By Ted Dabrowski and John Klingner -
One graphic perfectly captures the absurdity of Illinois pensions over the past three decades.
It’s what Justice Samuel Alito described as Illinois’ “generous public-employee retirement packages” when writing for the majority in the Janus v. AFSCME decision. “Illinois’ pension funds are underfunded by $129 billion as a result of generous public-employee retirement packages” he wrote.
Alito didn’t use the graphic below, but he could have because it makes his point.
In 1987, pension promises made to active workers and retirees in the state’s five state-run pension plans totaled just $18 billion. By 2016, they had ballooned to $208 billion.
That’s a cumulative 1,067 percent increase.
Contrast that to the state’s budget (general fund revenues) which was up just 236 percent over the same time period. Or household incomes, which were up just 127 percent. Or inflation, up just 111 percent.
Promised pension benefits have blown past any ability of the state, the economy or taxpayers to pay for them.
Read the report: Illinois state pensions: Overpromised, not underfunded
Wirepoints released a report on these booming benefits earlier this year, and while it received strong coverage online nationally, Illinois’ traditional media didn’t want to touch it. The findings interfere with the narrative that’s repeatedly promoted by public sector unions and politicians – that the crisis is all the taxpayers’ fault for failing to put in enough money towards pensions.
The report proved a lack of dollars wasn’t the issue. Illinois pension assets – buoyed by taxpayer contributions – also grew far faster than the same economic indicators in the graphic above. But taxpayer contributions could never keep up with the state’s explosive growth in promised benefits.
Overpromising is the real culprit of the pension crisis. Freezing and reversing that growth in promised benefits is the fair, and only, way to fix things.
The above graphic gives taxpayers every right to demand concessions from their public servants. The Janus ruling will hopefully give them more power to demand them.
And union members have a strong incentive to come to the bargaining table. After all, it’s their retirements that are teetering on the edge of insolvency in a state just one notch from junk status.
But If the unions won’t deal, Illinois should go ahead and freeze salaries, cut the subjects of collective bargaining, move to defined contribution plans, reduce headcounts and work with the feds on a form of state bankruptcy. With the constitution currently preventing any changes to pension benefits, those are the only levers taxpayers have to save this state from collapse.
This is why we need to have a bankruptcy today on all public sector pensions and payout what is there in these funds to each person.
New employees should only be on FICA or IRAs, only.
Im tired of hearing the argument that they “were promised.” This is a pension scam. All promised in exchange for power, money, and control,,,, and votes..
We need to cut property taxes in half, now. Also state income tax needs to be cut.
The idea of having these “deferred wages” is unsustainable and now people are leaving Illinois at a high rate. Everybody knows it but nobody talks about it.
The pension plans for new employees is hardly generous and there is nothing anyone can do Constitutionally about those already retired.
For those still working there might be a chance under the U.S. Constitution for such employees to be on a ‘before and after’ change in the pension statutes. And under the Illinois Constitution not even that.
So get real.
If the current pension is anything other than a defined contribution plan plus SS, then it is too generous. All defined benefit plans should be eliminated for all Government jobs. Government workers need to have skin in the economy like the private sector and face the same challenge and issues.
Was COLA in the constitution?
Since it was part of employment ‘contract it is a property right, and yes, that would be covered in the U.S. Constitution. Of course, one never knows how SCOTUS will rule. After all they ruled that illegal aliens had a right to our public schools.
Under the Illinois Constitution it is not even an issue. It is covered as the constitution covers all ‘benefits.’ Look it up for yourself.
I have written many times (well before this went to court, on this issue and I have always been right in my analysis.
For new employees SS + a 4-5% matching IRA would be logical.
However, this requires the state actually putting the money in and not “let’s don’t and say we did.”
By the way for all of those who think that SS is a majic answer that will solve the taxpayers problems, just wait until SS really goes belly up in the future.
Then the taxpayers will have to bail it out also. Already being done in Medicare which was supposed to be self sufficient but now has 42% of its revenues from general funds.
Indeed, many of the state pension systems are actually better off that SS with investments in the economy and not IOU treasury notes.
Of course such realities mean nothing to some out there.
That is overly broad. A future court ought to define it by looking at what benefits were at the time that the constitution was ratified. Did COLA exist in 1970?
Frank, a 4.5% match – where is that found in the private sector.
About 40% of companies contribute 50 cents for every dollar employees contribute up to 6% of their pay. Another 38% match employee contributions dollar for dollar, but the maximum is normally lower – commonly 3%. Source Investopedia.
And the reason fro SS is once again so the public sector has the same skin in the game as everyone else – no more special class of citizens. There is no SS guarantee unlike with IL public sector pensions. When the economy fails, government workers need to feel the pain in their 401K like everyone else. When SS benefits get cut they need to feel the same pain also. That is the point.
Actually the best option would be to pass a law in IL that the government can do nothing to set eh rates of match on private sector 401K plans and then tie the public sectors 401K match to the average match of private sector employers in the state.
It’s found all over the place Maybe you need a better job- if anyone would hire you.