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* Ed Bachrach, chairman of the Chicago-based Center for Pension Integrity, penned a Tribune op-ed entitled “A federal solution to Chicago’s public pension mess”…
Real people — retirees — are getting big checks every month and have been promised they will continue to get them for the rest of their lives. There are tens of thousands of those retirees. The well will run dry, and then what? Shouldn’t these retirees be entitled to all of their promised benefits, especially considering they essentially lent the city money over their years of service to pay for them?
But should this burden become a legacy cost to taxpayers — most of whom resent the fact that public employee pensions are so much higher than their Social Security payments will be? Plus, in some cases, taxpayers weren’t born when the benefits were promised to retirees — the taxpayers are paying the price for past services. With the plans the city is putting forth, taxpayers will be paying these debts off for another 40 years, two entire generations. And the gap between what’s owed and what the funds have in the bank is only getting wider.
The Center for Pension Integrity has a proposed solution for a comprehensive settlement to rectify this mess, and it’s a federal one. The relief would not be a bailout. Instead, it would legally allow state and local governments with plans that have funding levels below 50 percent to modify plan provisions and benefits, and ultimately freeze and terminate the troubled plans. At the same time, local taxes would be raised to fund the restructured plans completely because beneficiaries shouldn’t give up benefits unless they get complete security for what is left. Because the plans would be terminated, taxpayers would be able to see their way out of this crushing problem.
The plans would be restructured so that pension benefits would commence at age 65 no matter when an employee retires. There would be a cap on overall public employment pension benefits of 150 percent of the local median income — no more automatic cost-of-living adjustments. Such changes would protect those with modest pensions and eliminate the windfalls that some retirees receive from the current generous provisions.
I’m completely sure that no government would ever deliberately allow its funding levels to drop below 50 percent so it could take advantage of this proposal.
* But something’s gotta give somewhere. Check out this analysis of the city’s new water and sewer tax hike…
Here’s what Chicago taxpayers face under the proposal passed today by the Chicago City Council’s Finance Committee, supposedly to stabilize one of the city’s four pensions, MEABF:
This year and next, taxpayers will contribute $163 million to the fund. The ramp up thereafter is $267 million in 2018, $344 million in 2019, $422 million in 2020, $499 million in 2021 and $577 million in 2022.
Then, the real shocks start. Beginning in 2023, the taxpayer contribution will be based on the “ARC.” That’s a purported “actuarial” calculation that supposedly would take the pension to 90% funding by the year 2057. The city estimates that contribution would be $879 million in 2023. It keeps going up, passing $1 billion in 2030 and reaching $1.9 billion in 2057.
You might think those contributions would reduce the unfunded liability rapidly. Nope. It’s projected to keep rising from today’s $9.8 billion until 2040 when it reaches $15.4 billion.
And surely, you probably think, this isn’t all based on old accounting using a ridiculously optimistic assumption about what the pension’s assets will earn. Wrong again. The assumption is the widely ridiculed 7.5%.
By “taxpayer contributions” I’m including proceeds from the proposed water and sewer tax. That tax, however, isn’t enough to cover the contributions described above. It would start at $56 million and top out at $242 million in 2020. The difference will have to come from other taxpayer sources.
posted by Rich Miller
Monday, Sep 12, 16 @ 11:42 am
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Can someone send that guy a link to the Illinois Constitution?
Comment by Tootoo Monday, Sep 12, 16 @ 11:50 am
The same arguments can be made for stiffing bondholders — after all, the bonds were issued to pay for past services or purchases, some were issued when interest rates were a lot higher than they are today, and many bondholders are a lot wealthier than your average taxpayer. Where is the outcry about repaying all those bonds?
Comment by Anonymous Monday, Sep 12, 16 @ 11:51 am
11.51 was me.
Comment by Whatever Monday, Sep 12, 16 @ 11:51 am
=taxpayers weren’t born when the benefits were promised to retirees =
Just a dumb statement. You can say the same for an endless number of actions and obligations of federal, state, and local governments.
Comment by JS Mill Monday, Sep 12, 16 @ 12:01 pm
Ah yes, Ed Bachrach another Rauner/Tillman donor.
Comment by Ah yes Monday, Sep 12, 16 @ 12:01 pm
With another phony organization with the “right” Google key words.
Comment by ah yes Monday, Sep 12, 16 @ 12:02 pm
It is time to look at what the pension funding issue looks like as Tier 1s die off and the payouts are now to all Tier 2s. Is the crisis the same? I believe the issue/crisis sunsets over time if payments are made and no new debt is incurred.
Comment by illinifan Monday, Sep 12, 16 @ 12:04 pm
Two points:
Speak for yourself. This retiree is NOT getting a big pension check. Some might, just like some have massive incomes. How ignorant and uninformed this person is.
