By: Mark Glennon*
“Big pensions just tiny part of big pension mess” — that was the headline on a Better Government Association story widely republished across Illinois last week.
That’s an interesting if academic topic, but don’t look to that BGA article for any answers. It contained four whopping errors.
• First, it repeated the common mistake of looking at “average pensions,” which might seem very modest — the median for general state workers is just $28,946, they concluded. The problem is that those averages include those who worked only part of their careers to earn that pension and part time workers.
Had BGA simply googled “Illinois average pension” they would have quickly seen articles on that fallacy. To judge whether pensions are big, you need to put them on a full career basis or look at how much those retiring after a full thirty year career get. The Illinois Policy Institute did that in 2012 and reported the following numbers for the five state pensions for workers retiring that year:
• Second, the BGA repeated this common falsehood: “As a rule of thumb, pension experts generally consider a pension fund healthy if it has on hand at least 80 percent of the financial resources it needs to cover future obligations.”
Nope. The American Academy of Actuaries says flatly that’s a “myth.” 100% is obviously the correct standard because you either have the money you will need or you don’t. One actuary who writes often about pensions, Mary Pat Campbell, maintains a “Hall of Shame” for reporters and politicians who repeat the myth. I expect the BGA will be inducted.
• Third, the BGA relied heavily on data and interpretations from Ralph Martire and his Center for Tax and Budget Accountability. Not mentioned is that they are a union funded and controlled propaganda shop who regularly peddle distortions. For some background on them, see the story linked here, and for some examples of their distortions see our earlier article linked here.
• Finally, a BGA representative said in a radio interview that part of the moral of their story is that we’ll just have to knuckle down and pay the pensions in full. The error here is that they are entirely missing the real question they certainly didn’t answer: How?
It just doesn’t matter whether average pensions are big or small or whether it’s right to pay them in full. The harsh, overriding reality is that they cannot be paid. (Period, full stop.) To the BGA or anybody else who says otherwise, we repeat our standard challenge to show us how. There is no conceivable combination of taxes and cuts that will get them paid, which is why nobody has ever proposed one.
That’s why we need to move on to discussing the formula for reducing pensions in some progressive or means-tested way, along with cuts to other historical debt.
That means a formal bankruptcy proceeding.
*Mark Glennon is founder of Wirepoints. Opinions expressed are his own.