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Old 12-04-2013, 12:23 PM   #21
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A couple of things I just don't get.

1. Why in the world should anyone be guaranteed a 3% COLA; just doesn't make fiscal sense.

Instead of the fang dangled formula they came up with, why didn't they just adopt the same formula as Social Security, Federal Government Pensions, and Veteran's Pensions?

2. Why are Governments still in the pension business, as they are no longer sustainable as we can easily see. The Federal Government reduced pensions dramatically back in the early 80's for new hires, and coupled it with a 401K retirement. States need to follow that lead, as taxpayers can no longer afford pensions, especially coupled with fantastic health benefits. Heck, here in NJ, current retirees and future retirees grandfathered in, get reimbursed for their Medicare part B premiums; who else gets those benefits.

Politicians pandered to the public worker vote over the years, and made promises at the expense of future generations, and it is now catching up with us. Reform is long overdue.

Look, I'm not against the public worker, as I'm a retired federal worker, but at some point Governments need to realign benefits to a more realistic and affordable level.
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Old 12-04-2013, 12:32 PM   #22
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Just for reference, the kinds of pensions that many of these public sector employees get in Illinois puts them more in the top 5% income area, not the middle class. I know a couple of retired, married teachers - their household income from their pensions is ~ $130,000 - $150,000, and before this law that was all 3% COLA'd for life. That is not middle class, independent of any opinion of 'fair' or not. A more useful figure would be what is the median pension for someone who worked a full career. I don't have that number, but I'd bet it is above the 'middle class' definition, especially when you take into consideration retirement age and COLA value. What about the middle class who has to pay the taxes to fund those pensions? IL income tax is a flat tax, BTW. Recently raised from 3% to 5%. Plus, a 'win for MegaCorps' can mean more middle-class jobs in IL. It isn't always an 'us-versus-them' game. -ERD50
As a person with a generous pension who had the cola tweaked downward recently, I still find myself in agreement with you, ERD. We all know what coulda or shoulda happened over the years, but didn't. So nevertheless, here is where they are at. Raising taxes more to continue the same exact system would have created "us versus them" game, and eventually it would have been a losing battle for the pensioners. This is a decent outcome for the pensioners; especially compared to the way it is apparently heading in Detroit. Fifteen years ago, I barely gave my pension a thought. Now I'm worried in 20 more years us pensioners will have to hide in clustered compounds in the hills of South Dakota.
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Old 12-04-2013, 12:45 PM   #23
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Well, considering that the payout is about to get a lot worse, and that their pension payouts will ultimately depend on what the political scene looks like over the next 30-50 years, I can certainly understand wanting to just get the money now in a 401k.

Frankly, I think it would probably make sense for states with serious corruption issues like Illinios to move to a more pay as you go system like a 401k. That way the politicians have fewer ways to deceive the public.

Every time I hear about the stuff going on in Illinios, I'm thankful to live in a different state. Minnesota may not be perfect, but our political leaders manage to stay out of prison.

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Considering the kind of pay out Illinois retirees have been getting under the current system, I don't see how a 401k would be superior. Maybe if they live on rice and beans for 40 years.
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Old 12-04-2013, 12:56 PM   #24
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... The middle class erosion continues.
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... BTW, two thirds of Illinois megacorp pay no taxes through deductions, perks, and loopholes. ...
I'm not sure of the veracity or relevance of your claims regarding corporate taxes.

First, when a corporation pays tax, it passes it on to the consumer in the price of the product - it essentially becomes a flat tax on the consumer, and hurts the poor and middle class disproportionately. So I think it is more accurate to say that corporate income taxes are a drain on the middle class. We should eliminate them, IMO.

This source: State Tax Revenues: Charts and Data

shows that IL corps paid $3,494,539,000 in income tax out of a total tax of $36,437,803,000 - so about 9.6% of the total bill.

Texas on the other hand, has no corporate income tax at all. So what does this tell us? Anything? What I'm saying is, it is more complicated than any single number. Big Picture.

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Old 12-04-2013, 01:34 PM   #25
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Given the current state of the state and the lack of pension reform coming from the politicians, I don't see how Illinois can recover from this. I know of some state jobs where there are 2 retired people for 1 worker. Given roughly 80% pension, that means that Illinois could be paying at least 260% of a normal salary for each current worker. I have to convince DW to get out of here.
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Old 12-04-2013, 01:39 PM   #26
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... Sure there are people making 6 figures here but that is an extremely small sampling. ...

Define 'extremely small'.

Since I like actual numbers, I took the time to look at our school district, and found that of those with 25 years or more in the system, 4.76% had pensions above $100,000. The median for that 25 years plus group was $70,975.