Secondly: My pension check is the one and only thing I have to live on. Social Security was meant to supplement——-supplement——supplement your retirement savings or company pension. I am not eligible for any social security that I paid for because of the job I performed.
If social security is what someone is living on as their only income in retirement, it means they lived high and spent their earnings rather than planning for their retirement. Who can feel sorry for that?
Comment by Anonymous Monday, Sep 12, 16 @ 12:06 pm
= public employee pensions are so much higher than their Social Security payments will be =
Social Security employee contributions are lower than most public employee pension contributions. Social Security benefits also include part A of Medicare. Many retirees with Social Security benefits also have a nice 401k plan with matching employer contributions. Social Security benefits also include a cost of living increase.
Comment by Anonymous Monday, Sep 12, 16 @ 12:07 pm
“Can someone send that guy a link to the Illinois Constitution?”
Yeah, that will solve the problem. It’s called whistling past the graveyard.
Comment by striketoo Monday, Sep 12, 16 @ 12:09 pm
Blast the Trib, Rauner, Etc. all you want but this is real. It isn’t some made up contrived problem. Chicago taxes are going to go through the roof without reform. Think they are already through the roof? You ain’t seen nothing yet!
Comment by Big Muddy Monday, Sep 12, 16 @ 12:10 pm
Imagine asking the public sector to wait until age 65 to collect retirement benefits.
Asking the legislature and judiciary of Illinois (who are huge beneficiaries of this largesse) to reform this system is like asking them to vote themselves a pay decrease. Much easier to push their obligations on to future generations.
Comment by Lucky Pierre Monday, Sep 12, 16 @ 12:10 pm
== Is the crisis the same? I believe the issue/crisis sunsets over time if payments are made and no new debt is incurred. ==
-illinifan-
You are correct, just going to take 30 years or so.
Comment by RNUG Monday, Sep 12, 16 @ 12:11 pm
So we’re all choosing to gloss over the 2nd half of this posting? Too tough to argue with the blow this will deliver, so we will fuss over an op-ed?
Comment by Shemp Monday, Sep 12, 16 @ 12:12 pm
The author had no idea of what he was talking about. The single worst bit of news is TRS announced prelim returns which were if I recall .1 percent. Not ONE but point one. How is that even possible yet they seem to be sticking to the outsized allocation to hedge funds while almost all other similarly situated funds already exited??
Comment by Sue Monday, Sep 12, 16 @ 12:20 pm
Constitutions can’t stop math from happening.
Comment by Ron Monday, Sep 12, 16 @ 12:24 pm
===this isn’t all based on old accounting using a ridiculously optimistic assumption===
That should say pessimistic. A pessimistic assumption, say 5%, would dramatically increase the net present liability, driving up the contributions we need to make today to make up for low investment returns.
Comment by thechampaignlife Monday, Sep 12, 16 @ 12:24 pm
I don’t believe such a law is allowed under the federally enumerated powers.
Comment by A Jack Monday, Sep 12, 16 @ 12:25 pm
1. Chicago taxes are not already “through the roof”. Their property taxes, sewer costs, etc. are low when compared to other municipalities in the area and other large cities. This is one of the biggest screw-ups of the Daley administration.
2. The City pension funds have met that 7.5% return over the long term.
Comment by chi Monday, Sep 12, 16 @ 12:28 pm
–local taxes would be raised to fund the restructured plans completely because beneficiaries shouldn’t give up benefits unless they get complete security for what is left–
What the hell does that mean? What pensioners have to fight over the carcass of what is left in the pension fund?
I could not prevent lawmakers from using the pension funds that I have contributed to every check for other often nefarious purposes. So now I’m being punished by loss of a very very meager pension, all the while have the “taxpayer” being incited into jealousy over my meager pension by saying that I get more than those just getting social security.
What kind of moral destitution is this? You and your privileged ilk, in my mind, simply want to pay less than your fair share into our society. You don’t squeak a bit when you got tax cuts because you benefited while others paid. In this case those owed a pension. Lawmakers took our pension money and misappropriated it. PLAIN AND SIMPLE. I am raging with indignity that pensioners should be blamed for a crime we did not commit.
As Rich says, BITE ME!
(I hope you’ll let this post Rich)
Comment by Honeybear Monday, Sep 12, 16 @ 12:28 pm
FYI this would be illegal; US constitution prohibits passing laws that impair existing contracts, especially pension contracts.
Also comparing pension benefits from an employer with social security benefits is like cmparing 401k plans, and saying any 401k over social security levels should be seized as unfair.
