, “Engage Rhode Island,” on educating citizens, and only then negotiating a legislative fix. Her foundational document, “Truth in Numbers,” runs a mere 16 pages, unemotionally laying out the disaster facing retirees and taxpayers.
Raimondo’s success makes her a rock star in, of all things, public finance.
Treasurer Raimondo may be a rock star in the realm of public finance, but she’s a failure in the courts.
What the Tribune didn’t tell its readers is that a Rhode Island judge tossed out a motion by Raimondo and Gov. Lincoln Chafee for summary judgement against a lawsuit filed against the pension reforms. Basically, the judge ruled that the pension cuts violated the state’s constitutional mandates on contracts. Rhode Island doesn’t even have the strict language contained in Illinois’ Constitution about not diminishing pension benefits, but it does have standard contract language contained in most state constitutions.
Back in September, Rhode Island’s top dogs were confident that the state’s supreme court would overturn the decision…
“We’re going to go ask the Supreme Court to review the matter, and we’re going to ask the Supreme Court to do so expeditiously – as promptly as possible,” Tarantino told WPRI.com. Still, he said it’s “unlikely” the justices will rule before lawmakers meet to craft a pension overhaul next month.
The state will also ask both Taft-Carter and the Supreme Court to put the lower-court case on hold until it issues a judgment on today’s contract-rights ruling.
“I’m disappointed,” Tarantino said, but “I believe that the state’s legal position is the correct position, and ultimately I believe the state’s legal position will be affirmed by the [Supreme] Court.”
But that prediction turned out to be dead wrong…
Rhode Island’s Supreme Court is declining to hear an appeal from state officials who sought to reverse a lower-court ruling that public pensions amount to a contract and cannot be arbitrarily changed.
The court announced [November 21st] that it won’t intervene in the lawsuit filed by public-sector unions against the state. The lawsuit now returns to a lower court.
* And now the unions are calling for talks instead of confrontation…
From Smith Hill to Providence and Pawtucket, government lawyers have been batting zero in their efforts to convince Rhode Island judges to uphold changes to public-sector workers’ retirement benefits.
That’s why the four state leaders who pushed through the new pension law should start formal negotiations with union leaders on an alternative overhaul of the system before they lose in court, according to Bob Walsh of the National Education Association Rhode Island.
“The legislative victory that the folks who supported changes in the pension system achieved is going to be short-lived – because it was illegal,” Walsh told WPRI.com on Tuesday. He suggested state leaders should appoint a neutral mediator such as former R.I. Supreme Court Chief Justice Frank Williams to start talks between the two sides. […]
“The realists among labor leadership understand changes have to occur [in the pension system],” Walsh said. “I don’t necessarily believe that our successful efforts in court will lead to a judge saying, ‘Put everything back the way it was.’”
The lesson here is that you can pass all the bills you want and go on an international public relations jaunt touting your own brilliance, but it means absolutely nothing if the courts decide your achievements are unconstitutional. The Tribune ought to at least acknowledge that.
* Meanwhile, the governor’s pension working group is supposed to announce its recommendations by April 17th. The group has refused to invite labor union leaders to any of its meetings for about three weeks, but the unions were whistled in today. I’ll probably have more for subscribers tomorrow.
* In other news, the Tribune editorial board recently screamed about unfunded employee health insurance liabilities…
state government alone faces an unfunded liability of more than $54 billion in retiree health liabilities over the next 30 years.
Illinois lawmakers haven’t yet seen that startling number, but they do know they have to confront a retiree health debacle. Last year Illinois Senate legislation to begin addressing that debacle didn’t make it to a floor vote. Gov. Pat Quinn’s pointed words on the subject in his February budget address both encourage us and make us hope he sticks to his word that something has to happen.
Opinions differ on whether lawmakers can reduce current employees’ pension benefits going forward. (Our view is that lawmakers definitely can do that, and we hope Illinois courts agree if and when legislators pass pension reforms.) But there’s no dispute on this: While pensions have some state constitutional protection, retiree health benefits do not.