That is well above the median household income in Illinois ($56,576), and of course, there may be a second income in that household.

For the purpose of this discussion, I have no interest in whether anyone thinks that is fair/unfair, earned/unearned, etc. I'm just reporting actual numbers, and they are not 'middle class'.

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-ERD50
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Old 12-04-2013, 01:48 PM   #27
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Originally Posted by ERD50 View Post
Define 'extremely small'.

Since I like actual numbers, I took the time to look at our school district, and found that of those with 25 years or more in the system, 4.76% had pensions above $100,000. The median for that 25 years plus group was $70,975.

That is well above the median household income in Illinois ($56,576), and of course, there may be a second income in that household.

For the purpose of this discussion, I have no interest in whether anyone thinks that is fair/unfair, earned/unearned, etc. I'm just reporting actual numbers, and they are not 'middle class'.

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-ERD50
You are being naughty again ERD50.
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Old 12-04-2013, 01:56 PM   #28
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You are being naughty again ERD50.
In some circles, naughty IS nice...
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Old 12-04-2013, 04:02 PM   #29
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Define 'extremely small'.

Since I like actual numbers, I took the time to look at our school district, and found that of those with 25 years or more in the system, 4.76% had pensions above $100,000. The median for that 25 years plus group was $70,975.

That is well above the median household income in Illinois ($56,576), and of course, there may be a second income in that household.

For the purpose of this discussion, I have no interest in whether anyone thinks that is fair/unfair, earned/unearned, etc. I'm just reporting actual numbers, and they are not 'middle class'.

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-ERD50
Are we just talking about teachers here or all state public employees? Anyway I guess you have all the answers with your facts and figures.
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Old 12-04-2013, 04:27 PM   #30
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I know several people who are just starting their careers in the Illinois public sector and are quite excited for the 401K plan that will now be offered (court challenge pending I think?)
The DC plan won't be a 401k as that's for businesses, it will probably be a 401a DC plan.

Interestingly I have an MA state 401a DC plan and have the opportunity to use the balance to buy into the state's defined benefit pension. It looks like a good deal, as long as MA doesn't go bankrupt.
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Old 12-04-2013, 04:41 PM   #31
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An extremely important distinction is that Illinois refuses to declare bankruptcy, fully open their kimonas, and allow the courts to reorganize state finances as would happen with a private company before turning over pensions to the PBGC. Maybe some day in the future.......

.
It is not clear that a state can declare bankruptcy. The current federal code only covers sub units of states (cities, school districts, special districts, counties ...). The law does not provide for a state bankruptcies. However there is old precedent for state bankruptcies in In and Oh in the mid 1830s they spent wildely on canals roads and the like. As a result these states had to work out things with their creditors with no federal involvement.
There are issues of who is is sovereign in such a case the state or the federal government.
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Old 12-04-2013, 06:00 PM   #32
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It is not clear that a state can declare bankruptcy. The current federal code only covers sub units of states (cities, school districts, special districts, counties ...). The law does not provide for a state bankruptcies. However there is old precedent for state bankruptcies in In and Oh in the mid 1830s they spent wildely on canals roads and the like. As a result these states had to work out things with their creditors with no federal involvement.
There are issues of who is is sovereign in such a case the state or the federal government.
If Illinois would at least declare bankruptcy with the intention of opening the books for review and ask for help in determining how their creditors should be ordered in sharing whatever funds are left, then the comparisons to private businesses declaring bankruptcy and turning pension obligations over to the PBGC would make more sense. In fact, if the old precedent did not hold and Illinois could not be declared bankrupt in order to free itself of debt, "something" would happen. Myself, I'd like to see fed troops in the streets of Springfield and Chicago.

It doesn't seem like the executive or the legislative branch in Springfield wants to have the world see what they're wearing under their suits. And this is true whether it turns out they can achieve the formal status of "bankruptcy" or not.
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Old 12-04-2013, 06:16 PM   #33
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If Illinois would at least declare bankruptcy with the intention of opening the books for review and ask for help in determining how their creditors should be ordered in sharing whatever funds are left, then the comparisons to private businesses declaring bankruptcy and turning pension obligations over to the PBGC would make more sense. In fact, if the old precedent did not hold and Illinois could not be declared bankrupt in order to free itself of debt, "something" would happen. Myself, I'd like to see fed troops in the streets of Springfield and Chicago.