It seems that the private sector wants very much to make middle class employees of govt pay for this themselves…. but these large companies collect huge income tax breaks for themselves; and thier highly paid owners get hig tax breaks.
simple fed solution, end the low income tax on investment income. everyone pays the same tax on income however it is earned. tax all wages for social security, not just the first 108k, so its more then the middle class who pay social security on 100% of earnings.
these two changes just funded social security and will provide income for the money borrowed from worker oension tomgve ultra wealthy companies tax breaks and large bonuses for their ceo’s
Comment by Ghost Monday, Sep 12, 16 @ 12:30 pm
The plans would be restructured so that pension benefits would commence at age 65 no matter when an employee retires.
So will the law be changed so State Police can work until age 65 and not be terminated at age 60? How about all the other police and fire departments across the state with maximum age restrictions?
Comment by Anonymous Monday, Sep 12, 16 @ 12:35 pm
Why isn’t there more talk about a commuter income tax for those who commute in to Chicago for their jobs, like NYC has?
Comment by 32nd Ward Roscoe Village Monday, Sep 12, 16 @ 12:36 pm
Lol, there will never be enough money to pay the obscene benefits. Illinois is losing population now, the tax rates needed will kill the state.
Comment by Ron Monday, Sep 12, 16 @ 12:36 pm
== So we’re all choosing to gloss over the 2nd half of this posting? ==
Nope. This has been coming for a long time, and the ones cited in the article are just the beginning. Tax rates are going to get ugly. The only real choice is do you pay for the pensions through payroll / income taxes (ie, state help for Chicago or a city / county income tax) or you you pay for it through a combination of user fees and property taxes (which seems to be the road Chicago is going down)?
Comment by RNUG Monday, Sep 12, 16 @ 12:39 pm
RNUG, IlliniFan: It is plainly NOT true that Tier 2 sunsets the problem. The unfunded liabilities are owed entirely to Tier 1 workers for service already performed. The subsidy that Tier 2s are forced to contribute towards the Tier 1 problem are already reflected in the calculation of the Tier 1 unfunded liability.
And the better question on Bachrach’s proposal is not the IL Constitution but the US Constitution. The IL Constitution would be superseded if the law is constitutional at the Federal level, but short of using the bankruptcy power, need more analysis on that.
Comment by WirePoints Monday, Sep 12, 16 @ 12:39 pm
“This year and next, taxpayers will contribute $163 million to the fund. The ramp up thereafter is…”
The future pension payments would have been less had past payments been based on actuarial calculation rather political considerations. It appears to be yet another case where the math will win and the taxpayers will end up paying more than they could have.
Comment by Hit or Miss Monday, Sep 12, 16 @ 12:43 pm
- WirePoints -
In 30 years the majority of the Tier 1 retirees, myself included, will most likely be six feet under and no longer collecting pensions. Once we’re gone, there is no problem.
Comment by RNUG Monday, Sep 12, 16 @ 12:44 pm
How about a specific pension tax paid by household at the end of each year. That way the citizenry of the state will realize just how expensive these outrageous benefits are
Comment by Ron Monday, Sep 12, 16 @ 12:50 pm
@Honeybear “I could not prevent lawmakers from using the pension funds that I have contributed to every check for other often nefarious purposes”
That maybe true, but did you vote for anyone who did? Did your Rep and/or Senator vote for a pension holiday? Did they vote for HB 1? To me it seems hard to say that the elected officials spent the money and that nothing could have been done. The ones who did got endorsed and reelected by those who decry the mismanagement of the funds.
Comment by ste_with_av_en Monday, Sep 12, 16 @ 12:56 pm
The taxpayers, often for the City, the property owners, benefit from expenditures made before they were born; swamps were drained, mater mains installed, roads and bridges built, rivers diverted. The wise and foolish expenditures that went into making Chicago in the past have added more value than they cost. Live with it.
And if you think the pension liability is high, wait till the underlying infrastructure needs to be replaced. Check on the average age of the water mains in Chicago and ask how much longer they will last.
Comment by Last Bull Moose Monday, Sep 12, 16 @ 12:58 pm
The guy is on the board of the Illinois Policy Institute. nuff said.
Comment by Anonymous Monday, Sep 12, 16 @ 12:58 pm
Tax Tier 1 pension income over $x.xx.
3% COLA? Tax
Retiring at 50-55? Tax
The generation, and those advocating for them, that skipped payments, expanded benefits, and shorted the Funds should be responsible. You are already getting plenty of help from the tier 2 subsidization.
Comment by Anonymous Monday, Sep 12, 16 @ 12:59 pm
RNUG, you are dead wrong and you know it. OF COURSE pensions are owed only while people are alive. That’s why it’s such a problem. The UAAL has to be paid during their lifetime. It doesn’t just disappear. The debt does not sunset and Tier 2 doesn’t solve it. You’re making the same silly claim that Radogno has made in the past. The TRS actuary explained it. See the discussion of that here. http://www.wirepoints.com/the-tier-2-pension-mess-in-illinois-wp-original/
Comment by WirePoints Monday, Sep 12, 16 @ 12:59 pm
= it would legally allow state and local governments with plans that have funding levels below 50 percent to modify plan provisions and benefits=
Meanwhile Social Security is a pay as you go Federal government plan with funding far below 50%. The Center for Public Integrity and similar groups would like to cut Social Security benefits.