The IPI says that only 8 percent of private-sector retirees are offered health insurance benefits, and those retirees pay an average of 54 percent of the cost. Similarly requiring Illinois retirees to pay an average of 54 percent of insurance costs would save Illinois $500 million a year. Over the next 30 years, that change by itself would shrink the anticipated $54 billion shortfall by $21 billion. IPI suggests leaving benefits essentially intact for retired state and university employees with household incomes below $70,000 a year. Those with incomes between $70,000 and $200,000 a year would receive monthly subsidies of $302 and pay $369 themselves. And “retired union heads or university executives collecting pensions nearing $200,000 would be required to cover their own health insurance costs.”
The Illinois Policy Institute’s plan is similar to those proposed by top legislative Democrats, including state Sen. Jeff Schoenberg. There’s a very real possibility that something like this will pass. It would be helpful to see a bit of context here.
posted by Rich Miller
Tuesday, Apr 10, 12 @ 12:07 pm
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I haven’t been reading many Trib editorials.
Does the board get as upset over multiple unfunded or ill-funded military occupations as they evidently do over unfunded employee health insurance liabilities?
Comment by Kasich Walker, Jr. Tuesday, Apr 10, 12 @ 12:13 pm
This is kind of the essence of what’s wrong with the Trib editiorial board. I sometimes have a hard time putting my finger on it, but they just don’t have that independent, third party feel to their editorials that you get from most (but certainly not all) newspapers in the state. Maybe it’s because they constantly revisit the same topics or maybe it’s because their positions are so predictable. But too often they seem like a stakeholder in a debate instead of an unbiased observer.
The fact that they routinely present only part of the story…as they clearly have done regarding the Rhode Island pension reforms…really undermines their credibility.
Comment by Frank Tuesday, Apr 10, 12 @ 12:34 pm
Frank, the Trib Editorial Board is as independent as the IPI is nonpartisan.
Comment by PublicServant Tuesday, Apr 10, 12 @ 12:36 pm
Before they start attacking the retiree health benefits, I’d like to see a set of honest numbers on the actual cost.
IPI (or the people they are quoting) is claiming about $671 a month for health insurance.
I’ve read in newspaper stories on the extended Health Alliance contract where the cost is something around $425 per month per person (I got that number be dividing the published numbers of people claimed on it by the amount of the contract. That’s what group plans are about, averaging the cost of all the insured … young, old, healthy, sick … together.
I fit into the retired but not yet eligible for Medicare category; one of the group they want to target. My Comptroller benefit statement received the other day claims it costs $628 for myself on HA and $400 for my spouse (plus another $94 that I pay for the spouse) for a total of $494.
There is minor additional cost for dental & life insurance.
But the bottom line is the health insurance. The numbers don’t match up. HA says $425; Comptroller says $628 for myself & $494 for my (older non-Medicare) spouse, IPI says $671.
So who’s playing games with the numbers?
Comment by Retired Non-Union Guy Tuesday, Apr 10, 12 @ 12:44 pm
The public would be well-served if the Tribune would drop the fantastical argument that pension benefits can be unilaterally reduced and start offering some Constitutional solutions.
Here’s where I’d start if I were the Tribune:
1. Acknowledge that the problem with the pension system is not that benefits are exorbitant, but that lawmakers and governors over the last six decades skipped pension payments.
2. Acknowledge that the failure to make payments was not by employees or their unions, but lawmakers and governors from BOTH parties.
3. Acknowledge that lawmakers from both parties and the governor have a responsibility to work together to find a bipartisan solution.
4. Note that it is in the best interest of workers to find common ground with lawmakers: not just for the longterm economic sustainability of the pension system, but also to prevent further massive cuts in the state payroll and massive cuts those employees’ families rely on, like public schools and human services.
5. Insist that whatever solution they agree upon pass Constitutional muster: it doesn’t do the taxpayers any good to pass phony reforms that will be overturned in a year, placing us in an even deeper budget hole.
Comment by Yellow Dog Democrat Tuesday, Apr 10, 12 @ 1:10 pm
Fyi union guy, I think the best independent source on retiree health costs is Pew Center for the States.
