I’ve been biding my time on the incipient public pension deal working its way through the Illinois legislature until something has actually been enacted into law. It’s far from a done deal at this point and I don’t think it’s too much to say that, if the present deal can’t pass, no agreement that actually confronts Illinois’s public pension problem has a chance of being passed and Illinois’s only recourse would, ultimately, be bankruptcy.
The broad outlines of the deal are a reduction in public retiree cost of living adjustments, a higher retirement age for younger workers, and delays for younger workers in when they can expect to receive cost of living adjustments. During periods of very low inflation (like the present) that’s probably just fine but what if the circumstances change to double digit annual inflation as we had in the late 1970s?
One of the great ironies of this entire issue is that I would bet a shiny new dime that 90% of those who are complaining about the terrible injustice of this pension deal voted for Blagojevich, a primary architect of our problems. When you go fishing and you don’t catch fish, you’re entitled to complain. However, when you go fishing and you do catch fish, it’s too late to complain that what you really wanted was filet mignon.
One of my misgivings is that in Illinois different public employees are paid from different funds and not all of the funds are in equally bad shape. Unless this deal preserves those distinctions it might well be that Illinois teachers will in effect be paying for the retirements of state government employees which doesn’t quite strike me as just. Additionally, there’s the problem that Chicagoans pay for the retirements of retired Chicago Public School teachers and retired teachers who didn’t teach in the city while Illinoisans who don’t live in Chicago just pay for the retirements of teachers who didn’t teach in Chicago which is obviously unjust. I’m afraid that’s one of those injustices that is hallowed in tradition.
I don’t think most people – including lawmakers – understand pensions, how they’re funded, and how benefits are paid out. This has made them easier to raid when politically expedient. The only safe thing for pensions is to find trustworthy managers who set funding levels, and consistently meet those levels.
The deal – if it passes – does seem to put most of the burden on teachers, according to this graph: http://www.chicagotribune.com/news/local/ct-met-1203-pensions-gfc-eps-20131202,0,4597796.graphic
Also, the * at the bottom has me worried: $5 billion in ‘last minute’ savings? Is anyone else scared that lawmakers can find billions in ‘last minute’ savings? That money did not come from searching in our state’s couch….
That’s for the same reason as the one given for why Willie Sutton robbed banks: it’s where the money is.
It’s a consolation, at least, that Illinois kids are getting a great public education!
@TimH, I am not sure if this is what Dave is alluding to, but the Census shows for Illinois:
Public Elementary & Secondary Education
266,363 Full Time Equivalent Employees
$1,202,120,594 Total March Pay
All State Employees
131,153 Full Time Equivalent Employees (61,990 in Higher Ed)
$658,956,332 Total March Pay
So, it would seem a 2:1 ratio for teachers to state employees might be expected. I don’t have figures for retirees offhand to make a better comparison.