We should return to a 5% state income tax including all retirement income to help solve the state financial debt problems.
Then we should focus on adopting a progressive state income tax.
Comment by Anonymous Monday, Sep 12, 16 @ 12:59 pm
==Why isn’t there more talk about a commuter income tax for those who commute in to Chicago for their jobs, like NYC has?==
There has been. Home rule prevents this. But every municipality with an income tax of some sort has much lower property taxes.
Comment by City Zen Monday, Sep 12, 16 @ 1:00 pm
“The plans would be restructured so that pension benefits would commence at age 65 no matter when an employee retires”
My question is what about the cop or firefighter who retired at 60 ? Would their pension stop and then restart at 65 ???
Comment by paleghost1 Monday, Sep 12, 16 @ 1:00 pm
“Then we should focus on adopting a progressive state income tax.”
There is that pesky Illinois Constitution again. Who’s in favor of opening it up for reform? That pension protection clause and citizen led ballot initiative’s could use some updatin’ while we are at it.
Comment by Big Muddy Monday, Sep 12, 16 @ 1:04 pm
RNUNG - I would say it will take between 30 -40 years for all of the Tier 1 folks to pass on, but the 1%ers wants their taxes cut now.
Comment by Mama Retired Monday, Sep 12, 16 @ 1:05 pm
I love the fig leaf arguments about constitutionality; all the while Illinois losses population and is rated 48/50 by business groups…
http://chiefexecutive.net/2016-best-and-worst-states-for-business-full-list/
Comment by Lech W Monday, Sep 12, 16 @ 1:05 pm
RNUG, you spoke for my rationale side. Well stated. Thanks.
Honeybear, you spoke for my visceral reaction. Thanks.
Comment by Diogenes in DuPage Monday, Sep 12, 16 @ 1:08 pm
Big Muddy, of course amending our abomination of a state Constitution is the answer to fixing our problems. But Madigan and his public employee cabal won’t have it. Way too much at stake.
Comment by Ron Monday, Sep 12, 16 @ 1:10 pm
Ron: First you call them “obscene” benefits, then “outrageous” benefits. I think that they are neither. They were merely part of the negotiated contract, part of the terms of payment for services rendered.
Comment by Christopher Monday, Sep 12, 16 @ 1:13 pm
Taxes may go through the roof, but when you don’t make pension contributions you incur debt. When you keep taxes artificially low by borrowing from the pension funds, it’s a double whammy. That borrowing began in the 90s and happened before some public workers were born.
Comment by Carhartt Representative Monday, Sep 12, 16 @ 1:15 pm
The solution is actually *more* benefits. Subsidized cigarettes, alcohol, and skydiving for all Tier 1 retirees.
Comment by lincoln's beard Monday, Sep 12, 16 @ 1:19 pm
And to be clear, Tier 2 was part of the “solution” because, if the analysts are anywhere close to correct, it stopped the pension debt from growing bigger due to new employees no longer being on Tier 1.
Comment by RNUG Monday, Sep 12, 16 @ 1:20 pm
== The solution is actually *more* benefits. Subsidized cigarettes, alcohol, and skydiving for all Tier 1 retirees. ==
Toss in race cars and I might be interested … /s
Comment by RNUG Monday, Sep 12, 16 @ 1:21 pm
U.S. Constitution twelfth admendment. This is not an interstate issue, but a state issue. So the federal government has no standing and cannot overrule the state’s constitution.
Comment by A Jack Monday, Sep 12, 16 @ 1:22 pm
Tier 2 is part of the solution until some foolish pol offers more generous benefits in the future. The state Constitution and it’s inherent unfairness to private sector citizens needs to amended.
Comment by Ron Monday, Sep 12, 16 @ 1:41 pm
==specific pension tax paid by households…..==
Love that idea. Then the citizenry will see how much they got from my (and other public workers) money so that they could have services for less than they should’ve been paying. Who’s ripped who off?
Comment by Anonymous Monday, Sep 12, 16 @ 1:43 pm
I still think there’s a great unknown out there: how courts would handle local government bankruptcies. We have Detroit as an example but that’s just one judge. (And yes, I know, there are huge downsides to local government bankruptcies - the question is when shedding the debt becomes the lesser of two evils).
The other thing that is killing us is the lack of progressive taxation. A lot of times when people here talk about a budget deal, I ask them how much more the median income family in Illinois should have to pay in taxes? I don’t think anyone has ever answered - mostly because I’m a PITA, but in-part because the answer is really uncomfortable. Rauner’s tax cut/letting the tax hike expire has hurt the poor, but it’s helped the working and middle class. There’s no simple solutions here.