Comment by Yellow Dog Democrat Tuesday, Apr 10, 12 @ 1:11 pm
= Kasich Walker, Jr. - Tuesday, Apr 10, 12 @ 12:13 pm: =
So, basically, you’re saying it’s Bush’s fault?
What an ultra maroooon.
Try staying on topic. The pension debacle is serious enough that your attempted distraction is more than just annoying.
Comment by dupage dan Tuesday, Apr 10, 12 @ 1:16 pm
“international public relations jaunt touting your own brilliance”-who is this referring to?
Comment by Shore Tuesday, Apr 10, 12 @ 1:21 pm
The unions may be correct: a contract is a contract. But, you can’t get a check if there’s no money left in the fund. Someday, in the future, the S.E.C. may tell several public pension funds that they can’t send out checks until they are 80% funded. So, your pension check might not be diminished but you might not get one, just a reminder.
Comment by Steve Bartin Tuesday, Apr 10, 12 @ 1:26 pm
Kudos to the Rhode Island officials who at least tried to save the system. There are two alternatives left - either amend the constitution to allow the benefit cuts or let the retirement systems fail. My bet is on the latter. The proponents of the status quo spent years denying there was any problem with current structures and now are preoccupied with whose fault it is that the systems are underfunded. It is neither politically or mathmatically possible to pay the promised benefits so the benefit cut will happen by default if the courts rule out compromise.
Comment by Gil Lozpez Tuesday, Apr 10, 12 @ 1:33 pm
@Steve Bartin
you can’t get a check if there’s no money left in the fund.
Of course you can, although benefits would be paid on a pay-as-you-go basis rather than pre-funded.
Someday, in the future …
… The earth may collapse into the sun. Which means what, exactly?
Try to bring some actual facts to the discussion, please.
Comment by Reality Check Tuesday, Apr 10, 12 @ 1:36 pm
Treasurer Raimondo may be a rock star in the realm of public finance, but she’s a failure in the courts.
What the Tribune didn’t tell its readers is that a Rhode Island judge tossed out a motion by Raimondo and Gov. Lincoln Chafee for summary judgement against a lawsuit filed against the pension reforms…. Come on Capt Fax you know the Tribbies still believe that Internet won’t catch on an people in IL cannot possibly know what is really happening way, way over in Rhode Island….like everyone knows they ran right down to the USA to report the Blagoof “Wrigley for Edits” rather than ask when the next meeting would be.
Comment by CircularFiringSquad Tuesday, Apr 10, 12 @ 1:41 pm
==Before they start attacking the retiree health benefits, I’d like to see a set of honest numbers on the actual cost.==
It varies by plan type, age, etc. HMOs (Health Alliance) are cheaper than PPOs.
COGFA report: http://www.ilga.gov/commission/cgfa2006/Upload/2011-MAY-17MercerRetireeHealthcareContributions.pdf
Comment by Jorge Tuesday, Apr 10, 12 @ 1:41 pm
Wow, lots of know-nothings here today.
@Gil Lozpez:
There are two alternatives left - either amend the constitution to allow the benefit cuts or let the retirement systems fail.
What happened to all the other alternatives? Like everybody working together in good faith to, you know, solve the problem? I thought that’s what government was supposed to be about.
The proponents of the status quo
Who are you talking about, exactly? I don’t see anyone defending the status quo, which produced the current train wreck. From where I sit, everyone says the system is broken; some people point to the facts and say we need to address the funding problem that got us here, while others say never mind how we got here (and ignore the constitution), just cut the benefits.
now are preoccupied with whose fault it is that the systems are underfunded.
I suspect what you are circuitously referring to is the attempt by many to look at the reality of the situation, which is that the state failed over decades to make actuarially required contributions. It would seem relevant to understand its nature if we hope to address it.
It is neither politically or mathmatically possible to pay the promised benefits
Again you are making an enormous set of dubious assumptions. In the real world, there is an example that shows how wrong you are. The Illinois Municipal Retirement Fund, which includes every local government save Chicago and Cook County and offers benefits equal to (actually slightly better than) the State Employees Retirement System, is fully funded today. What they have that the other systems don’t is a law requiring the employer to make its actuarially required contributions each year.
