By: Mark Glennon*

 

I must have fallen asleep outside last night in the -12°. I can’t be reading correctly the guest opinion piece in this morning’s Crain’s, Beware the Siren Call of ‘Pension Reform.‘”  Only cessation of my neurological activity can explain my understanding of it.

 

First, just a little background on the author, which I do think I remember correctly: Louis Kosiba is Exectutive Director of IMRF (the Illinois Municipal Retirement Fund). That’s the pension that is unique in Illinois because it automatically imposes property tax increases sufficient to cover the promises it makes, helping make Illinois property taxes the highest in the country. Those promises include a special savings account offered only to IMRF members bearing interest at 7.5% per year, which we wrote about last week, also paid for by forced property taxes. IMRF is Illinois’s second largest pension. It covers most all employees of towns, cities, park districts and the like outside of Chicago and Cook County, other than teachers, cops and firefighters.

 

Read the whole Crain’s article but, if you can’t, some key points from the article are below. Given my numbed condition, I won’t attempt any comment:

 

  • Illinois’ pensions are not overly generous.
  • “New legislative proposals to ‘tweak’ retirement benefits ought to stop.”
  • The problem is budgetary; not structural.”The unfunded liabilities incurred to date are a permanent fixed cost that cannot be reduced. ‘Pension reforms’ intended to reduce that cost are an illusory pipe dream. Benefits promised need to be paid.”
  • IMRF is over 87 percent funded, which is considered very solid by industry standards. This is due to proper, prompt and full contributions by local units of government.
  • There is popular rancor over public pensions—but if properly funded, costs are manageable.
  • The 2010 pension reform creating Tier 2 is a swell success.

 

I see that Crain’s doesn’t have its usual comment section on Kosiba’s article. Hat tip to them for sparing Kosiba the wrath.

 

*Mark Glennon is founder of Wirepoints. Opinions expressed are his own.