Comment by lake county democrat Monday, Sep 12, 16 @ 1:47 pm
Except the general populace would be outraged by the obscene amount shoveled to the never satisfied public sector.
Comment by Ron Monday, Sep 12, 16 @ 1:47 pm
Why didn’t the state create a Tier 2 back in 1971 when they guaranteed all those benefits in the state constitution? What made them think they could keep the same pension rules in place when they couldn’t afford those same pension in the prior decades?
Comment by City Zen Monday, Sep 12, 16 @ 1:47 pm
RNUG, baloney again. Tier 2 “stopped the pension debt from growing bigger”? I think you know full well the UAAL will continue to grow DESPITE Tier2’s having to contribute extra to try to keep the Tier 1 liability from growing faster.
Current contributions do not even cover normal cost + interest on the UAAL. It would take another $3 billion at least just to stay even. Here’s one actuary who calculated that: http://www.wirepoints.com/full-pension-payments-arent-full-in-illinois-wp-guest/
Comment by WirePoints Monday, Sep 12, 16 @ 1:48 pm
People, tier 2 is already in place. The current bill is being paid. The cost will stay relatively flat for many years then begin to drop.
Nothing to see here. Move on.
Comment by People Monday, Sep 12, 16 @ 1:48 pm
CiryZen, beacuse that would hurt public employees. We can’t let that happen. Better to have a state that is losing population with the fifth highest state and local tax burden and anemic economic growth.
Comment by Ron Monday, Sep 12, 16 @ 1:50 pm
We can’t afford welfare for the wealthy anymore.
If the top 1% (who get 25% of IL’s personal income) paid the same overall tax rate as the median taxpayer (about double what they are paying now), it would be equivalent, in terms of personal income tax revenue, to instant 12.5% growth in the state’s economy. There would also be an instant upgrade from Moody’s decreasing the cost of our debt service. No way the return from 1.4%’s TA agenda can match that. Even bigger gains if you make the top 10% pay their fair share (they enjoy 50% of the state’s personal income).
A solution is entirely possible if our leaders on either side had the political will.
Comment by X-prof Monday, Sep 12, 16 @ 1:59 pm
A serious discussion on all this would start with this article from last week by Bill Isaac, a Democrat, and former FDIC chair. Bankruptcy now now just for Chicago but Illinois, too. It’s a pivotal financial opinion being ignored by the Illinois press: http://www.bondbuyer.com/news/commentary/time-to-restructure-debts-of-chicago-and-illinois-is-now-1113026-1.html?utm_content=socialflow&utm_campaign=thebondbuyer-tw&utm_source=twitter&utm_medium=social
Comment by WirePoints Monday, Sep 12, 16 @ 2:00 pm
Ron, you pay in salary or you pay in benefits. For many years a lot of State salaries were low and benefits made up for it. At the moment, a lot of State salaries are decent and (Tier 2) benefits are low … and Rauner is trying to gut the health insurance.
Remember, about 15 years ago the State started to “professional” most the job positions, with a 4 year clehge degree being the entry point and lots of positions requiring advanced degrees and certifications. You want to upgrade the workforce, it costs. Pretty soon you will see new hire salaries skyrocket to make up for the lousy Tier 2 pension. Remember Rauner’s superstars who had to have salary and retirement kickers in order to hire them? That was the tip of the iceberg.
Comment by RNUG Monday, Sep 12, 16 @ 2:02 pm
==Shouldn’t these retirees be entitled to all of their promised benefits, especially considering they essentially lent the city money over their years of service to pay for them?==
Evidently, Ed Bacharach doesn’t think so.
Comment by TinyDancer(FKA Sue) Monday, Sep 12, 16 @ 2:11 pm
Everyone but the poor pays the same 3.75%. if you make more you pay more total. Very fair.
Comment by Ron Monday, Sep 12, 16 @ 2:12 pm
“- People - Monday, Sep 12, 16 @ 1:48 pm:
People, tier 2 is already in place. The current bill is being paid. The cost will stay relatively flat for many years then begin to drop.
Nothing to see here. Move on.”
I WANT WHATEVER YOU ARE HAVING.
Math is hard…The dumbing down of America continues at warp speed.
Comment by Big Muddy Monday, Sep 12, 16 @ 2:13 pm
Retirement ages should be changed, employee contributions should be increased, automatic colas eliminated. But we can’t, because of a bunch of fools 45 years ago.
Comment by Ron Monday, Sep 12, 16 @ 2:14 pm
That’s right. City of Chicago employees were / are paid by a combination of salary and benefits.
Comment by Christopher Monday, Sep 12, 16 @ 2:14 pm
Pensions should also be eliminated for the sake of future generations
Comment by Ron Monday, Sep 12, 16 @ 2:15 pm
Evidently, Ed Bacharach doesn’t think so.