Comment by Reality Check Tuesday, Apr 10, 12 @ 1:46 pm
@ D. Dan’s “So, basically, you’re saying it’s Bush’s fault? What an ultra maroooon. Try staying on topic. The pension debacle is serious enough that your attempted distraction is more than just annoying.”
No, Dan, I was asking a question that is worth repeating: Does the board get as upset over multiple unfunded or ill-funded military occupations as they evidently do over unfunded employee health insurance liabilities?
Comment by Kasich Walker, Jr. Tuesday, Apr 10, 12 @ 2:06 pm
@ Reality Check
If any diminishment of promised benefits is unconstitutional then there is nothing that good faith or working together can do. Employee organizations cannot agree to unconstitutional cuts on behalf of their members any more than the state can unilaterally impose them. Barring a change in the constitution, the systems fail because compromise is illegal and the taxpayers can’t make up the difference and still fund a decent level of public services. I have the impression that your definition of good faith means that the taxpayers pony up all the money. If I am wrong, please lay out what benefit cuts you believe could be achieved by agreement of both the employees and courts.
Comment by Gil Lozpez Tuesday, Apr 10, 12 @ 2:10 pm
Cudos to Yellow Dog. I think you’ve hit then nail on the head, but, unfortunately reason and ration are never in fashion at the State House!
Comment by D.P. Gumby Tuesday, Apr 10, 12 @ 2:37 pm
Gil,
There is an article in the Tribune (which remains a valuable source of reportage, despite I agree its odd editorial board practices) just the other day, suggesting that the wording “contractual obligations” in the Constitution suggests that what was negotiated by contract then, can be revised via contract today. In other words re YDD, if unions and general pension recipients recognize that they can’t ride this ship all the way to the bottom of the sea without some reforms to the funding process, future promised benefits could be re-negotiated (not passed via fiat).
I don’t know what the courts would say to that, but apparently it’s not without some past precedents. And heck, this is Illinois, maybe Mike Madigan can gently murmur to the courts that they have some flexibility to decide here…
Comment by ZC Tuesday, Apr 10, 12 @ 2:54 pm
“The lesson here is that you can pass all the bills you want and go on an international public relations jaunt touting your own brilliance, but it means absolutely nothing if the courts decide your achievements are unconstitutional.”
Holy Astroturf!! Does Obama know this??!!
Comment by IL8 Tuesday, Apr 10, 12 @ 2:55 pm
Trib: “…state government alone faces an unfunded liability of more than $54 billion in retiree health liabilities over the next 30 years.”
http://costofwar.com/en/tradeoffs/state/IL/program/11/tradeoff/0 “Taxpayers in State of Illinois will pay $5.7 billion for Total Iraq & Afghanistan war spending for FY2012
Putting aside questions about methodology for sources of both the Trib & the costofwar.com, imagine revenues and cost savings to be had with full commercialization of marijuana and industrial hemp nationwide.
If the US can end the Drug War — as multiple Latino national leaders now recommend — and the off the charts military spending, there would be significant budget relief, even considering the crushing debt already accumulated.
Comment by Kasich Walker, Jr. Tuesday, Apr 10, 12 @ 3:05 pm
Mr Walker,
I got it the first time. Repeating yourself doesn’t change the fact that your question is not relevant.
Comment by dupage dan Tuesday, Apr 10, 12 @ 3:41 pm
===Someday, in the future, the S.E.C. may tell several public pension funds that they can’t send out checks until they are 80% funded. So, your pension check might not be diminished but you might not get one, just a reminder. ===
And the sky could one day turn permanently orange.
Comment by Rich Miller Tuesday, Apr 10, 12 @ 3:47 pm
===wording “contractual obligations” in the Constitution suggests that what was negotiated by contract then, can be revised via contract today===
Pension benefits aren’t covered by the state’s public employee collective bargaining law.
