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By: Mark Glennon*

 

Source: Compiled from BGA pension database

The number of public retirees receiving pensions over $100,000 in Illinois jumped this year to 7,407, up 1,384 since last year. The chart on the right shows the growth in that number since 2012.

 

The numbers are extracted from the  Better Government Association’s pension database. They include only 17 pensions — the statewide pensions and those for Chicago and the Cook County area.  They do not include retirees in the 655 pensions for police and firefighters outside of the City of Chicago, for which the same data are not readily available.

 

Of those 7,407 in the $100,000 club, 5,241 worked less than 35 years to earn that pension. 1,516 worked less than 30 years.

 

It’s an old story when numbers like that upset private sector taxpayers.

 

But there’s another group you’d think would be livid, and that’s a whole other story: “Tier 2” workers — those hired after 2010. And it’s not just because their pensions will be far lower than for Tier 1 pensioners (who account for all those in the $100,000 club). They have to pay dearly to help fund the fat Tier 1 pensions, and they may end up with nothing at all.

 

In 2010 Illinois created a second, junior level of beneficiaries for state and local pensions. Employees hired after 2010 became Tier 2 pension participants with far lower benefits. Tier 1 employees kept the same, more generous benefits they had before. The unfunded liabilities you always read about are owed entirely to Tier 1 employees for work already done.

 

What’s less known is that those young, Tier 2 employees are forced to pay more than what’s needed to fund their own pensions. They pay an additional subsidy to help reduce the growth of unfunded liabilities owed to their Tier 1 coworkers.

 

New numbers on that subsidy are in the recently released Preliminary 2015 Actuarial Valuation Report for TRS — the Teachers Retirement System, which is by far Illinois’ largest pension and accounts for about 60% of the state’s unfunded liability. According to that report (P. 21), $6.75 billion will be taken out of Tier 2 employees’ share of pension contributions to go towards the Tier 1 unfunded liability over the coming three decades. Tier 2 workers will pay their own “Normal Cost” (which is the cost of funding just their own pensions) and more: 21% of what they pay in will go to those older workers’ pensions.

 

A similar situation exists for Tier 2 employees in other Illinois pensions, though I have yet to see hard numbers on them. (It should be noted that, in the case of teachers, many do not in fact pay their entire employee contribution. Many local school districts help pay that.)

 

Making matters much worse for younger workers, many will never see a dime of pension money because they will change jobs before their pension vests at all. For teachers, a “shockingly high” number will get nothing, which is the conclusion in a new study by Bellweather Eduction Partners. Only 38% of Illinois teachers can be expected to stay on their job for the minimum ten years needed to get any pension. Only 18.5% are projected to work to their full retirement age. They do get back their own money they put in if they leave their job before vesting, but that should be little comfort to anybody rationally planning for retirement.

 

Illinois is one of only four states that double-whack younger workers this way, by denying them any Social Security or a pension until they work ten years. And, even if they work until their pensions vest, can they really count on anything being there?

 

That’s crazy. Even one of Illinois’ most radical labor activists, Fred Klonsky, who is hell-bent on defending his Tier 1 pension, has noticed the unfairness in this. (Fred’s basically a Marxist as far as I can tell, and I usually like to annoy him, but he’s right about this one.)

 

So, what do we have? It’s a system that, on one hand, gives ever more lavish pensions to Tier 1 workers that grow each year thanks to an automatic COLA much higher than market projections on inflation, and unfunded liabilities surging every year with no hope of being paid. (The subsidy paid by Tier 2 employees isn’t nearly enough to control the growth of those unfunded liabilities.)

 

But for new employees, it’s a system that offers little if any reliable benefit and forces them to help fund the lavish pensions of others.

 

Public union leadership, comprised of Tier 1 members, certainly will have an interesting problem as the number of Tier 2s grows. By then, the whole Tier 2 system may collapse because it may run afoul of legal requirements for its exemption from Social Security, which we wrote about earlier.

 

What a sickening mess.

 

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

 

 

 

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Jim Palermo

WirePoints, how do you keep track of all the anonymous posts? I have a suggestion: Request that readers who respond to your articles uses a handle or pen name of their own. Some posters use vitriolic language they’d never sign their name to, I get that, but for those of us who wish to carry on a dialog on the important matters you carry, it would be helpful to have an name to respond to.

S Moderation Douglas

If “sixty is the new forty”, is $100,000 the new $60,000?

And is Illinois’ $60,000/Year Pension Club “Surging” also?

Or the $98,000 club or the $40,000 club?

Isn’t that called “inflation”?

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anonymous
Mark your premise has a fatal flaw. It assumes an employees contributions pays for the pension they will recieve. But,as you know that is not true. The contributions from the govt. IN ADDITION to the employee contibutions COMBINED pays the pension. If the TIER 2 employee contributions alone does not even cover the cost of thier own Tier 2 pension….how on earth could that employees contributions in addition, subsidize another tier 1 employee?…..when the employees contributions singularly cannot pay for thier own pension…you strain facts to claim there is extra cash from that employees contributions to go to another. Mark you claim what you propose are facts…..and… Read more »
Anonymous
Anonymous

Mark,
Thank you for posting this article. The level of anger to it is directly proportional to it’s cogency. These are the sorts of facts that the CTU does not want to get out as they prepare for a strike vote. The younger teachers are being screwed here and their more senior brethren and union leadership are certainly doing much of the screwing. As you’ve indicated earlier, it is generational theft.

mark glennon

Karl-

How about we get to the point? You, or anybody else, please state the tax solution you propose with numbers: What taxes should be raised and by how much to fix the pensions?