Nor does Mark Glennon, apparently.
Comment by Ole' Nelson Monday, Sep 12, 16 @ 2:15 pm
Ron
=…But we can’t…=
You finally figured it out - - YOU CAN’T change it. Now, how about figuring out a way to move forward instead of crying foul all the time. There are solutions presented almost everyday on this site that are possible - WE CAN - fix the problem.
Comment by Consideration Monday, Sep 12, 16 @ 2:21 pm
- WirePoints -
I’ll concede I should have phrased it as “slowed the growth”.
The less than principal and interest payments are the reason the Edgar Ramp still goes up and has baloon payments on the back end. If you want to switch it to a level payment like a mortgage, go for it … take your plan to the GA and get them to pass it.
Comment by RNUG Monday, Sep 12, 16 @ 2:31 pm
Amend the Constitution to save future generations from public employee pensions. Push all teacher pe soon. Obligations onto local school districts and allow municipal bankruptcy. Solves a lot of the problem.
Comment by Ron Monday, Sep 12, 16 @ 2:31 pm
I wonder…..what percentage of these debt payments are actual pension costs and what percent is going toward userious interest rates?
CPS debt is mostly outrageous interest payments on high-fee “structured products,” swaps. And my favorite - CAP (capital appreciation bonds.)
If you really want a federal solution, then let the Fed buy munis and refinance this debt at the same zero interest rate they give the banksters - you know, those guys who blew up the global banking system and got a federal bail-out and no criminal prosecution.
Comment by TinyDancer(FKA Sue) Monday, Sep 12, 16 @ 2:36 pm
This is my favorite paragraph from the article recommended by Wirepoints:
“State and local governments should absolutely strive to fulfill their commitments. But once a financial mess of the first order is at hand, as is the case with Chicago and Illinois, it can be far better to act decisively by restructuring rather than prolonging the pain.”
I find this to be a weaselly sentence. It seems all too easy for some to quickly move from doing the right thing (sentence #1) to reneging on long term commitments to avoid pain (sentence #2).
Comment by Ole' Nelson Monday, Sep 12, 16 @ 2:37 pm
I wonder…..what percent of these debt payments are actual pension costs and what percent is going toward userious interest rates?
CPS debt is mostly outrageous interest payments on high-fee “structured products,” swaps. And my favorite - CAP (capital appreciation bonds.)
If you really want a federal solution, then let the Fed buy munis and refinance this debt at the same zero interest rate they give the banksters - you know, those guys who blew up the global banking system and got a federal bail-out and no criminal prosecution.
Comment by TinyDancer(FKA Sue) Monday, Sep 12, 16 @ 2:37 pm
Everyone banking on the Tier 2 bailout should familiarize themselves with the Safe Harbor rules.
Comment by City Zen Monday, Sep 12, 16 @ 2:42 pm
I can’t help but be amused by much of this conversation regarding “math.” I guess these “math” people suddenly became smart because this whole “math” problem is nothing new. If these newfound “math” wizards would have been paying attention long ago we might not be in the serious pension hole we face. The debt has been incurred. The debt is owed. The supreme court has ruled. It’s settled. Now just figure out how you are going to pay for it!
Comment by Anonymous Monday, Sep 12, 16 @ 3:00 pm
=== Everyone but the poor pays the same 3.75%. if you make more you pay more total. Very fair. ===
Ron, overall tax rate includes sales tax, property tax, etc. Ron, if you support a flat overall tax rate, sign me up! That would make IL one of the most progressive (or least regressive) tax systems in the nation. Let’s go for it! Deal?
Comment by X-prof Monday, Sep 12, 16 @ 3:03 pm
TinyDancer @ 2:37 ==I wonder…..what percent of these debt payments are actual pension costs and what percent is going toward userious interest rates?==
No interest rates are being paid by the funds, userious or otherwise. The actuarial computation of the pension fund debt is based on the concept that your financial reports should show the pension expense when it is earned. When a 20-something earns a little bit of pension this year, that pension isn’t going to be paid until 40 or more years in the future, depending on when they retire and how long they live. If you put money into the fund today, it can earn a 7% return until you pay it out. If you wait until next year to put the money into the fund, you’ve lost one year’s earnings, so you have to put the same amount plus 7% in missed earnings into the fund in order to have enough to pay the same pension. Skip a couple of payments, and the missed investment compounds and you have to pay a lot to catch up.
But no one is charging interest to the funds. The funds are failing to earn an investment return that they could have and would have if contributions had been made in a timely fashion.
Comment by Whatever Monday, Sep 12, 16 @ 3:15 pm
“Big Muddy, of course amending our abomination of a state Constitution is the answer to fixing our problems. But Madigan and his public employee cabal won’t have it.” Nice straw man there. There was a Con Con initiative on the ballot in 2008. It was voted down 67/33. So unless Madigan controls 67% of the electorate, you’re talking nonsense.
