Riverside Info » About Riverside
Pensions
(98 posts)-
Posted Wednesday Jun 16, 2010 19:21 #
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posted by mr MONDAY FEB 28, 2011 19:24 in this thread and moved here by request:
I think we are spending too much time worrying about WI. We should be worrying about the situation in Illinois. IL probably doesn't have the options available that they have in WI.
Here in Riverside, we are responsible for several pension funds:
1. The five pension funds that the state of Illinois - all of which are severely underfunded. These are the teachers, the colleges/universities, legislators, probably some funds that cover administrative employees, judges.
2. County pension funds - I don't know how many they have. I don't know if they have separate funds for the court employees.
3. In addition, educator pension funds that the state funds, the school district also has to kick in a share of the pensions. The employee also kicks in a share, but typically, the school picks up the employee share for administrators like principals and superindentents.
4. Riverside also has to fund its municipal pensions for its own police, fire, public works. I suppose there are also library and township pension.
Laws were recently passed in Springfield to require municipalities to fund their municipal pensions up to a certain level - one based on actarial projects by 2015. This would require the City of Chicago to double its property taxes by 2015. I wonder what this does to Riverside and if this applies to all of the local funds - county, school district.
Many people who support collective bargaining for government employees undoubtedly voted against the last village tax increase. We have been told we have a "structural deficit" - meaning expenses are rising faster than revenues. My guess is that the structural part of the equation is pensions. That is probably the main component of the expenses that are rising faster than inflation. Riverside will not be able to fund pensions unless the residents votes in a tax increase. At least how the current board has been operating. I think that we have been funding prior to this, but who knows what the actuarial projections the funding has been based on.
I am concerned - the population base of the county, the state is declining. The people who remain are going to have to pick up the pension obligations established when the population was larger. I also wonder if some communities are unable to meet their local obligations - would someone look to the rest of the state to share in the shortfalls?
Attempts to renegotiate the pensions for current employees are complicated by the fact that the Illinois state constitution says that pensions promised must be paid without alteration. That is interpretted to mean that if you start working for the state at age 25, the structure and rules of the pension plan that are in affect when you are hired must remain in place until you retire - per the constitution.
Of course, there is nothing like this in the private sector - and for sure - not for Social Security.
Every state has a different series of tools they can use to slow the growth of these pensions and other benefits. Illinois seems to have fewer tools.
Different ideas have been floated at the federal level to help states like Illinois lighten its load-
1. allow states to file for bankruptcy - which they can't now.
2. disallow tax deductibility for state and municipal bonds if pensions are not funded to an acceptable actuarial level.Here's a recent article on the state of ILlinois pension issues. I think it also touches on local pension funds.
http://sunshinereview.org/index.php/Illinois_public_pensionsIt doesn't matter if the state now puts a warning about the state not funding pensions. By the constitution, we owe it no matter what.
Anyway, WI is a nice to watch, but our own situation should command more of our attention.
Posted Monday Feb 28, 2011 21:32 # -
I saw an idea debated in the NYT today to move states workers pensions into 401k. I assumed that it wd be cheaper for the sponsor / employer since that is what my ex private company did about 12 yrs ago. But it seems like this is not necessarily the case.
http://www.nytimes.com/roomfordebate/2011/02/27/why-not-401ks-for-public-employees?ref=opinion
I did have a question on the stmt above,
Laws were recently passed in Springfield to require municipalities to fund their municipal pensions up to a certain level - one based on actarial projects by 2015. This would require the City of Chicago to double its property taxes by 2015.
Obviously, the C of C will not dbl its taxes in the near future. My initial question was - what if thet pensions were not funded? I then saw that it is written into the IL constitution. Will Gov Quinn send out the national guard on himself for not funding it? Is this what is meant by the proverbial 'kicking the can down the road'? ie, not paying today, but intending to pay it in the future?
Posted Monday Feb 28, 2011 22:09 # -
I was talking to an old friend who is a retired county worker. He told me not only has the county failed to fund their portion of the pension oblicgations, they also did not put the employee's salary contributions in for the last decade or so. Used them for " God knows what" were his words.