S Moderation Douglas

Originally, as I understand, two of the ancillary functions of defined benefit pensions were to retain qualified employees early in their careers, (therefore the five to ten year vesting period); and to encourage the retirement of superannuated employees.

Depending on the type of job, employers actually lose money early on due to the learning curve. Five year vesting doesn’t sound punitive, and encouraging retirement in the early to mid sixties makes sense, also. Nothing nefarious happening here.

Steve-oh

S Mod: The “nefarious” part of the entire issue of pensions that are much too large, paid much too early…….is that they’ve become unaffordable. The net investment return since 1/1/00 has been in the 4%/year range, not the 8%/year that might have made the pensions POSSIBLY affordable. But now they’re not. Period

S Moderation Douglas

There is a difference between “excessive” pensions and “unaffordable” pensions.

No Agenda
Mark are you aware of the actuarial method used to calculate pension benefits? This will result in pensions that are far larger than typical based on the 75% formula. For example: I know a school superintendent who worked and contributed to his pension for 52 years. He retired at the age of 75 and is receiving 100% of his working salary. But because of his age he probably won’t live to collect all that he contributed for 52 years, especially when you calculate in interest earned. But if you look only at his benefits you would think it’s outrageous. But It’s simple not. Are you aware of… Read more »
Steve-oh

Mr. No Agenda: I doubt the 75-yr old would have selected a straight-life annuity. Almost certainly picked something like 75% J&S with wife or someone else continuing on. But it doesn’t really matter. Mark’s right…..working to age 75 is ‘outlier’, not an example that means anything at all for the entire financial mess the pensions have caused

No Agenda

The anti-public employees/pensioners propaganda folks rely on “outliers” to frame 90% of their arguments. That is in fact the whole premise of the $100K pension article.

nixit71

Are you sure he contributed to his pension or did the district pick those up for him? Many supes don’t make pension contributions.

Anonymous

The one set of figures i’ve seen was from, i believe, cullerton’s pension expert. His data showed that from 2002 – 2012 the state shorted the pension systems 41.5 ( or 42.5, i don’t remember which ) billion dollars. Using the average rate of return of those years, that money would be worth app. 150 billion dollars, thus no pension debt of 110 billion plus. Now, what has caused this pension crisis?

mark glennon

OF COURSE the state underfunded the pensions. If it hadn’t there would be no crisis. The underfunding continues. The system has always been unaffordable, which is why underfunding went on even when Dems beholden to labor controlled all levels of government.

Anonymous

That makes no sense what so ever…That is like saying if I make $3,000 a month and my rent is $500 a month and I choose to blow $3,000 a month on everything other than paying my rent, my apartment is unaffordable…I am irresponsible…that would be the true analysis..

nixit71
A more accurate analogy is that you were told your rent was $500, but it actually cost $1,000. Your landlord never disclosed the true cost of your rent. But when he finally decided to raise your rent to reflect the actual cost, you told him you were locked into $500 forever because that was the deal when you first moved in. You assumed that, even though other rents in the area were $1,000, that because you were paying your “fair share” all along, that nothing should change and you were entitled to the lower rate. So now, every new tenant has to pay $1,500 to make up… Read more »
Anonymous
That is so not what that analogy is and you know it…trying to twist things around… What kind of retirement do you get? Why are you sooo jealous…you could have been a measly state employee when pay was low but benefits high to compensate…now the tides are turned…I know as I am now in the private sector and see how mistreated the average workers can be due to corporate greed…I paid into my pension more than twice what Social Security payments were..the State was supposed to put a measly 4% in didn’t do it as scheduled and then robbed what kitty there was so that they didn’t… Read more »
nixit71
Actually, the analogy is pretty spot on. And to carry it further, while the landlord (state) is locked into under rent-control rules, he cannot reduce the size of your apt (COLA), even though he increased square footage after you signed the lease, and he cannot charge you for heat (health benefits) even though that was never part of the lease. But to address you comment, “been a measly state employee when pay was low but benefits high to compensate…now the tides are turned”, I assume you mean public sector salaries have now caught up to private sector. That’s fine. But if benefits were high to compensate for… Read more »
S Moderation Douglas
nixit71, No, the tides have not turned. The progressivity in public sector compensation is in the salaries, not pensions and benefits. The average difference in pay is about 12 percent. But that aggregate is misleading. Lower skilled/educated state workers make about the same wages (nationwide data) as similar private-sector workers, but with much higher benefits. Public sector professionals and higher educated workers make much less in wages than their private sector peers, and the higher pensions and benefits are NOT sufficient to compensate for the lower pay. How much is MUCH? According to the AEI nationwide data, lower level state workers make 20 percent more in total… Read more »
PGMJR
Doug, I pulled some information for the article you cited. https://www.aei.org/wp-content/uploads/2014/04/-biggs-overpaid-or-underpaid-a-statebystate-ranking-of-public-employee-compensation_112536583046.pdf The main thesis of the article is: “In states where public sector pay is an active political issue, state government employees appear to be better compensated than similarly skilled private sector workers. In states where state government compensation is at or below market levels, pay for public employees is generally less controversial.” Also, the data you cited doesn’t include the pay of public safety public workers,i.e. cops, fire, jail guards, and 911 dispatchers(p. 5). This is a huge component of public sector workers that has been left out of the data. Furthermore, there was this: “The… Read more »
S Moderation Douglas
PGMJR Very good. I highly recommend this study, for various reasons. Yes, police and fire are left out of this particular study. Lesson 1; All public retirees are not the same. When someone claims “public workers retire 10 to 15 years younger than taxpayers”, do NOT generalize safety workers to all public workers. (And, although retirement at 50 is possible, the average safety worker in California retires at 55 or higher, compared to an average of 60 to 62 for all US workers, so 10 years was an exaggeration anyway, and 15 is a gross exaggeration.) For most state workers, average retirement age is the same as… Read more »
S Moderation Douglas

