Squeezy the Pension Python

[Fermion]

I think the teachers actually only contributed 2% not 9%. The district matched the 2% with another 7% which is where the 9% figure comes from.

 

[clifp]

I think the teachers actually only contributed 2% not 9%. The district matched the 2% with another 7% which is where the 9% figure comes from.

I don't know what the real truth but if you are right this statement is incredibly misleading.

Our members have never missed a pension payment, investing 9 percent of their salary from each paycheck toward retirement.

 

[bld999]

Haircuts

Here is a state that could open the gates:

CA mayors want voters to let cities cut public pensions | Represent! | 89.3 KPCC

 

[seraphim]

DWs pension is $21k. A little more information on the type of teaching job the person in the example had is essential. Had DW worked at certain private institutions, or certain communities inhabited by a wealthier clientele, she could have have made a higher wage. She preferred working with disadvantaged kids. Nor is my pension, as a recently retired public worker, much better. It's ignorance to post one high wage, and assume it to be a good example. And in Ohio, teachers don't particate in SS, and the 401b (forget the correct numbers) plans there school's come up with tend to be crap. Nor do schools contribute to that plan. Don't assume a 75% pension rate.

 

[ERD50]

... It's ignorance to post one high wage, and assume it to be a good example. And in Ohio, teachers don't particate in SS, and the 401b (forget the correct numbers) plans there school's come up with tend to be crap. Nor do schools contribute to that plan. Don't assume a 75% pension rate.

But this thread was about Illinois pensions, and I believe the numbers that clifp posted are accurate for Chicago Illinois teachers. No assumptions that I see, other than a bit of rounding.We could look up specific numbers, and I think you'd find they are right in line with what he posted.

Back to the OP - us native Illinoisans didn't bother to post anything about "Squeezy the Pension Python", because that silliness is just business as usual here in Illinois, nothing notable about it at all.

-ERD50

 

[ERD50]

Originally Posted by Fermion View Post
I think the teachers actually only contributed 2% not 9%. The district matched the 2% with another 7% which is where the 9% figure comes from.

I don't know what the real truth but if you are right this statement is incredibly misleading.

Our members have never missed a pension payment, investing 9 percent of their salary from each paycheck toward retirement.

According to the city of Chicago's own web site, it's true:

City of Chicago :: Just The Facts

How Much Do City Employees and their Employers Contribute to their Pension Benefits?

Chicago Teachers: 9% (*CPS pays 7% under collective bargaining agreement, and 2% is deducted from employees’ gross pay)

And of course, CPS (Chicago Public Schools) is funded by taxpayer dollars. I guess you need to recalculate your figures?

-ERD50

 

[Texas Proud]

I find it interesting that they say that they will not qualify for SS... well, they COULD if the elected officials voted to have them in the SS system...

But that would mean that they would have to match and they could NOT delay that match....

Yes, I think the pensions were/are to high for some.... and the politicians are the most to blame... they promise something that they cannot deliver and do not try and fix it when it is staring them in the face.... as long as you have money to send out, everything looks good....

 

[Chuckanut]

Here is a state that could open the gates:

CA mayors want voters to let cities cut public pensions | Represent! | 89.3 KPCC

With a little luck they can get the voters to let them cut past payments to vendors and people who contracted work with the city. "Acme Asphalt, we could not really afford to pay you the $500,000 we contracted for road repairs five years ago, so we are taking back $150,000. If you don't pay us in 30 days we will seize your property and sell it."

 

[Fermion]

With a little luck they can get the voters to let them cut past payments to vendors and people who contracted work with the city. "Acme Asphalt, we could not really afford to pay you the $500,000 we contracted for road repairs five years ago, so we are taking back $150,000. If you don't pay us in 30 days we will seize your property and sell it."

Well, technically the people the city should go after are past taxpayers, even if they have died or sold their house and moved to another state. If you didn't pay enough tax back in 1995 for the pension system to be fully funded, you owe money now, even if you are no longer living in Illinois or are dead.

If I just moved to the city, why should I be shouldered with all of the problems of the previous tenants? (yeah, I know the answer is don't move there)

 

[Chuckanut]

Well, technically the people the city should go after are past taxpayers, even if they have died or sold their house and moved to another state. If you didn't pay enough tax back in 1995 for the pension system to be fully funded, you owe money now, even if you are no longer living in Illinois or are dead.

If I just moved to the city, why should I be shouldered with all of the problems of the previous tenants? (yeah, I know the answer is don't move there)

Good point.

Besides, I am sure that wherever you moved from probably could use more money anyway, so one way or the other you can pay your 'fair share'. Nobody should be left out.

 

[Mulligan]

I read in the paper yesterday that the Illinois teacher pension system last fiscal year had over a 12% return and yet still added more money to the unfunded liabilities... At 40% funded, it definitely can't earn it's way out of the problem. Sad situation to be in if it is the pension system you are counting as your retirement.