Posted Tuesday Mar 1, 2011 11:40 # -
But he is still collecting his pension, correct?
Posted Tuesday Mar 1, 2011 11:42 # -
For those of you supporting the PUBLIC sector unions in Wisconsin, let me relate this to what is happening in Illinois.
Illinois is broke. Illinois' pension obligations have an $18 BILLION shortfall. The governor rammed through a 67% income tax increase in an effort to somehow start paying the pension obligations. This means that all of us in Illinois just had hundreds and thousands of dollars taken out of our paycheck FOREVER to help pay the pensions of the PUBLIC sector workers. Is this fair to me and you who do not belong to these PUBLIC sector unions? I don't think so. Why do I have to pay for the pensions of these workers? No one pays into my 401k but me.
When you go to these unions and ask for them to increase their pension contribution and an increase in what they pay for their healthcare, you are shouted down as anti-union. Why should PUBLIC sector unions have a better deal on my taxes than what I have through my own efforts? Studies have shown that PUBLIC sector wages are higher than those in the private sector. I don't think some of the pro-union posters realize that it is your tax dollar that is funding PUBLIC sector salaries, pensions and healthcare benefits.
Posted Tuesday Mar 1, 2011 11:55 # -
Wouldn't matter if they did put more towards the pension. The politicians would use it for something else.Once again, the unions did not create this mess. The Politicos did. No bid contracts. Sweetheart land deals. etc... ad nauseum. I'm not talking republican or democrat here. You well know that at least in Illinois there is little if any difference between the two.
Posted Tuesday Mar 1, 2011 13:11 # -
Public sector employees' compensation packages, including contribution levels, should track with their comparable private sector neighbors. Can't these comp pkgs be adjusted to reflect new economic conditions?
Is that what is meant by 'opening the contract'? It does take to two to dance, to have a contract or an agreement. The gov officials, supposedly representing us, did give them these deals. Were these deals done in secret? This needs to be opened up for everyone to see. The press should better cover it. We as citizens should better watch how our money is spent, too. With the internet now, hopefully we can minimize 'smoke filled rooms'.
ANd I just read that the politicos spent what was supposed to go the pensions in yrs back 'for something else'? Again, that is not fair to the low wage workers who were counting on this - and it seems like something Enron would do.
If our supposed representatives did give away the store, to use mr's phrase from these pages, then we should elect people who will better serve us.
I support the right of unions , even in the public sector , to exist and to get a reasonable compensation pkg for its members. MAybe these pension deals were hammered out when the norm was 5 pct a yr? When was that, the mid 90s?
I am curious - pensions seem very complex - where are the pension obligations in the priority scheme of State of IL's bills to pay? Are the pensions being paid now? It was asked in this thread whether that county worker was still receiving a pension. Or are these pension obligations *long term obligations * sort of like in the case of social security it is said that *long term* there will not be enough money in Soc Sec for the younger folks? SOrt of like funding the reserves? This seems pretty foggy to me, but I guess this drove Quinn to request and get a 67 pct increase. I assume it was for other items, too.
I guess it would be good right about now to see some sort of graphic that shows a breakdown of the IL debt and Bills/obligations.
Posted Tuesday Mar 1, 2011 13:59 # -
Eric is correct that the significant underfunding is not the fault of the union. But there are two reasons for the high level of debt and public anger. The second reason is the lucrative nature of the pensions themselves. The unions sued to force CA and NY to fund their pensions - and they did. Yet the pension obligations are still projected to explode. These are states with already high taxes.
mrt makes a couple of interesting statements:
Public sector employees' compensation packages, including contribution levels, should track with their comparable private sector neighbors. Actually, when public employee compensation is negotiated, the benchmark is what other public employees in other states have secured.
Can't these comp pkgs be adjusted to reflect new economic conditions? Not the pensions, supposedly. The news stories talk about the fact that in Illinois the pensions are constitutionally guaranteed. Whatever short falls there are in the fund must be made up by the taxpayers.
And I just read that the politicos spent what was supposed to go the pensions in yrs back 'for something else'? Again, that is not fair to the low wage workers who were counting on this - and it seems like something Enron would do. The government can legally do things that are illegal in the private sector. Social Security Funds have been spent on other things too.