Comment by Rich Miller Tuesday, Apr 10, 12 @ 3:49 pm
The constitution doesn’t guarantee a particular level of prefunding, it guarantees the payment of benefits. Fully funded is the cheapest method longterm to provide the benefit, but if your funder is a chronic deadbeat, the constitution implies they’ll be in the direct benefit payment business eventually.
Comment by countryboy Tuesday, Apr 10, 12 @ 4:04 pm
===And the sky could one day turn permanently orange===
Watch it Rich. This is 2012. 12-21-12 it might. LOL
Comment by Demoralized Tuesday, Apr 10, 12 @ 4:14 pm
It is appearing more and more that without a source of new revenue it will be the human services folks will be taking the brunt of this fiscal calamity.
Comment by Anonymous Tuesday, Apr 10, 12 @ 4:20 pm
Way too much time and effort has been wasted on debating unconstitutional pension law changes. Like it or not, benefits for existing workers cannot be taken away.
Health care premiums are another matter and more effort should be made to find a fair, reasonable approach. Ideally, one that doesn’t punish people for having the initiative and work ethic to go out and get a job post retirement.
Eliminating the Quality Care option might be a smart, if unpleasant, first step.
But, the fact is, over time, the pension “problem” will fix itself if Governors and Legislators have the discipline to keep making the payments (which will eventually level off.) The pension “problem” won’t get much worse and eventually, it will get much better.
That’s not the case with Medicaid, which continues to grow at a pace far faster than inflation, continues to add new recipients and only shows signs of accelerating. At some point, both the feds and states are going to have to come to grips with the reality that we simply cannot afford free unlimited cradle-to-grave health care for over half our population.
Comment by Waste of Time Tuesday, Apr 10, 12 @ 4:29 pm
Steve @ 1:26 pm:
Not sure the S.E.C. even has jurisdiction over the State retirement funds. When it comes to State (not county or municipal) employees, a lot of Federal laws & rules don’t apply. In simple terms, because we are a republic, State’s have certain rights that aren’t easily preempted by the Feds.
Jorge @ 1:41,
I’m familiar w/the Mercer report; I’ve quoted it here before. I’ll stand by my statement that nobody’s numbers agree.
Gil @ 1:33 pm:
Can’t change the law after the fact; the State has to pay.
ZC @ 2:54,
As I understand it, changes could potentially be negotiated but … and this is where the going gets tough … for it to be legal, trading away a benefit (i.e., a reduction of some kind) has to be offset by a “value received” (read increase) somewhere else. If you just have to pay it a different way, either sooner or later, it isn’t really a savings.
Waste of Time @ 4:29:
Quality Care is the most expensive option and should be eliminated but that would put the State in a real bind, payment wise. They use the “self funded” plans like QC to float the payments out anywhere from 9 to 18 months. That’s why the State (in my opinion) tried to eliminate the HMO options this past year; the HMO premiums have to be paid every month … if they could have got rid of the HMOs and forced all the State employees to a self funded plan, they would have reaped a huge one-time budget benefit by pushing all those bills off into the next FY.
Comment by Retired Non-Union Guy Tuesday, Apr 10, 12 @ 5:20 pm
Rich, a) I am in here out of my depth, but to follow up on my confusion, if anyone here wants to help educate me: Article 13 literally states, “Membership in any pension or retirement system of the State, any unit of local government or school district, or [etc…], shall be an enforceable contractual relationship.”
By which I mean, the Illinois Constitution -itself- defines pension benefits as an enforceable contractual relationship. Whether or not they get treated that way in ordinary IL law, couldn’t that be separate from the core constitutional issue? If they -were- included for the first time in a collective bargaining law, say … could you modify past promises that way?
Comment by ZC Tuesday, Apr 10, 12 @ 6:21 pm
Very belated thanks to Yellow Dog for his numbered points… all true and all very important.
And as a nonunion state worker, thanks Rich for pointing out that pensions have nothing to do with union contracts (thank goodness for that!).
This whole issue makes lots of people crazy, including me. I can retire in two years but was planning on working four more. Now it may be ten years.
