By: Mark Glennon*
For the ugly story behind the demise of Chicago Public School pension, read From Retirement Security to Political Slush Fund by Illinois Policy. Its lessons are largely generalizable to most Illinois pensions, particularly the deliberate diversion of contributions to the pension to fund salary increases instead. That’s been a frequent tactic in union negotiations not just in Illinois but many other parts of the country — negotiate primarily for cash now and rely on other supposed assurances for fixing pension deficits later.
As usual with Illinois Policy’s work, their research is superb, even if you don’t agree with all their policy proscriptions. Personally, I don’t agree with a simple, full switch to a 401(k)-style program. I think reform should include a separate plan or component that provides a safety net with a high degree of security, something akin to Social Security. The bulk of it, however, should be in a 401(k)-type account because all workers should have a stake in the economy.
But that’s a minor issue: The larger point is that radical reform of the current system is essential and the CPS pension story illustrates why.
*Mark Glennon is founder of WirePoints. Opinions expressed are his own.