I support the right of unions , even in the public sector , to exist and to get a reasonable compensation pkg for its members. MAybe these pension deals were hammered out when the norm was 5 pct a yr?
The phrase "5 pct a year" does not have any meaning with regard to pensions. A pension payout is based on a formula and a series of rules. Some of the values plugged into the basic formuala are double or triple what an equivalent value in private industry - or even federal pensions. For example, the City of Chicago allows the average salary to be multiplied by 2.2% for each year of service. California is 3%. I think private industry has been 1% to 1.5%.
In Illinois, pensions go up annually 3%. Private sectors pensions do not go up at all, not even private sector union pensions.
I could go on an on about the various rules in the program that make these pensions extremely lucrative - overtime pay counts, the value of car allowances is added to salary. I have a feeling the unions wrote the pension rules and no one even looked at them, or the obvious things were modified, but no one caught a number of other things -like you can collect a pension based on a salary you were paid as an officer of a union local.
The steep increases in pension formulas actually seemed to occur in the late 1990s or early 2000s. I am sure some of the underfunding has to do with changes to the pension formula that affected people relatively close to retirement. The lucrative benefits should have been funded for twenty or thirty years - but the formula changed too close to retirement - amounting to retroactive increases in benefits. It's hard to fund for that.
As for the funding, that's complicated. The state of Illinois is actually borrowing to pay pensions. They put the amount that they need to pay in the current year in the budget. They borrow for the budget shortfall. As for the tax increase, it doesn't make a dent. The tax increase largely enabled the state to continue to borrow. Their credit rating isn't so hot. I have seen estimates that the income tax needs to double and the sales tax needs to go to 13% to begin to make serious strides towards funding these pensions.
Posted Tuesday Mar 1, 2011 18:36 # -
Saw in today's Tribune a Letter to the Editor that gave a state pension point of view, which I have not heard as much in the pension discussion. Feel free to reply to this letter. Is one of the issues that pensions are extravagant? Arent they something like 90-100 pct of the last salary an employee had at retirement?
THe letter writer puts the blame on the municipalities that 'kicked the can' down the road not paying into the agreed upon pensions. But it seems to me one of the problems is the extraordinary benefits in the first place, the blame of which would have been our elected representatives who negotiated the terms of the pensions.
Funding pensions
The recent outcry over public pensions has gone viral. Public sector employees are under attack by those claiming their public pensions are "unsustainable." The proponents of those changes point to "extravagant" benefits as the cause of the current pension crisis. For municipal police and fire pension funds in Illinois, the real cause lies with the municipalities themselves.In 1993 when the Illinois Legislature passed "pension reform," it allowed municipalities to pay dramatically lower payments into their police and fire pension funds in the short-term, with the knowledge and understanding that much larger payments would have to be made "in the future." James McNamee, who founded the Illinois Public Pension Fund Association, sued the state of Illinois over the funding change. The case went to the Illinois Supreme Court. The Supreme Court essentially stated that the individual funds should only be concerned about making the benefit payments and the funding was the responsibility of the municipalities. It appears it forgot that benefits cannot be paid without proper funding.
As you would guess, the municipalities took the opportunity to save money in the short-term and put off the obligations to the future. (The set-up was actually a negative amortization. The principal and most of the interest was put off to the future. In mortgage terms, that is known as "predatory lending" and is illegal in Illinois. The Legislature and Supreme Court apparently did not think it was illegal/wrong for pension funding.)
Although police officers and firefighters did not descend on the capitol as a mob, in retrospect we probably should have. We did grasp the implications but foolishly thought the court system would recognize the scam being perpetrated by the municipalities with the help of the Legislature and stop it. Now that the future is here, municipalities want to blame the benefits for the cause of the lack of sustainability.
Police pension funds have been in place 75 years. The only reason they are not sustainable in their current form is that the money was not paid in by the municipalities as it should have been.
— Donald M. Bisch, president, Naperville Police Pension Fund
Posted Wednesday Mar 9, 2011 23:10 #
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