Thank you.

For me, a Cadillac is “unaffordable”, a much misused word. (And I am a retired state employee, no less.)
That does not mean a Cadillac is not “worth” it’s market price, to the right person; any more than the average public employee is not “worth” his pay and benefits.

“Unsustainable” is another misused word.

Steve-oh
Bravo Mark, great article ! There should be a list of “Net Worth Millionaires” for govt retirees and actively employeds not yet retired. But the figure would no doubt be 50,000 to 100,000 participants in the govt-sponsored pension plans — that would include those getting, or promised “just” $40k or $50k/year (or more) pensions at age 55 with the COLA……and that’s exactly why private sector workers/taxpayers are vastly overtaxed & must work an extra 10 years or more to pay for the govt ees and retirees to accumulate their largesse, and almost every private sector worker cannot possibly accumulate even 1/2 of that. Quite sickening.
S Moderation Douglas
Jockey, Sometimes….. There are thousands of pension systems and they are almost like snowflakes; no two alike. In California, some local governments included OT, (and/or the value of unused vacation “sold back” in the last year). The 2012 PEPRA law now forbids that. There are many pension advantages specific to certain systems that seem to be generalized as “typical” to all retirees. They are not. Elsewhere in this blog, nixit71 calculates the value of a “3% compounded COLA”. Those do exist, but for most California state workers, and others, the COLA is the lesser of annual CPI, or 2%. And yes, it is better than almost all… Read more »
S Moderation Douglas

On average…….

“private sector workers/taxpayers” do not work an extra 10 years or more.

True, safety employees retire earlier (many of those have MANDATORY retirement at 55), but most public workers retire at about the same age as everyone else.

“Average U.S. Retirement Age Rises to 62” Gallup, April 28, 2014.

Typical records for the last few years show miscellaneous public workers retire at roughly 60 (and rising). Same as private sector.

We have met the enemy, and he is us.

Steve-oh
Those average retirement ages are not correct. My profession is one of administering retirement plans of private sector ‘ers — 401(k) and DB plans both. Many private sector workers do not have enough money for any type of comfortable retmt at age 62, often they have even been laid off and must make ends meet by getting a much lower-paid job. It’s not good out there S Mod. And the govt workers DO have a comfortable retmt usually in their early 50s for police & fire, and late 50s for teachers and administrators. That’s what I was referring to for the Big Picture. Studies of this topic… Read more »
S Moderation Douglas
Stev-oh: “The bottom line is that govt workers can retire much earlier and with VASTLY more financial comfort. Period” Average. Before going further, remember the “average” is misleading. Again, without a doubt, lower skilled government workers total compensation is much higher than their private sector equivalents. And higher educated/professional public workers, even with the value of pensions and benefits, earn much less than the private sector. Concentrating for the moment on those higher ranks of public workers; ¡Si! they can retire much earlier and with VASTLY more financial comfort. Because, When they were working, they earned much less in cash wages. It is called deferred compensation. Using… Read more »
S Moderation Douglas
” Studies of this topic are never accurate. ” Thank you Mr. Obvious. There are “studies” of the comparison of public and private pay that say public workers on average earn about four percent less than the private sector …even with the value of pensions and benefits considered. There is one study that says federal workers earn seventy eight percent more than private workers, and Ed Ring of Unionwatch has promised an update of his study showing state and local public workers make twice as much as the private sector. (There is a caveat that S Moderation Douglas says makes ALL these studies inherently misleading. [More on… Read more »
Fact Checker

Ignore Rex. She is a hired gun who keeps spewing the same hate, such as fire-whiners, trough feeders, GED’rs, etc.. Posts coast to coast under various other names, such as Surf Puppy and Tough Love. It has become old and is best ignored

