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HomeIllinois NewsDabrowski: It’s the pension promises, stupid!

Dabrowski: It’s the pension promises, stupid!



By Ted Dabrowski - 

You can trust public pension apologists to deflect any critique that calls out the failure of defined benefit plans. Unsurprisingly, their response to a recent Wall Street Journal editorial highlighting Wirepoints’ research was just that – deflection via misdirection and victim playing.

Wirepoints found that a skyrocketing growth in pension benefits, what are known as accrued liabilities, is behind most of the state pension crises playing out across the country. Uncontrolled pension benefit growth is swamping many state economies and the residents who pay for those benefits.

The apologists find the facts inconvenient, so they deflect. But they don’t disprove the core findings of our research: that unrestrained benefit growth is behind many state fiscal crises.

That was the subject of our two most recent reports: Illinois state pensions: Overpromised, not underfunded and Overpromising has crippled public pensions: A 50-state survey.

The numbers are undeniable. And it’s not just the growth rate of accrued liabilities that’s daunting. It’s how they’re crowding out everything in their path.

For example, look at the chart below. It compares the total of Illinois’ state pension promises to the state’s operating budget over time. You’ll quickly see why those promises are swallowing the budget and crowding out spending for everything else.

Unnamed (1)

In 1987, total promises made to active workers and retirees were 1.6 times, or 162%, the size of the state’s yearly operating budget.

By 2016, those promises had jumped to 6.8 times that of state general fund revenues. That’s outrageous any way you measure it.

The bottom line: Total pension benefits owed by the state grew 2.5 times faster than state revenues, year after year, for nearly 30 years.

Illinois’ pension growth has dwarfed the growth of everything else in the economy – the state’s GDP (using state personal income as a proxy), the state’s tax revenues and its residents’ ability to pay for them.

It’s little wonder that Illinois pensions are dramatically underfunded. Taxpayer contributions could never keep up with that kind of growth. It’s left Illinois with an officially-reported pension shortfall of $129 billion. And a credit rating that’s just one notch above junk.

It’s time to stop blaming taxpayers for the pension mess in Illinois. It’s overpromising, and not underfunding, that’s the real cause.

Illinois' pension crisis won't end until the growth in liabilities is halted.


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  1. Medicaid costs are even a bigger culprit but that is not the mantra of CC and IPI types.
    And this is true for states throughout the nation, yet many including including Illinois, jumped on board to get the expanded ObamaCare program.
    Funny how little play that gets but I am not laughing.
    There is no question that pensions are a serious issue and that includes SS which is probably even in bigger trouble that many of the state plans as it has no real investment assets. Again no coordinated attack on this issue which will eventually affect all those who pay any significant amount of federal income taxes as they will undoubtedly be the ones who will bail it out. Don’t think so? Then you have not been paying attention to the way these ‘things’ work.
    At the Illinois state level pensions have been significantly reduced and everybody knows it at least for new employees (not sure about Judges and GA)
    One could have new employees be on SS with a 4% matching IRA.
    Of course the state would actually have to put the money in immediately with no phony IOU’s.
    And make no mistake about it, if the state had put their share of the money in over the past decades these pensions would be in much better shape. They would also be in much better shape without early retirement buyout type plans and favoritism for those well connected to get big salary boosts at the very end of their careers. Those type of games do stink!
    Next, federal and Illinois Constitutional law. I have written on this before and have been proven to be correct. An ‘inconvenient truth’ for many.

  2. Ted,
    Excellent article, but I think a different approach is in order, which I have titled “Dr Common Apathy: or how I learned to stop worrying and love the pension debt”. The large unfunded liability in IL is the only thing preventing IL government from growing even larger, and is a blessing for small government advocates. Eventually, the pensions will consume so much revenue whole departments will have to be eliminated.

  3. One could have new employees be on SS with a 4% matching IRA.
    The match is too high. The average in the private sector is 2.67%. They way to implement any public sector match is with the arithmetic average of matches nationally, one year in arrears. That way the public sector shares both the pain or joys of the private sector, which ultimately is the real issue.

  4. https://www.wsj.com/articles/u-s-companies-have-a-new-401-k-fix-spend-more-1500283804
    many firms have long resisted because of the costs.
    The average company contribution to 401(k) plans rose to an estimated 4.7% of employee salaries in 2016, up from 3.9% in 2015, according to data on 1,900 workplace retirement savings plans run by mutual-fund company Vanguard Group. It was the highest percentage and biggest year-to-year jump since…
    If you did not get that much you had better get a better job.