The path to our pension problem

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If you feel as though you don’t quite get how the state pension systems came to be in such dire condition, Sunday’s Springfield State Journal-Register helps you get caught up with a front page story titled, “History of Neglect.”

Doug Finke’s article points out that concerns expressed about the solvency of the pension systems in a 1959 report presented to Gov. William Stratton were by no means the first to be aired.

But in the 54 years since that report was issued, the debt of the state’s pension systems has grown exponentially, and mostly for the same reason the Pension Laws Commission warned of in 1959 – inadequate contributions by the government.

The reason for those inadequate contributions hasn’t changed either.

Putting more money into pension obligations meant funds had to be taken away from something else, such as education or health care. It might have meant cutting the state work force or forcing officials to try to pass an unpopular tax increase. 

If you’ve been following what IEA, the We Are One Coalition and others have been saying about pensions, there aren’t many surprises in the story, or in the accompanying graphs and charts.

But the evidence that the state over many decades ignored its duty to the pension systems, the participants in the systems and to all Illinois taxpayers, remains compelling.

Sandor Goldstein has done actuarial work on state pensions since 1979. He said that instead of basing payments on actuarial standards, in which contributions are made as benefits are earned, the state was basing payments on a “pay as you go” approach.

“You wait until the employee retires and whatever is needed to pay his pension, that’s what you contribute,” Goldstein said. “That was always quite a bit less than the actuarial cost.”

For a while, Goldstein said, the state at least contributed 100 percent of the pay-as-you go costs.

“Then, during the Thompson administration, they came up with this proposal that they felt they really don’t need to contribute even this 100 percent of payout because there’s been good years of investment return,” Goldstein said. “Because of that, they proposed they would only pay 60 percent of the payout.”

The original plan was to pay as you go for only one year, but that stretched into several years.

But not everyone agrees that, just because past legislatures and governors took the actions that created the financial fiasco, politicians should shoulder the blame.

But some lawmakers contend that argument doesn’t take into consideration what would have happened if pensions had been fully funded. Spending for education or state operations might have been cut to pay for pensions, and the impact might well have been felt by public workers.

“I don’t have a lot of sympathy for those folks who claim that we underfunded pension systems,” said Senate President John Cullerton, D-Chicago. “They were in there lobbying for more money for the school aid formula, for paying our contracts that they negotiated with huge benefits, for more money for higher education.”

For the record, “huge benefits” are not being paid out when one considers what the average pension system annuitant receives. For every administrator pulling down a big pension, there are thousands of pensioners who get far, far less and who receive little or no social security.

The We Are One Illinois coalition continues to try to convince Gov. Quinn and the legislative leaders to work with the unions to develop a fair and constitutional solution to the problem that, this newspaper story again makes crystal clear, the public employees did not cause.

Making the blameless bear the entire burden for the irresponsible decisions by politicians (as in Senate Bill 1) is plainly wrong. The system participants didn’t cause the mess but they’re willing to help fix it.

Illinois has a revenue problem, not a benefits problem. Diversion of revenue got us where we are. Addressing revenue needs to be part of the answer.

Read the coalition “White Paper” on pensions and the union framework for a solution

Senate Bill 1 fact sheet

Comments

  1. Here is a posting I sent out on Facebook. It’s a wee bit long, but I think I make a good case. Enjoy!

    “You can teach til you’re DEAD!” This is to all my Illinois peeps (teachers, parents of school age children, community members).
    The IEA (Illinois Education Association) has been lobbying AGAINST a couple of bills that will:

    HB1154: Completely eliminate COLAs for our senior citizen retirees… (so they still get a pension, but may loose the roof over their heads if they live too long) OR Eliminate COLAs unless an individual system in 80% funded (which would be in 2040!)

    HB1165: Broadly and IMMEDIATELY raise the retirement age to 67… (Many of our retirees were able to retire at 55 over the past 20 years and almost all of them are still involved in education or community volunteer programs. If teachers have to teach 12 more years beyond the 33 years they already do, their own quality of life will diminish exponentially as will the quality of education our Illinois students receive. If you know a teacher personally, you know what I’m talking about. If not, message me, I can give you plenty of meat (or tofu) to chew on :) BTW, these laws are for all state public workers so imagine Dad or Grandpa at age 66 slinging manhole covers or running after a group of punk-@$$ teens who just stole a bunch of cell phone from people on the L platforms.

    HB1166: Increase employee contributions to retirement by 5%… (According to Boston College, IL state employees would have the 2nd highest contribution rate in the nation. Did you know that state employees are NOT eligible for social security? To get that, one must have a separate job in addition to their full time employment. During the school year is near impossible and in the summer many teachers work for the school or are taking classes to stay current in education and become better teachers. Others may travel to bring back enriching life experiences back to their classrooms in the fall or simply recharge their batteries in the summer seeing that we do a years worth of work in 38-40 weeks.)

    So there it is my FB friends. The career path that I prepared for and pursued almost 2 decades ago for teaching teenage kids mad math skills and lessons in personal character delevelopment may come to an end in the near future if these bills come to pass. Please understand that although I care deeply about my students (past and current) and am passionate about them truly comprehending Algebra, I’m not a schmuck and know that I deserve better as a professional educator and as a hard-working member of American society. I have paid my dues and fair share for a decent retirement under the IL constitution (as have many others) and should not be shafted because former and current lawmakers made bad decisions with our retirement contributions. What the house and senate are doing is illegal and if these bills pass and the cases go to court, lawyers will profit, the state and the employees will lose time and money and ultimately it is the kids and the baby boomers who will suffer the most.

    Thanks for reading, share if you wish, and if you are from IL, please call your state representatives and give them your two cents! You can find them through a few clicks from the IEA website: http://ieanea.org or call toll-free at 888-412-6570

    Cheers!
    Stacy Ambrozich (math teacher & future rock star or Glee cast member if this teaching gig doesn’t pan out)

  2. I am currently a IL teacher and I am just plain tired of having the responsibility of correcting others mistakes. The solution to the pension problem, would be for the state to pay what it owes the pension system, period. But they would rather pass on their financial liabilities/responsibilities to current stake holders. The school districts, school teachers and public employees shouldn’t have to pay a dime more than they are currently paying to fix a problem they had to part in creating.

  3. Educators work 35 years in order to receive full benefits. Our politicians will receive a pension following FOUR years of service. What more needs to be said?

  4. Tom Willoughby says:

    I am a retired IL teacher and worked hard to get my full retirement and paid in my share. I don’t think it is fair to penalize us at the time when we are receiving our benefits and insurance. Don’t see how people in government (who are supposed to be representing our interests) could do something so ridiculous. This bill needs to be found unconstitutional on both parts and government officers should do their part to fix this without taking away from others.