Anonymous
Why don’t all you brain children who hate the public employees who get a pension provide the math of where the funds would be if the State paid what they were supposed to pay..they didn’t pay Social Security and they didn’t pay the pension system either. If they paid a simple 6.5% in for all the employees who don’t get social security and NEVER missed a payment or paid late what would that fund be now? We can look at history and see what the market did the past 30 years or so. I know what I personally put into the pension and if the state put… Read more »
Dr X

Mark your comment of Klonsky as basically a Marxist is a little off he`s a Marxist thru and thru he`s pink all the way down to his pink undies. He loves to write how he`s down for the struggle against whitey. But he taught in Park Ridge last census Park Ridge was 92% white he lives in Logan Square last census over 80% white. Now if that’s not really being in the trenches with the oppressed what is. This clown is exactly what`s wrong with the education system today. Total propaganda very short on facts.

nixit71
Dr X nailed it. Klonsky is one of the haves pretending to be a have-not. Mark, you give Klonsky too much credit. He is no radical. He is a union drone that is just as much a part of the political machine as Rahm, Madigan, et al. He is more a reflection of his Me-First Generation than the reformer he claims to be. Class A hypocrite. Klonsky had a blog post awhile back complaining how much his property taxes has risen over the years. Ironic that the guy whose pension is a direct product of those high taxes is complaining how expensive those benefits are only because… Read more »
Tired of the lies of the overlords

Mr. Glennon, I find it interesting that you attack “average” employee pensions by lumping them in with the pensions collected by management types enrolled in their system. Is that how it works for you as a venture capitalist? You are just another vulture feeding off of those who actually do work, just like they are.

Jim Palermo
“Tired”, no one in Illinois has done more consistent and thoughtful analysis of public pensions than Mark Glennon. What you may perceive to be an attack on public employees, I’d describe as the hard and thankless work of identifying the financial dangers facing our state and its municipalities. As a financial professional and former local elected official, it is clear to me that for the most part, public plans in Illinois are unsustainable. This is because plans were designed and later enhanced, for the most part, before computers and spreadsheets, were ubiquitous, making it impossible for interested stakeholders, the press, or residents to check the work of… Read more »
Anonymous

Glennon… thoughtful & consistent analysis??? Just for a comparison, why don’t you go to the bi-partisan Center for Tax and Budget Accountability (CTBA) and compare its figures with Glennon’s. I’m here looking at his. Why don’t you take the time to look at another source as well?

Karl

My ears are burning…did someone say “bi-partisan” Center for Tax and Budget Accountability? I already debunked that myth:

https://citizenvsmachine.wordpress.com/2015/09/08/the-not-so-center-for-tax-and-budget-accountability/

Any financial analysis that results in working families paying more taxes just because some union-funded guy backs into his revenue numbers at the behest of his union patrons in not the thorough analysis I nor any independent taxpayer should subscribe.

mark glennon

The CTBA is union funded and its board is union people and pensioners. We’ve written about them and their “analysis” often here. Their “reamortization” plan is just a different word for a can kick — underfunding — the very thing you claim to oppose.

anonymous

Only Marks numbers matter….union numbers are simply lies. If your a union member…your biased and cannot be trusted as you have a financial stake. Everything you attempt to say is discredited because of your bias. Taxpayers on the other hand have a financial stake as well…..yet somehow… are deemed bias free in the pension debate and more worthy of comment….right?

nixit71
Mrs. Tired – To offer some context on the “average” pension, a public sector employee who retired with a “reasonable” $75,000 pension in 2005 would have a $100,000 pension today, thanks to 3% compounded COLA. Likewise, if that person retired in 2000 with a “reasonable” $65,000 in 2000, that pension too would be in excess of $100,000 today. Considering the 20% multi-year pension spikes that we’re legal back then, it’s not a far off assumption that more and more of these new 6-figure pensions are coming from regular rank-and-file (teachers, not principals). And keep in mind that many of these folks would be under the age of… Read more »
Rex the Wonder Dog!
I find it interesting that you attack “average” employee pensions by lumping them in with the pensions collected by management types enrolled in their system I always LAUGH MAO when ANY public employee tries to defend $100K+ pensions after just 30-35 years of work, and then uses “talking points” to spin their argument. Especially when the pension is one for a GED job like cop or firewhiner. BY FAR the largest % of gov employees receiving $100K+ pensions are the “public safety” jobs- cop and firewhiner; in fact I would guess that of all the $100K pensioners with 35 years or less of service, cop and firewhiner… Read more »
Karl
The stench of your pension envy is so thick and overpowering that even a gas mask with a respirator is of no use. You benefited from a low state income tax because our lawmakers and governors, Republicans and Dems, in effect, used Illinois’ five pension systems as a credit card to keep your state taxes low in order to pay for the services you demanded over the decades. You ought to be ashamed, you damned hypocrites. You want to deny pensions to people who’ve played by the rules and earned them. You have no clue about how the pension systems are financed; you have no clue about… Read more »
nixit71

Karl – Please retreat back to Klonsky’s blog where you can feel safe and secure while wrapped in a blanket of your own ignorance. Your diatribes don’t play well in the real world.