Comment by DuPage Dave Tuesday, Apr 10, 12 @ 6:56 pm
Both self & spouse are state retirees, not medicare eligible yet. Gross income about $72,000 yearly. Wow, guess our family would be really hit hard if we each have to pay half of the HMO insurance premium! Dental is worthless, although we pay our premiums, we found much better & cheaper privated DDS insurance. Spouse is trying for Social Security disabily so maybe we could use that payment to pay our healthcare costs. By the way, we both worked for 30 years (one of use more) for the State of Illinois.
Comment by Alegra Tuesday, Apr 10, 12 @ 6:59 pm
ZC @ :21 pm,
In this case, it is federal, not state, contract law that applies … as the State clause explicitly uses the federal language
Comment by Retired Non-Union Guy Tuesday, Apr 10, 12 @ 7:18 pm
Re eliminating QC plan. All should remember that, since QC is self insured, those “premiums” approximate actual costs. So moving those people to some other plan isn’t going to significantly reduce costs; probably at most by the difference in discounts negotiated by HMOs vs the state, and that ain’t gonna be that much
Comment by steve schnorf Tuesday, Apr 10, 12 @ 8:49 pm
sorry for back to back, but as to the main question, I believe we retirees should pay more toward the cost of our state insurance, and I believe the amount should be income based, not cost based, tho there probably needs to be some add-on for pre-Medicare eligible retirees. I know , it isn’t fair, it isn’t what we were promised blah, blah, blah.
We got too good a deal, we need to step up in some reasonable way.
Comment by steve schnorf Tuesday, Apr 10, 12 @ 8:53 pm
Steve,
Not denying it is a good deal … but we got exactly the deal the State offered to keep long term employees around: free health care upon retirement if we stayed for a minimum of 20 years.
In other words, for the past 20 to 40 years the State got continuity of operations at the highly skilled technical and the middle management levels (i.e., “institutional knowledge”) and they got to keep us at a cost less than actual market level. The State got their savings … and they squandered it.
Except for a few of the alternate formula law enforcement people, there hasn’t been anyone eligible to retire at age 50 since the 2002 ERI.
As I’ve pointed out previously, the whole cost of health care for “retired but not on Medicare” problem pretty much takes care of itself in less than 5 years … by 2017 the 50 year old who took the 2002 ERI will be on Medicare. Between now and 2017 there is a decreasing amount of those people every year …
Comment by Retired Non-Union Guy Tuesday, Apr 10, 12 @ 9:51 pm
Steve,
re QC … actual costs plus a management fee plus monthly interest fees for late payment plus (as you noted) paying the full freight versus the often significant discounts the HMOs manage to negotiate with “their” doctors. Yes, they won’t save 50%, but a good negotiator (Tristano?) would get more than 10%, probably closer to 20% or better …
Comment by Retired Non-Union Guy Tuesday, Apr 10, 12 @ 9:56 pm
Guy, granted I’ve been gone a long time now, but at least back in the day the state negotiated substantial discounts from hospital and pharmacies for the QC program: I suspect they still do.
Comment by steve schnorf Tuesday, Apr 10, 12 @ 11:02 pm
@DuPage Dave -
Our pension problems are quite manageable.
The only crisis is our inability to sit down and work things out because of the truly toxic environment created by all of this anti-public employee, anti-union, anti-government rhetoric.
Math problems are easy. People problems are much harder.
Comment by Yellow Dog Democrat Tuesday, Apr 10, 12 @ 11:40 pm
@DuPage Dan -
To be fair, I and everyone else should add a 1A. From the nonpartisan Pew Center on the States:
“Record investment losses characterized fiscal year 2009: The nation’s pension plans suffered a median 19.1 percent drop in their assets’ market value.”
We need to remind ourselves that as of 1999, the states’ pension systems were 89 percent fully funded. I repeat: 89% fully funded. Three things happened that were all beyond the control of Illinois lawmakers:
1. The collapse of the technology bubble.
2. 9/11.
3. The Great Recession.
That’s part of the reason that I’ve agrees with Schnorf that we need to adjust the ramp to 90% for Illinois’ pensions.