Comment by Skeptic Monday, Sep 12, 16 @ 3:19 pm
– Did your Rep and/or Senator vote for a pension holiday? –
I wouldn’t know, I lived in Oklahoma at the time.
Comment by Honeybear Monday, Sep 12, 16 @ 3:28 pm
@Skeptic,
You can’t have a progressive tax without changing the constitution.
So we can let that idea just go away any time now. No straw man, just facts.
Comment by Big Muddy Monday, Sep 12, 16 @ 3:44 pm
- But we can’t, because of a bunch of fools 45 years ago. - That would be 57.25% of the voters or 1,122,425.
- Pensions should also be eliminated for the sake of future generations - Because then everyone can live their retirement in poverty. Because 401(k)s are not the solution.
Comment by Retired SURS Employee Monday, Sep 12, 16 @ 3:57 pm
Big: I agree, there are a lot of things we can’t have without a change to the Constitution. My point is that when given a choice, the voters overwhelmingly chose the status quo. Madigan had nothing to do with it.
Comment by Skeptic Monday, Sep 12, 16 @ 4:07 pm
Back off on blaming a person who voted for someone who voted a certain way. My own rep verbalized to me and my spouse about how he felt about pension reform. We voted for him. He promptly voted the opposite way. Do not blame a voter. They don’t make legislation happen. The blame for what has happened with pension theft lies squarely with the legislators.
Comment by Anonymous Monday, Sep 12, 16 @ 4:20 pm
===Pensions should be elimination for the sake of future generations===
Anyone who believes this has drunk the entire stock ever made of the KoolAid. Once upon a time, not very long ago, everyone had a pension–private or public. Private hands got sticky and helped themselves to what belonged to employees and voila! The 401K was born (in their best interests, they say). Instead of ripping up pensions, private employees should be demanding that theirs be revived! With supervision to keep the crooks out! Instead, they jealously want those who still have db plans to come into the abyss with them! Do working people not understand that we all are in the same boat? It is management (and those who sit on boards, owners, etc) who want to keep more of their profits and cash for themselves by giving workers less? Those without db plans shouldn’t be jealous—they should demand the same for themselves!
Comment by Anonymous Monday, Sep 12, 16 @ 4:25 pm
“pension theft lies squarely with the legislators”
No it doesn’t. Remember that IEANEA, SEIU and IFT supported the pension skip. Witness slips are still part of the public record. There is blame here for everyone so can we just stop pointing fingers and get to a workable solution?? Or let it implode.
Comment by Big Muddy Monday, Sep 12, 16 @ 4:35 pm
Social security and 401ks for all. That’s the only thing that is fair. No penaions and no Constitutional protection for public workers. It’s completely unfair that social security is changed all the time, but the coddled public unions in Illinois are protected from market forces.
Comment by Ron Monday, Sep 12, 16 @ 4:41 pm
It will implode, there will never be enough money. The sooner we act the less painful. Municipal bankruptcy would be a fantastic starting place.
Pensions are an economic disaster destroying Illinois
Comment by Ron Monday, Sep 12, 16 @ 4:44 pm
= The difference will have to come from other taxpayer sources.=
Maybe have corporations give their employees’ state income tax money to the state government instead of keeping it for their own executives’ lavish retirement plans.
Comment by Anonymous Monday, Sep 12, 16 @ 4:44 pm
No, Ron, politicians and other “leaders” who lack integrity to do what they should are destroying / have destroyed Illinois. They all look for an easy way out, rather than to do what they are obligated to.
Comment by Christopher Monday, Sep 12, 16 @ 4:47 pm
Oh, I’m sure increasing our corporate tax rates will encourage companies to create jobs and locate here. We currently are at the bottom of the barrel in job growth. Illinois hasn’t recovered the jobs lost since the early 2000s.
Comment by Ron Monday, Sep 12, 16 @ 4:47 pm
Illinois is losing population because people are tired of horrible job prospects and Madigan and his public employee union economic system that bleeds the private sector dry.
Comment by Ron Monday, Sep 12, 16 @ 4:50 pm
=Social security and 401ks for all. That’s the only thing that is fair. =
The state can’t afford Social Security and 401ks for all. The government would actually be required to pay into the Social Security System. There would not be enough money to pay something into matching 401k plans.
Comment by Enviro Monday, Sep 12, 16 @ 4:52 pm
6.2% for social security and no guarantee d match is much cheaper.
Comment by Ron Monday, Sep 12, 16 @ 4:53 pm
401k matches are not guaranteed in the world where private sector taxpayers work, you know, 90% of the workforce
Comment by Ron Monday, Sep 12, 16 @ 4:55 pm
The state can’t afford Social Security because the state government would be legally required to pay the 6.2% into the Social Security System.