Anonymous

Nixon/1
Why? I like it here. I can’t be here all the time because I do have others things to do during the day.

Anonymous

I’m your worst nightmare and here to stay, unless M. Glennon censors me, but I don’t think he’ll do that. Stay tuned…

Karl

Adam

Karl is a self serving greedy idiot like most public sector workers when you talk to them about the pension problem. There is no tax increase or amount of cuts to fix the problem and Karl has avoided giving any details as to how he would fix it because there are not any in reality other than pension reduction. Enjoy the pension default Karl.

anonymous

He censored Paul.

mark glennon

Karl- Up the meds, and try not to just make stuff up.

Anonymous

Mark,
Worry about your own meds. Unlike you, I don’t make things up.

PGMJR
Karl, Great rant! Unfortunately, I’m not able to see your point of view because I cannot shove my head up my own ass that far. For the record, I was a former public sector employee, and I have stepped foot in dangerous areas, particularly, in the depths of the IL prison system. And from what I have gathered over the years, upon dealing with inmates, is that there is one constant theme on why these guys continually get recidivate. That theme is the failure of our education system. Many of these inmates have done some very bad things, but many of them are also smarter than both… Read more »
Anonymous

PGMR,
“Great rant!” Thanks. I appreciate the complement.

“Unfortunately, I’m not able to see your point of view because I cannot shove my head up my own ass that far.”

PGMR, Apparently, you haven’t tried hard enough.

Karl

Anonymous

I only used a quote from PGMJR. Did you give him a warning too? I haven’t seen it yet. Did I miss it? All I told him that is that “he / she didn’t try hard enough. The rest was from him / her.

Karl

anonymous
Karl this is the mindset you deal with here. PGMJR is a typical response you will get. And very very few posters, if any, will call one out for being personally unfair, or out of line…..as long as thier in the I hate pension/unions/public employee camp….then as you will see…anything goes. Right Mark? If on the other hand as you will find out if you continue to post… Mark may delete your posts…or threaten to edit your posts…or ask you to leave like he did to a past poster named Paul who used to post here challenging Mark’ and companies mantra. Mark wants an orchestra that all… Read more »
Anonymous

Thanks, Anonymous,
I’ll take my chances. So far, I feel very welcome here. I’m right in my element. I think that Mark likes what I have say. We provide challenges as well as entertainment for each other. Right, Mark?

Karl

mark glennon

No, actually, I’m anxious to get all points of view here and, no, I do not delete them. That guy Paul who you mentioned offered to stop posting here and I took him up on it. The reason was that he repeatedly misrepresented what we said and didn’t say here. No other comments have been taken down here except a few who agreed with me but were too long or profane.

Here’s a suggestion for comments: Provide facts. Give sources. Insults are fine, but if that’s all you provide you’re not helping your side, whatever that is.

anonymous

If indeed Mark you speak true…..and “Want all points of view” then invite Paul back to post. If he “repeatadely misrepresented what we said and didnt say” …then that is easily recognizable by the intelligence and critical abilities of your readers and posters. Your readers, I am sure, dont need protection from his alleged misrepresentations. Invite Paul back. His counterpoints, I suspect, were never intended to misrepresent; but, to persuade and challenge ideas that were promoted on wirepoints. Invite him back to get all points of view.

You can be a partisan hack all you want, but you can’t fight math.

Steve-oh

And Karl: We should not only blame the union bosses who lobbied and won the outlandish pay and bfts contracts…….but also the dimwitted Democrat legislators who approved the pay and bfts packages, and enshrined the pension promises in the state constitution. The Democrat legislators over the decades appear to have had NO common-sense. ZERO. And NO understanding of the unfairness to the non-govt workers who have been screwed and fleeced in the attempt to pay for the govt largesse. Period.

Steve-oh
Karl: You’re railing against the wrong target. Messengers of the financial crisis are not the evil-doers. Govt union bosses who lobbied and won, the pension laws that promise $50,000/year (or more) pensions at age 55 (or earlier) creating “net worth millionaires”……..which is beyond imagination of possibly for the vast vast majority of private sector workers/taxpayers, who must pay for the govt ee largesse….. is a creation of fiscal time bomb that is unaffordable for the private sector to pay for. It’s happening right in front of your eyes. And Karl, taxpayers are being CREAMED by all the types of taxes and fees levied by the (mostly Democrats)… Read more »
Anonymous
“Railing” against anyone is very easy to do as you prove amply by what you wrote in response. Getting right is quite another matter. Why don’t you do some fact checking of these points: 1. Republicans and Dems, in effect, used Illinois’ five pension systems as a credit card to keep your state taxes low in order to pay for the services you demanded over the decades. Check the sources of the so-called “unfunded liability.” 2. Teachers or other public employees weren’t responsible for the State’s financial mess and neither were the public sector unions. 3. Teachers paid 9.4% of their salaries into TRS, one of the… Read more »
Steve-oh
Karl: No one has enough time to rebut all your falsehoods and misunderstandings, but I’ll take 5 minutes: You spout out the typical Leftist railings against people who’ve done well financially…….and you display a complete lack of understanding to a basic premise of this website, which is: Making net worth multi-millionaires to so many govt ees by their late 50s…….and millionaires by their early 50s…..is simply unaffordable. The fact that many of them contributed 10% from their paychecks for their working careers just explains about 1/5th of their net worth when they’re close to, or at, normal retirement age to get unreduced early pensions. I’d love to… Read more »
Anonymous