Less than a dozen states meet the 90% funding goal. 31 are below 80%. If Illinois reaches 80%, we’ll be doing better than more than half the states.
I also believe that we need to accept the political and social reality that when the economy stumbles, we can’t just cut safety net programs or raise taxes to meet our pension obligations. Pension payments are going to stagnate when the pension stagnates. A responsible pension funding plan should recognize that reality by estimating flat payments when state revenues are flat or declining and dedicating a larger chunk of new revenue when the economy and tax revenues are growing.
Lastly, it seems inherently wrong to me that we have a pension stabilization plan that will take more than a generation to realize. I know these problems have been building for more than a generation, but it seems wrong that the solution is being pushed off not just on people who haven’t been born yet, but pushed off onto their children.
Schnorf is the math expert here, but I’d like to see a plan that gets us to 80% by 2032, not 90% by 2045 if at all possible.
Comment by Yellow Dog Democrat Wednesday, Apr 11, 12 @ 5:32 am
Meant to say “Pension payments are going to stagnate when the economy stagnates.”
On retiree health care, the state may find some benefit from moving retirees out of the prescription drug coverage of the retiree health plan and into Medicare Part D. Right now, we actually discourage retirees from enrolling in Part D because the coverage of the state plan is “as good or better.” Makes absolutely no sense to me.
I also don’t understand why the state provides ANY benefit to those who are eligible yet fail to enroll in Medicare Part B. Maybe the feds require it, but it makes sense to me that we would want to usher as many retirees as possible into Medicare coverage.
Perhaps Schnorf or AFSCME can provide the rationale?
Comment by Yellow Dog Democrat Wednesday, Apr 11, 12 @ 6:06 am
I like the 5 points of Yellow Dog Democrat, but I’d also include a point to prioritize the state’s financial obligations, with such things as pension commitments above discretionary programs. I say that because that is the root of the pension problem.
Comment by JustaJoe Wednesday, Apr 11, 12 @ 8:14 am
Why aren’t state(all) employees required to sign up for Medicare as soon as they are eligible? If you are still working you do not have to sign up, only if you are retired.
Comment by Anon Wednesday, Apr 11, 12 @ 8:44 am
==As I’ve pointed out previously, the whole cost of health care for “retired but not on Medicare” problem pretty much takes care of itself in less than 5 years … by 2017 the 50 year old who took the 2002 ERI will be on Medicare. Between now and 2017 there is a decreasing amount of those people every year …==
This only makes sense if you assume after 2002, all new retirees were 65+. But that hasn’t happened. And it’s still not happening. The average new retiree is still under 65.
Comment by Jorge Wednesday, Apr 11, 12 @ 9:15 am
Well, why not ask the pensioners of Prichard, Alabama how well pay-as-you-go has worked out for their retirement benefits?
Funny how court rulings can’t will money into being, or make taxpayers who have moved away come back.
Comment by meep Wednesday, Apr 11, 12 @ 9:17 am
From SERS — Number of active recipients of annuities in SERS under the age of 65–
2007: 17820
2008: 18,160
2009: 18,081
2010: 18,240
2011: 18,676
Comment by Jorge Wednesday, Apr 11, 12 @ 9:21 am
Jorge,
You cherry picked the numbers. You didn’t include the critical years, before and after the 2002 ERI, for the under 65 group (data from SERS):
2001 - 8,238
2002 - 9,437
2003 - 18,801
2004 - 18,380
2005 - 18,334
Notice that spike in 2003 of 9,364? That’s all the 2002 ERI people that will be dropping off in 2017 or sooner.
Comment by Retired Non-Union Guy Wednesday, Apr 11, 12 @ 10:17 am
To clarify, dropping off the state health insurance being their primary carrier and having Medicare become primary (which the State claims costs them very little by comparison)
Comment by Retired Non-Union Guy Wednesday, Apr 11, 12 @ 10:22 am
Just watch the numbers for 2012 spike if the legislature tries to increase contributions or cut benefits for Tier 1.
