The Dumpster Fire of Illinois Public Pensions is Still Smoldering

[rk911]

Quote:

Originally Posted by Rianne Correct. SS will be taxed and retirement income will be taxed. Currently it is not. Actually, I think that's OK. Heard on one of my state podcasts, it will bring in @ $2B. That will help, but we have a long way to go.

i MIGHT think ir’s OK if every single new $ was put towards paying down the debt including the gazillion dollars in unpaid vendor bills. but you know that ain’t gonna happen. not with our new administration preaching free this and free that.

[ripper1]

Well, now you have Tier 2 and Tier 3 who will be getting less benefits and have to retire much later in their 60's. Of course Tier 1 can't live forever. Seems the problem may take care of itself.

[ERD50]

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Originally Posted by ripper1 Well, now you have Tier 2 and Tier 3 who will be getting less benefits and have to retire much later in their 60's. Of course Tier 1 can't live forever. Seems the problem may take care of itself.

Yes, the lower tiers help the situation, but the actuaries have taken all that into account. And by all reports, IL is still in trouble.

-ERD50

[Rianne]

Quote:

Originally Posted by rk911 i MIGHT think ir’s OK if every single new $ was put towards paying down the debt including the gazillion dollars in unpaid vendor bills. but you know that ain’t gonna happen. not with our new administration preaching free this and free that.

I will not touch that with a 10 ft pole. That history is too recent.

I'm discerning benefit to free. Illinois needs talented, educated tax payers. How do we achieve a state population that are earners/tax payers? If you're sick, you can't work, thus a HC system (whatever that is) that keeps people healthy is one way.

If you're uneducated, you can't get a decent paying job. If you don't have a decent paying job, you're not paying much in taxes.
If I'm healthy and educated, I'm looking to find a high paying, challenging job that makes me feel I'm contributing to society and the betterment of our economic health.
Would you expect an unhealthy, uneducated person to even apply for a decent job?

Say I own a company. I get a resume or application that says the applicant has a 10th grade education and diabetes. Those are 2 strikes. And that applicant has torn sneakers. I'd say that's 3 strikes, you're out.

I'm looking at the long term big picture. This won't happen in 4 years, 5 years...this will take a major overhaul. Oh and where to start?
I'm not sure "free" is the right term.

[Chuckanut]

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Originally Posted by Ronstar $2B? Really? How many retired Illinois residents are going to stay in Illinois once their SS and retirement income is taxed?

Here is an overview of how states tax SS and retirement income.

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Seven states have no personal income tax at all: Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming. Among those that do, here’s how it breaks out when it comes to retirement income. Social Security: 31 states exempt all Social Security benefits from tax; six follow the federal formula. The remaining six use unique formulas or tweak the federal formula. Pensions: Four states exempt all pension income; from there, policies vary widely. Some states tax pensions for all but military personnel, for example.

The seven no income tax states plus the four that do not tax pension income equals only 11 states the Illinois pensioner can flee to and be certain of avoiding taxes.

[ripper1]

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Originally Posted by ERD50 Yes, the lower tiers help the situation, but the actuaries have taken all that into account. And by all reports, IL is still in trouble. -ERD50

I guess you have an answer for everything. Maybe we should just put public employees in gas chambers.

[OldShooter]

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Originally Posted by ripper1 I guess you have an answer for everything. ...

Snarky? Why? @ERD50 is just stating a fact that should be obvious. The actuaries know pretty exactly what their risk pool and obligations look like.

[ripper1]

I guess I get a little emotional about this whole situation because I am in that boat. I worked 30 years for Chicago outdoors in the heat and brutal winters. I just feel the legislators and...yes...unions have let us down. A lot of people think that public service is free and that we all have gold plated pensions. But that is far from the case. Of course there is a lot of abuse at the top....private and public.

[MichaelB]

I’m sure a discussion that is civil, free of snark and vulgarity will be more interesting to the community.

For a change of pace, you might even consider setting aside the part about blame, which is somewhat pointless, and instead discuss what the different options might be and their impact on members there, both working and retired.

[beowulf]

I agree with MichaelB and, since this is a very specific discussion concerning the situation in Illinois, I recognize that it generates extremely strong emotions from those involved. I don't live in Illinois and I have limited knowledge of their pension and tax situation. From everything I have read, the problems there go back many years and many factions are responsible for the current situation.

I do, however, disagree strongly with statements made by some posters that appear to impute the problems in Illinois to all public employee pensions (federal, state local, etc.) everywhere in the US. The state of Illinois has a long history of corrupt politicians, union fraud and other issues that have affected its public employees and their pensions. That history is not necessarily repeated in other states, many of which have far better funded public pensions.

Since what happens in Illinois concerning their pensions and taxes does not directly affect me, I will become a lurker on this topic and refrain from commenting.

[ERD50]

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Originally Posted by MichaelB I’m sure a discussion that is civil, free of snark and vulgarity will be more interesting to the community. For a change of pace, you might even consider setting aside the part about blame, which is somewhat point,es, and instead discuss what the different options might be and their impact on members there, both working and retired.