The reason that you don’t rebut my points is because they’re true and you’re too lazy.to do any fact-checking. Admit it!

mark glennon
Karl, you are either uniformed or dishonest. First, it’s the math. Math is neither conservative or liberal, pro-labor or against. Nothing you said matters — because of the math. NOBODY has ever proposed any combination of tax increases or spending cuts that will allow for adequate funding of these pensions. Nobody ever. Even if your points mattered, they are bunk: – Most teachers do not pay 9.4% of the salaries into their pensions. In most school districts that employee portion is subsidized, in whole or in part, by the district. – Taxes were not kept “low.” They were kept middling for a long time, but they are… Read more »
Anonymous

Mark,

Stop projecting!

Karl

Anonymous
Mark, 1. No, I’m not in a “uniform.” I assume that you meant “uninformed.” I’m not that either. I put in 9.4% and so did every teacher in our district. Our district’s contribution was .4%, hardly a big subsidy. Most districts do not “subsidize” pensions unless there’s a contractual agreement between teachers and district which usually means that there’s some kind of a trade-off in the contract. School boards and superintendents don’t “give” things to teachers out of the goodness of their hearts. 2. Illinois’ state income tax, the MAIN SOURCE of Illinois’ (state) revenue from 1969 until 1989 was a flat tax of 2 1/2% for… Read more »
PGMJR

Just two points:

Was inflation in the 1970’s caused by OPEC or by Nixon removing the US from the gold standard?
https://en.wikipedia.org/wiki/Nixon_Shock#Later_ramifications

IMO, I feel that this event has allow governments in the US to accumulate more debt because it was not back by any physical metal.

Also, I’m not old enough to remember, but what was the responsibility of the IL Lottery and funding education? Obviously, it has not been used as originally sold to the public.

Anonymous
PGMJR, Good Questions! I mean that sincerely. First of all, Nixon didn’t take us off the gold standard; it was FDR in the 1930’s. Nixon let the Dollar “float” in August of 1971, which in effect led to some devaluation on the international currency market. Neither FDR’s gold standard drop nor Nixon’s Dollar devaluation had anything to do with the inflation that came in 1973. No country, especially with a modern economy has a gold standard. If we were tied to a gold standard, our economy would not be able to expand. Gold is a relatively fixed commodity which means that only so much is available worldwide.… Read more »
PGMJR

Karl,

“Inflation is caused primarily by scarcity of crucial commodities like oil or other fuel sources which affect many or all other sectors of the economy. That’s what happened in 1973 with the OPEC Oil Embargo led by Saudi Arabia.”

I hope you weren’t an economics teacher. How did the sacristy of commodities cause inflation in the Weimer Republic and Zimbabwe?

https://en.wikipedia.org/wiki/Hyperinflation_in_the_Weimar_Republic

https://en.wikipedia.org/wiki/Hyperinflation_in_Zimbabwe

Anonymous
PGMJR, Fair question. I can’t speak in detail about the hyperinflation in Zimbabwe. I do know that terrible post-colonial instability, the rise of Mugabe as dictator and his confiscation of white-owned farms, corruption, lack of exports, and… yes, scarcity or shortages of goods all played major roles in Zimbabwe’s hyperinflation. I speak, read and write German fluently. I’m also very familiar with German history. The hyperinflation in the Weimar Republic resulted from German war debts policy during the First World War, the devaluation of those German war debts in the immediate post-war period, LACK OF CONSUMER GOODS IN GERMANY DURING AND AFTER THE WAR PLAYED A MAJOR… Read more »
Pam
That may be true Karl ….. but there are reasons to advance the themes that public pensions are excessive and undeserved and imposed upon innocent taxpayers illegally and immorally by evil union boss’ who controlled the legeslature. If you dont want taxes raised to make up for the years of pension underfunding, and you do not have an alternative revenue source to pay the backbill, (The state of our State) you must then make justifications for default. If your going to convince the public to renege on the pension contract then you attempt to plant the theme that pensions are excessive and undeseved. Evil union public employees… Read more »
Anonymous
Pam, When you understand what the “unfunded liability” is; when you understand that retirees and their benefits weren’t responsible for the “unfunded liability”; when you understand that cutting pensions, or putting public employees on 401ks won’t eliminate the “unfunded liability, maybe will have the basis for a rational discussion. Are you familiar with SB 1 which Madigan (D) pushed through the House, passed by the Illinois Senate under Cullerton (D), and signed by Gov. Pat Quinn (D) on December 13, 2013? When you find out what SB 1 is, including the several years that led up to it, it might lead you to question the amount of… Read more »
S Moderation Douglas

Karl,

Please read Pam’s 5:02 PM post more closely. I don’t think she’s saying what you’re reading.

mark glennon

Karl, SB-1 would have reduced the UAAL by only $20 billion. Had it been upheld, the UAAL today would be about the same as only three or so years ago. And that’s not including the additional $50 billion added in the meantime for healthcare because of the Kanerva decision. So, precisely contrary to your claim, the SB-1 experience proved the power of unions to block meaningful reform.