Comment by Anonymous Monday, Sep 12, 16 @ 5:09 pm
Why is anyone feeding Ron? Let him continue to troll with his same old nonsense if it makes him feel better.
Comment by Demoralized Monday, Sep 12, 16 @ 5:15 pm
He does seem to be tied up in knots on this subject. Relax, Ron.
Comment by Anonymous Monday, Sep 12, 16 @ 5:17 pm
More head in the sand.
Comment by Ron Monday, Sep 12, 16 @ 5:17 pm
==It will implode, there will never be enough money.==
If they had kept current with their contributions, there certainly would be. What killed private-sector defined benefit plans was the fact that federal law required them to be funded, which meant that a good year or two in the stock market caused them to be overfunded and the employers shut them down to get their hands on the overfunding.
==401k matches are not guaranteed in the world where private sector taxpayers work,==
No return is guaranteed, but when the contract calls for matches, the employer has to make them. And the return on investment has not been the problem — if the state had been required to keep up on their contributions, we wouldn’t have this problem.
Comment by Whatever Monday, Sep 12, 16 @ 5:30 pm
Nope, 401k matches are changed all the time I’m the private sector.
Comment by Ron Monday, Sep 12, 16 @ 5:41 pm
Do you know how large an increase social security recipients received in 2016? So we are clear the answer is 0%.
Do you know that social security recipients retirement ages are constantly being extended?
Comment by Ron Monday, Sep 12, 16 @ 6:41 pm
Dear Ron…….don’t you have any retirement savings planned for your retirement? Did you not know that Social Security was intended to be a supplement to your savings and investments? It was never intended to be your sole support, as pensions for many public workers are. No one can feel sorry for you if you never saved.
Comment by Anonymous Monday, Sep 12, 16 @ 7:18 pm
==It will implode, there will never be enough money.==
==If they had kept current with their contributions, there certainly would be…if the state had been required to keep up on their contributions, we wouldn’t have this problem.==
If they had kept current with their contributions, there would have been less money for raises, health care coverage, promotions, etc. all resulting in less take home pay over a career and lower pensions for each and every employee. I’m not sure why this simple fact goes unmentioned.
Comment by City Zen Monday, Sep 12, 16 @ 8:16 pm
==Did you not know that Social Security was intended to be a supplement to your savings and investments?==
I agree, but to think if just a mere extra 2.8% was taken out for Social Security…and invested with guaranteed 8% ROI like pensions…and I got to keep each and every penny instead of having to progressively give a large chunk away it because I happened to make more than others…I could have a healthy retirement just like you.
2 annuities…2 very different sets of rules. Most folks aren’t happy with our mandatory insurance plan. Ergo the Rons of America.
Comment by City Zen Monday, Sep 12, 16 @ 8:22 pm
This is a continuation of the retirement heist that corporations began in the private sector:
https://www.c-span.org/video/?301767-1/retirement-heist
Employee pension diverted to the CEO’s.
Comment by TinyDancer Monday, Sep 12, 16 @ 8:59 pm
There was a recent California Court case regarding their pensions. The court “… said benefit cuts are permissible if the pensions remain “reasonable” for workers…”
http://www.bloomberg.com/news/articles/2016-09-06/california-court-case-opens-door-for-pension-benefit-reductions
Comment by Huh? Monday, Sep 12, 16 @ 9:02 pm
City Zen
We all make choices in our lives. Why didn’t you go into public service to live the glorious life?
Comment by Anonymous Monday, Sep 12, 16 @ 9:29 pm
The California case 1) isn’t final yet, 2) is in no way binding on Illinois, and 3) largely irrelevant due to differences in State laws and Constitutions.
Ron, I would rather have my head in the sand than where yours seems to be lodged. The view, and aroma, are certainly superior.
Comment by Arthur Andersen Monday, Sep 12, 16 @ 10:05 pm
If you receive a pension from the state of Illinois and move out of the state. You should be required to pay taxes on your pension. If this money is recycled back into state economy that is OK, but that is no longer the case.
Tier 1 employees won lotto but will never admit it.
Comment by Almost the Weekend Monday, Sep 12, 16 @ 10:09 pm
==Do you know how large an increase social security recipients received in 2016? So we are clear the answer is 0%.
Do you know that social security recipients retirement ages are constantly being extended?==
Why are we comparing state pensions to Social Security? Is that the benchmark for pensions now? Can’t have it better than Social Security? Nonsense.
==Tier 1 employees won lotto but will never admit it.==
==Nope, 401k matches are changed all the time I’m the private sector.==
I get so tired of this constant whining about pensions. If some of you don’t like your particular pension situation then perhaps you should have gotten another job with a different pension. Instead you want to bellyache about what someone else has.
Comment by Demoralized Tuesday, Sep 13, 16 @ 8:07 am