It doesn't seem like the executive or the legislative branch in Springfield wants to have the world see what they're wearing under their suits. And this is true whether it turns out they can achieve the formal status of "bankruptcy" or not.
My gut feeling is it would be another GM situation and same outcome all over again...
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Old 12-04-2013, 06:18 PM   #34
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Define 'extremely small'.

Since I like actual numbers, I took the time to look at our school district, and found that of those with 25 years or more in the system, 4.76% had pensions above $100,000. The median for that 25 years plus group was $70,975.

That is well above the median household income in Illinois ($56,576), and of course, there may be a second income in that household.

For the purpose of this discussion, I have no interest in whether anyone thinks that is fair/unfair, earned/unearned, etc. I'm just reporting actual numbers, and they are not 'middle class'.

Public database here:

Champion Pensions

-ERD50
Excellent work ERD50. Although it doesn't make much sense to compare the retirees from a plush school district like yours with the entire state. How does the median pension for your school district compare to the median household income for the residents of your school district. That would be more meaningful.
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Old 12-04-2013, 06:27 PM   #35
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Excellent work ERD50. How does the median pension for your school district compare to the median household income for the residents of your school district. That would be more meaningful.
Should one median pension (no longer working) really be compared to median household income which will mainly be households with at least one and maybe more active wage earners? I never expected my income cobbled together from savings during my working years to equal my active earnings, why should a government worker expect this?

You can get lot when you are holding the whip, but sometimes the whippees get it away from you. Then it's time to expect change.

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Old 12-04-2013, 06:29 PM   #36
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Frankly, I think it would probably make sense for states with serious corruption issues like Illinios to move to a more pay as you go system like a 401k. That way the politicians have fewer ways to deceive the public.

Every time I hear about the stuff going on in Illinios, I'm thankful to live in a different state. Minnesota may not be perfect, but our political leaders manage to stay out of prison.
+1

There are a lot of gov't retirees thinking that right now. We all hear stories about folks in Illinois who were awarded juicy pensions due to some sort of political connection. Or folks who were able to work the system to receive very generous pension payouts. We don't here much about the average public worker who had no opportunity to spike their pension, worked hard and effectively for a normal wage for their job and, in the end, are receiving a pension that few would challenge as overly generous. Yet, those same everyday folks are sitting there with no SS and seeing the GOP, the Dems, many conservative business organizations and many conservative citizens rallying to have their pensions eliminated or reduced. It has to be a scary thing.

Sadly most (IMO) of these everyday folks don't feel comfortable managing their own futures and therefore don't like the concept of a 401-type arrangement. Hence they leave themselves at the mercy of the politicians from both parties, business lobbying groups and many citizens. Not a good thing, IMO, to have that many people wanting to eliminate\reduce a pension you've already earned and are retired.

If it was up to me, public employees in Illinois would join SS, have a 401-type plan and a modest DBP pension (similar to the current fed situation).

You are fortunate to be living in Minnesota. You have no idea how bad it is here. You might think you understand from what you read and hear. But you can't get the real feel of it unless you're here with your feet in the hot coals.
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Old 12-04-2013, 06:34 PM   #37
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My best friend hates the Federal government with a passion. He keeps arguing that more rights should be given to governments at the local level. I counter that what the Fed does is under more scrutiny and local governments can be more abusive and corrupt, and many have certainly been.

Looks like I am right...
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Old 12-04-2013, 06:35 PM   #38
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Should one median pension (not working) really be compared to median household income which will mainly be households with at least one and maybe more active wage earners? I never expected my income cobbled together from savings during my working years to equal my active earnings, why should a government worker expect this?


Ha
Dunno Ha. The pension vs median income is really ERD50's comparison. I was just suggesting that if he's going to compare pensions from his high tier school district vs state wide median household incomes, perhaps he should also compare pensions to median incomes within his own school district. Otherwise, I agree with you and have no clue what point was being made.

Why did you ask me why a gov't worker should expect "income cobbled together from savings during my working years to equal his/her active earning?" I'm not a gov't worker and, like you, I didn't/don't expect that to be the case.

In any case, it's clear one can profess to always "be looking at the numbers" but pick the numbers and do the analysis in a manner which guarantees the desired results.
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Old 12-04-2013, 06:38 PM   #39
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My best friend hates the Federal government with a passion. He keeps arguing that more rights should be given to governments at the local level. I counter that what the Fed does is under more scrutiny and local governments can be more abusive and corrupt, and many have certainly been.

Looks like I am right...
In this one case perhaps. But there are many states much better governed than the federal government.
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Old 12-04-2013, 06:39 PM   #40
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True. I stand corrected.

PS. Think of the Fed like index investing. You'll get the average, and that eliminates the risk that you may get something a lot worse.
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