Pension 101: Understanding The Illinois Government Pension Crisis (bankruptcy, schools)

[Manterro]

The state’s pension crisis – the worst in the nation – hurts everyone in Illinois, from state workers and lower-income residents to retirees and taxpayers.

https://www.google.com/url?sa=t&rct=...oeTOUX0rZtTPcg

[dtcbnd03]

Wow that is insane. Again we only have two options. Tax pensions and funnel 100% back into future benefits creating a compounding reduction effect (for out of staters call it a maintenance fee). Or declare bankruptcy (which I know is illegal but let's do it anyway).

[Fta23457]

Originally Posted by dtcbnd03

Wow that is insane. Again we only have two options. Tax pensions and funnel 100% back into future benefits creating a compounding reduction effect (for out of staters call it a maintenance fee). Or declare bankruptcy (which I know is illegal but let's do it anyway).

First you have to tax everyone into poverty & homelessness. Then you close down all the schools and services.
Then after all that is done maybe Congress will authorize bankruptcy.
Glad we got out

[lepoisson]

Here's the way I understand it:

1. The state promised pensions to workers. Workers only contribute a small portion of their salary, if any at all towards the pension fund.

2. The rest of it is funded by tax payers.

3. The state underestimated (decades ago) the amount of tax payers who would be in the state, so there aren't enough people to pay the bills.

[MrSirfellow]

I remember precisely how the pension problem began. Up until the middle 80's state employees contributed 6% of their paycheck to the state pension fund. This was on top of the 6.5 % that they were putting into Social Security. The fund was healthy.

If you recall the economy in the mid-eighties inflation was high. Some years close to 10 percent. Big Jim Thompson was governor and when the contract came up for state workers he had no money for any increase. The deal that was struck that year was the workers would get no increase in that contract but the state would start picking up the contribution. The state never kept their part of the bargian. That's how the whole mess started.
When the economy picked up, the pension fund thought they could make it up with investment income. That didn't pan out so well.

When workers paid their own pension plans it got funded. They made a deal that cost them 2 years of increases when inflation was out of control. Now 25 years later when they are all retired, they are supposed to take another hit.

The median pension for a state worker is $28,946. All you hear about is the former judge or school administrator that raking in $100,000.

[chet everett]

There was never a time when Illinois governmental workers paid into Federal Social Security. Any honest analysis of Illinois various pension funds shows they were NEVER "fully funded" in an actuarial sense -- the reason they could afford their imbalance had more to do with the SHORT lifespans of retirees than any made-up shift in who was footing the bill.

Statewide panels / commissions going back to at least William Stratton's era in the 1950s understood the problem of shortfalls in the pension funds. The wording of the 1970 Illinois Constitution was chosen to impress upon lawmakers that they were creating contractural obligations. Tellingly there was no corresponding plan of funding...

During the Thompson administration (which lasted 1977-1991, first term was two years as state re-aligned elections) the state pension accounting switched from "pay-go" to more normal accrued liability. The shifts in returns and increased longevity should have been met with efforts to set aside more reserves but short sighted politicians from both parties have preferred to assume somebody else will pony up the cash.

[HomeIsWhere...]

Originally Posted by lepoisson

Here's the way I understand it:

1. The state promised pensions to workers. Workers only contribute a small portion of their salary, if any at all towards the pension fund.

2. The rest of it is funded by tax payers.

3. The state underestimated (decades ago) the amount of tax payers who would be in the state, so there aren't enough people to pay the bills.

With all due respect and more likely...

"Employees do not own or control their own retirement funds under a pension system, nor do they have their own accounts. Instead, state officials and politicians control the pool of funds, allowing them to use workers’ retirement dollars as a political slush fund."

https://www.illinoispolicy.org/repor...ension-crisis/

If "the state underestimated (decades ago) the amount of tax payers who would be in the state" imagine how underestimated that count will be once they realize anyone who cannot possibly afford to remain here or who is able to...leaves the state entirely.

[lepoisson]

Originally Posted by HomeIsWhere...

If "the state underestimated (decades ago) the amount of tax payers who would be in the state" imagine how underestimated that count will be once they realize anyone who cannot possibly afford to remain here or who is able to...leaves the state entirely.

Yep, it will only get worse.

[1AngryTaxPayer]

A big part of the problem is expecting to get a raise every year when there is no money for it. Then the tricks and scheming start without public input.

[Liledgy]

The imrf pension system has worked fine for over 70 years with no problems. The employees and the cities both pay into it. Full r firemen the age (per the website) is age 67 (60 if you were hired before 2011). The downfall of it (for anyone with skills) for most people is that you have to roll the dice for 10 years (to be vested) before you can recoup anything from what the cities (maybe counties too) put in. You still wouldn't see anything compensation till age 67 but at least it is there.