Thanks. In that light, I will try to address this post (and skip any reply to an earlier one, OldShooter handled that just fine):

Quote:

Originally Posted by ripper1 I guess I get a little emotional about this whole situation because I am in that boat. I worked 30 years for Chicago outdoors in the heat and brutal winters. I just feel the legislators and...yes...unions have let us down. A lot of people think that public service is free and that we all have gold plated pensions. But that is far from the case. Of course there is a lot of abuse at the top....private and public.

May I suggest it might help you to get past the emotional aspect of this and focus on solutions and impacts if you rethink some of this.

For example, "A lot of people think that public service is free". You can always find "some guy on the internet" saying stupid things, but I honestly don't think the average IL taxpayer thinks that way. We recognize that we need to pay for services and infrastructure, etc. If you actually think your fellow IL residents believe that, I can see where it would affect your thinking on the issue.

And "we all have gold plated pensions". I don't know how all the pensions across IL are set, but I think it is fair to say that many of them are far more generous than most private pensions. I don't know whether that rises to the level of "gold plated", but it does come into play when taxpayers are asked to pay even higher taxes to support something beyond what they have received.

And "I worked 30 years for Chicago outdoors in the heat and brutal winters." And many people have done this, and won't receive a comparable pension. If you look at the BLS site on top 10 most dangerous jobs, you will see a lot that are not generally associated with a pension at all - farm workers, fishers, loggers, truck drivers, landscape supervisors, etc.

OK, solutions/effects, and the past is the past:

Just like with Social Security, I'd like to see whatever changes are needed now, so that the future is secure. IIRC, a modest increase in SS taxes now will keep it stable in the future. But if they wait, those increases become higher, and will be more objectionable to more people.

As I said earlier, I'm fine with some IL tax increases, and some cuts in services (where it can be done w/o long term consequences) if it is coupled with some real long term solutions. Unfortunately, those solutions won't come without some pain (or they would have been done already). But at this point we have to play the cards we were dealt.

I'd look to model it after the PBGC - over time, roll in some caps on pensions. This way, the little/mid guys/gals won't be hurt at all. Unlike PBGC, it could be graduated rather than a hard cap - say on the amount above $X, you get 75% of original, above $Y 50%, above $Z 25%, etc. Let the actuaries figure where these points need to be. Combined with tax and service adjustments.

edit/add: This would require an IL constitutional amendment, as would a graduated income tax. I'm fine with both, if it leads to a solution.

We can't wish the problem away. But I can move away, which is more and more likely. But that won't help the IL pensioners. Do you really want to drive me and my money away?

-ERD50

[OldShooter]

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Originally Posted by ripper1 I guess I get a little emotional about this whole situation because I am in that boat. ...

Very sorry to hear that. Your reaction is understandable. One of the sad things about these underfunded pension situations is that the pensioners are not at fault for any of it, but it seems inevitable that many will suffer to at least some degree.

[Bamaman]

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Originally Posted by OldShooter Very sorry to hear that. Your reaction is understandable. One of the sad things about these underfunded pension situations is that the pensioners are not at fault for any of it, but it seems inevitable that many will suffer to at least some degree.

I certainly agree with the above.

But remember what happened in the City of Detroit--and San Jose--and Stockton.

Many government entities are simply bankrupt, but they will not admit it. And states that are may be hitting the Federal Government to fund them in some way in the future.

[JoeWras]

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Originally Posted by Bamaman Many government entities are simply bankrupt, but they will not admit it. And states that are may be hitting the Federal Government to fund them in some way in the future.

Which is why it may be all our problem.

[Taxman59]

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Originally Posted by OldShooter Snarky? Why? @ERD50 is just stating a fact that should be obvious. The actuaries know pretty exactly what their risk pool and obligations look like.

Do you know the difference between actuaries and the Mob? Actuaries know how many will die in a given period. The Mob knows the names!

[ripper1]

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Originally Posted by Bamaman I certainly agree with the above. But remember what happened in the City of Detroit--and San Jose--and Stockton. Many government entities are simply bankrupt, but they will not admit it. And states that are may be hitting the Federal Government to fund them in some way in the future.

It is interesting to note though that pensioners in Detroit took only a small hit of around 4.5% but did lose the cost of living part. I believe the city of Stockton pensioners took even a lesser haircut.

[GlennN]

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Originally Posted by OldShooter I think that's easy. Pension calculations should be based on the employee's base pay rate, period.

+1
From my personal experience, that's how the military and the feds do it. No such thing as "spiking".

[Teacher Terry]

In our state you can’t spike your pension. Not having a cost of living raise will really hurt people in the long term. Glad we have one.

[hopefullyoneday]

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Originally Posted by GlennN +1 From my personal experience, that's how the military and the feds do it. No such thing as "spiking".

Kinda hard to spike in the military when there is no such thing as overtime. Also the military and feds pay into social security so that helps them with additional retirement.

[Chuckanut]

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Originally Posted by hopefullyoneday Kinda hard to spike in the military when there is no such thing as overtime. Also the military and feds pay into social security so that helps them with additional retirement.

+1

One of the sad things about some of the public pension problems is that the workers were not eligible to contribute to SS. I believe this is true in Detroit and Illinois. Even though my pension is reasonably well funded, I am still thankful my retirement is backstopped by SS.