Anonymous
Mark, The unions supported Cullerton’s SB 2404 but not SB 1. which, to retirees, showed that the unions didn’t have the clout with Madigan. SB 2404, a slightly milder version of SB 1, never saw the light of day. SB 1 was Madigan’s “baby” and supported enthusiastically by Pat Quinn. Both of them had nothing but contempt for public sector unions. If the IEA, IFT, or AFSCME had “clout,” I never saw any of it, in fact quite the contrary. Here’s the text of a note that I wrote to a friend about my time as a “Quinnster” when I worked on the Quinn campaign. The strong… Read more »
mark glennon

Karl, throughout all your comments you seem to think that readers here, and I, are unfamiliar with the cases, the history, the law, the place of unions in Illinois and how pensions work. We are quite familiar with all of it.

Much of it doesn’t matter. It’s the math, Karl. There’s no way to pay these. That’s why neither you nor anybody else will lay out any specifics about a tax plan that could possibly fund them properly.

Anonymous

Mark,
You overrate yourself.

Karl

nixit71
Mark – I think Karl has a partial solution, but he will never volunteer it because it would impact him and others like him. It addresses the #1 regressive aspect of our income tax system. It is probably the most obvious solution that, although would not solve 100% of the state’s revenue (and pension liability) issues, is the solution that would go a long way. No, it is NOT the flat tax. It is the exemption of retirement income from taxation. The state loses about $1.5-2B annually by not taxing retirement income with no means testing whatsoever. So when the state raises income taxes to pay pension… Read more »
Anonymous
Nixon, Yes, the low, regressive state income tax was and still is the source of a lack of revenue in Illinois. You can also add the hefty amount that Illinois gives in tax breaks to large corporations. Let’s see… Archer Daniels Midland, Sears… Yeah, I know… the “job creators.” By the way, public employees were taxed on all income before the 9.4% was deducted as the retirement contribution. That 9.4% deduction from our checks wasn’t tax-free. As far as taxing retirement income, you can’t eliminate Social Security benefits. The world doesn’t work that way. That’s really the sticking point to taxing retirement income. Don’t think that it… Read more »
nixit71

So you can’t exclude Social Security benefits from taxation yet tax pension/401k income? The world doesn’t work that way, you say? You may want to tell that to the 25 or so states that tax retirement income yet exempt Social Security from taxation.

And that 9.4% deduction from your checks was tax-free. That’s why they call it a deferral…you deferred taxation on that amount upon receipt in retirement. The fact that IL is one of the few states that doesn’t tax it is part of the problem.

Anonymous
Nixit, Sorry about the “Nixon.” Spell check changed it and I didn’t notice it. I live in Illinois. I have a home here and only here, not in Florida, Scottsdale, Arizona, not anywhere else. I’m perfectly content to spend all four seasons here, even in the winter. I like the white snow in my backyard. My wife and I don’t take many vacations. When we do, it’s usually once a year and only for a week and no more. There was one exception; we were gone for 9 days three years ago. I hope that that’s okay with you. Do I detect some pension envy on your… Read more »
nixit71
Karl – As I expected, here comes the sob story of your meager existence in the state while not once addressing why you pay ZERO state income tax and your employed neighbor with a salary EQUAL to your pension pays 3.75%. That is true income inequality. Because if your neighbor of equal means can pay 7.65% Social Security, 10% towards his pension, and 3.75% in state income taxes and manage to survive, I think 3.75% isn’t a stretch for a retiree of equal means yet no such deductions. Much like the argument with union dues, it sounds to me like you have zero interest in paying your… Read more »
S Moderation Douglas

Well said, Pam.

S Moderation Douglas
There are still two main points of controversy in this thread. 1. Are pensions excessive? 2. Are pensions affordable? Admittedly they are not necessarily mutually exclusive. It’s pretty clear at this point, as Mark said, Illinois pensions are now not affordable. Much like New Jersey, the unfunded liability is so high there is no feasible tax increase that could correct it. (Barring the dirty words “Federal bailout” for the too big to fail states.) It does make a difference philosophically if the unfunded liability is due to excessive pensions or due to the failure by the state and cities to properly fund the pensions. But it makes… Read more »
PGMJR

Doug,

You cite California often: however, it is a different beast than Illinois. Especially since Illinois doesn’t have a law like Proposition 13. Much of the pain is self inflicted.

https://en.wikipedia.org/wiki/California_Proposition_13_%281978%29

S Moderation Douglas
PGMJR , Yes, because I live here, and they send me a check every month. Till the day I die, hopefully. There are a lot of differences between Illinois and California. One big difference between California and Illinois, New Jersey, and others, is that CalPERS receives full ARC every year, from both the state and local governments. (Although there is good argument that ARC should be higher.) The other large system here, CalSTRS (teachers retirement) doesn’t have the same protection and is dependent on the legislature to allocate funds. Some cities and counties have their own seperate systems with the same problem as CalSTRS. ————————– “Much of… Read more »
mark glennon

Pam, actually, my starting point is the simple math that says these pensions cannot and will not be paid in full. There is no combination of tax increases and spending cuts that will fix them without benefit cuts. The moral arguments and history don’t change that math. Honest actuaries know say just that.