Comment by Ready To Get Out Wednesday, Apr 11, 12 @ 10:57 am
Dog, been a while but I THINK for insurance purposes the state treats anyone Medicare eligible as if they were enrolled whether they actually enrolled or not..could be wrong, tho
Comment by steve schnorf Wednesday, Apr 11, 12 @ 11:18 am
==You cherry picked the numbers.==
There’s no need to cherry pick the numbers (which were the only numbers given in the most recent SERS report, anyway). Why? Because, according to your theory, the only people who aren’t Medicare eligible are people who took the 2002 ERI.
That’s simply not true, and the data bears that out. If it were true, we would be seeing a constant decline in retirees under the age of 65. We don’t. We see that number INCREASING.
Why? Because the average age of a new retiree is under 65. As more and more of the 2002 ERI folks hit 65, they’re replaced by younger, new retirees.
The same thing is happening in SURS. 75% of new SURS retirees are under the age of 65.
Comment by Jorge Wednesday, Apr 11, 12 @ 3:13 pm
Jorge,
As long as tier one employees are still working, you’ll always have some rule of 85 people … but most of those are age 55 or greater to get to “85″. And you’ll have some 2.2 alternative formula law enforcement people (which I noted previously).
The 2002 ERI is what doubled the number of “non-Medicare” people and, according to the State, pushed that segment of the insurance cost up. Because it mostly cleared out the people between 50 and 55, the numbers have been pretty flat since 2002. About the same number of people reaching 65 each year as new people taking rule of 85. Those rule of 85 people are going to be there until all the tier one people retire. The State has consistently complained about the increased health cost for the 2002 ERI ‘non-Medicare’ bunch … and the data shows the 2002 ERI spike. What the 2002 ERI did, primarily, was clear out the 50 to 55 year olds who weren’t eligible for “85″. Those people will reach 65, starting this year and continuing for the following four years. By 2017 the “expensive” 2002 ERI people will be on Medicare … so the State’s “drastic” health insurance increase that started in 2003 will go away.
Comment by Retired Non-Union Guy Wednesday, Apr 11, 12 @ 5:34 pm
Ready,
I already know one of those people; my sister is going the end of the year.
But your point is valid; if drastic changes are made, everyone who can will pull the plug before the change takes effect. Since it’s been ten years since the 2002 ERI, the 45 to 49 year old who couldn’t take it then are approaching or at “rule of 85″ (since you tend to reach “85″ around age 55 / 56 if you started straight out of school). Don’t know if it will be the +11,000 that 2002 took off the SERS payroll, but it may be higher than 6,000 who bail out. And if you think the State is a mess now, just wait; those people are pretty much what there is left of the “institutional knowledge”.
Comment by Retired Non-Union Guy Wednesday, Apr 11, 12 @ 6:37 pm
Retired…..I will be doing the same. I’m not waiting either. 33 years is enough!
Comment by Ready To Get Out Wednesday, Apr 11, 12 @ 7:15 pm
And I’ll be 64 years and 8 months. Should I wait a little longer so I don’t end up in Jorge’s statistics and be an anchor on the state’s health finances????
Comment by Ready To Get Out Wednesday, Apr 11, 12 @ 7:20 pm
The changes being discussed would apply to all retirees, so what benefit comes from retiring early?
Comment by Jorge Wednesday, Apr 11, 12 @ 10:33 pm
Jorge,
Ex post facto law … google it … you can’t change things retroactively. If they are already retired, there is zero, repeat, zero doubt in anyone’s mind that the retirement benefits (except, maybe, health insurance) are 100% protected and can’t be changed. That’s why everyone who can will retire before the effective date of any legislation.
Comment by Retired Non-Union Guy Thursday, Apr 12, 12 @ 12:10 pm
==except, maybe, health insurance==
Which is exactly what we’re talking about, here, isn’t it? Because they’re not pensions.
==Ex post facto law==
Those prohibitions apply to criminal laws, not civil. Maybe you were thinking of the pension clause?
Comment by Jorge Thursday, Apr 12, 12 @ 6:43 pm