But it’s better for all sides to address this sooner than later and to do it as fairly as possible. The Tier 2 reforms did not do it fairly.

Pam

Is Rauners plan to make all State Employees tier 2 a fair plan? I think the latest reform idea floating around was to incentivise voluntary transfer from tier 1 to tier 2 by employees themselves to avoid a wage freeze. Sounds like Rauners a tier 2 advocate. Tier 2, I think, could be fixed easily enuff by increasing the benifits so they reach safe harbor levels.

Anonymous
Pam, The Illinois Supreme Court, three Republicans and four Democrats ruled UNANIMOUSLY that your notions or ideas to cut pensions are unconstitutional (Heaton v. Quinn, May 2015). It’s a non-starter. Even if the Illinois Constitution is amended to eliminate the “pension clause,” a pension cut flies right into the realm of breach of contract. Illinois pensions are contracts. The U.S, Constitution, Article I, Section 10 protects contracts. Article I, Section 10 was specifically included in the U.S. Constitution to prevent states from breaking contracts. Rauner knows this but he’s wedded to his “talking points.” Mark should know this too because contracts are absolutely crucial to venture capitalism.… Read more »
mark glennon
Wrong. The Federal ex post facto and contract clauses are debatable, open issues, though it’s hard to see this Supreme Court ultimately overriding a state constitutional amendment on this. As a fallback, amending Chapter 9 could do it for the state, which is already being discussed in DC. For Chicago and some other municipal pensions, bankruptcy may not be necessary — especially if the city wins its argument that it’s not liable on underlying pension obligations. In venture capital as in the rest of the private sector, all contracts are subject to being voided in bankruptcy, renegotiated or simply breached (and breach of pension obligations is a… Read more »
Anonymous
Mark, What happens when a state is allowed to declare bankruptcy? What would happen to the many private vendors who depend on state contracts and get paid with public funds? Isn’t the State of Illinois in hock to private vendors by around $10 billion already and growing? What would happen to those businesses that depend on State reimbursements when it declares bankruptcy? I don’t want to be overconfident but if Chicago tries an end run around the State Constitution and initiate cuts to pensions, how will the State courts decide, especially in view of the decision in Heaton v. Quinn? Don’t forget that in 1999, Chicago’s public… Read more »
Pam

Still; no political will in Springfield with the Dems in power to amend the Constitution.

mark glennon

Rauner’s plan is DOA with the Dems so that’s probably academic. And bringing Tier 2 to safe harbor levels will probably have to be the minimum that is done.

Anonymous
Mark, “Rauner can speak for himself; I don’t speak for him and I was never in his league. I do know that he was an unmatched money maker for pensions, which is why they invested in his funds time after time. There would be no crisis if all pension investments performed as well has the ones he made for them.” I don’t really have a beef about how you earn your money and I would never think of attacking you for that, but you attacked my fellow retirees and me for our source of income, our pensions. I do have questions about the whole concept of “venture… Read more »
Anonymous
Mark, Please explain “list of irrelevancies. You attack Tier 1 retirees but have a big heart for the Tier2. Are we Tier1 annuitants somehow screwing the Tier2? How does that work? Tier2 employees are getting screwed because Madigan, Quinn, and Cullerton decided that short-changing the Tier2 is a way of saving money. You’ll never get an argument from me on that one. I agree 1000%. Tier2 should never have passed and signed into law. All vested teachers and other public employees should be Tier1, period. Tier1 retirees opposed the Tier2 bill. Due to the Tier2 unfairness and idiocy, the State will run into trouble with Social Security… Read more »
mark glennon

Dear Tired of the Lies-

You might want to read up on the many things I have written here about true “average” numbers. If you have better data, put it up: Which numbers that I’ve used would would change by how much by excluding managers? BTW, those “managers” include spikers put into management positions just before retirement, which is rampant.

nixit71

Mark – re: “put into management positions just before retirement…”

Is it possible to FOIA the pension systems for info on pay grades or positions? I would love to be able to query final pay grade and amount, year final pay grade obtained, preceding pay grade and amount, retirement year. That would be a good indicator of late career promotions. From there, you could probably extrapolate the true cost of spikes.

I have nothing against promotions, but if everyone is getting significant promotions 5-10 years before retirement, then the actual cost of their pensions is skewed even more so on the taxpayers.

Anonymous

FOIA or any other type of request? Why do you expect someone else to do it for you? Why don’t you get off your butt and do it yourself? You want someone to hand you stuff on a silver platter, don’t you? Then again, you probably have better things to do.

Suggestion: Why don’t go to the TRS (Teacher Retirement System) web page? I’d gladly give the web address, but I’m doing this right now. Besides you’re old and competent enough to do a Google search.

Karl

P.S.Thanks for allowing me to post on your blog.

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