 

[imoldernu]

If only it were just Pensions...

 

[Gatordoc50]

If only it were just Pensions...

My old hometown, Springfield, il with 3 days cash on hand. That's because you never know when the mob wants their money in 72 hours...

 

[BLS53]

Oh, it's for the children............................

I live in the peoples republic of IL and I missed that. We have no money in this state.

I work with a guy...his wife is a retired teacher from Chicago. Her pension is 98,500/year.

Yep. If anyone knows a representative sample of IL retired teachers, it doesn't take a genius to figure out where the money is going.

 

[Fermion]

I am assuming most of these teachers would have a hefty 403b account since they were only contributing 2% of their salary to the pension fund and didn't have to contribute 6.4% to social security?

This might ease the pain a bit if the pension payments need to be reduced.

 

[clifp]

According to the city of Chicago's own web site, it's true:

City of Chicago :: Just The Facts



And of course, CPS (Chicago Public Schools) is funded by taxpayer dollars. I guess you need to recalculate your figures?

-ERD50

I don't get how can you claim that teachers pay 9% of their salary (a reasonable sum but less than I contributed to my 401K) when the reality is they pay only 2% and the CPS contributes 7%. Geez

So if I recalculate my figures you need to add 17% to teachers salaries when comparing to the public sector workers.

 

[Walt34]

Teachers are no different from other people. Heck, I know (slightly) a retired math teacher who is over $500k in debt.

Go figure.

 

[ERD50]

... I work with a guy...his wife is a retired teacher from Chicago. Her pension is 98,500/year.

That made my eyes open wide. Wow.

Yep. If anyone knows a representative sample of IL retired teachers, it doesn't take a genius to figure out where the money is going.

Right, you can look them up here - though it helps to know if they were teachers, admin, etc..

Champion Pensions

I looked up a few of the retired teachers I know (outside of Chicago), the first three were $81K-$84K (34-38 years), and this has a 3% COLA factor. Found a few more in the mid $60K's, had to get down to ones that retired with 27/28 years to get to mid $50K range.

I looked up salary history on one elementary school teacher, $84K pension, salary was $85K in 2001, and (miraculously?) jumped to $107K in 2003 (retirement year)! A 26% increase in a bad economy! Of course, this factored heavily into the pension calculation, but the contributions were based on a lower salary history.

And most of these are taken before age 65. For comparison, my private pension (non-COLA) would be cut in half if taken at 55.

I think that it is a mistake to make a judgement on whether someone else "deserves" their pension. It is pretty hard to know how hard someone else's job was or how hard they worked.

I agree with this, but as far as I could see, no one made any such statement before your post. So why bring it up?

In case it is misunderstood, my comments are not directed towards 'deserve' or 'fair', they are just the factual numbers we must deal with here in Illinois. An $80K 3% COLA pension is a bill to pay, whether it was 'deserved' or not. Facts.

The fact is that an agreement was made, the work was delivered as promised over many years and there is an expectation that the agreement will be honored.

No one wants to see promises broken. But the question is - what can be done if the money is not there? We can take a cue from the private sector - if my company went BK, my pension would fall under the rules of the PBGC, and my pension could be capped. I see the current cap, w/o COLA, is ~ $37K for someone retiring at 60 YO (pretty typical of the pensions I quoted). Add maybe $20K SS that a private sector might get, and I think you have a reasonable basis for comparison of what could reasonably be done - and that $37K would not be COLA'd.

Should the expectations of those in the public sector be higher than those in the private sector? It is tough to determine 'fair', but how about 'equal'?

A bit OT, but was 'the work delivered as promised over many years'? Seems the Union fights tooth and nail against any attempt to measure teacher performance, so how can we know this?

The fact that the pension was not adequately funded falls on the governing body that refused to fund it properly and the voters who allowed them to get away with it.

This gets complicated. The unions supported the campaigns of the politicians. Then they negotiate with them. The taxpayers really didn't have a seat at that table. The mailings my daughter gets from the Teacher's Union reads like a campaign ad for one party here in IL.

OK, people will probably find this article informative.

Set the record straight on teachers pension fund problems | catalyst-chicago.org

Interesting that an article that claims to 'set the record straight' gets the facts wrong on the Chicago teacher's salary contributions. They are 2%, not the 9% claimed as I linked to earlier - big difference. It seems intentionally misleading, as the 9% number is out there (but 7% paid by their employer), so it is easy to misinterpret. Cuts the credibility of that article by a lot.

So to get back to the point of what to do in IL - I just don't think you can take some sort of PBGC type pension limits/caps off the table. Raising IL taxes further might just create more of a downward spiral in revenue, and that could make it even tougher to meet pension responsibilities in the future.

-ERD50

 

[Chuckanut]

I am curious. Was the Ill-in-noise pension system ever reformed at all?

I ask because in my home state we have moved from a very generous older plan (closed to new members since the 70's) to a less generous DB plan, and now to a hybrid 50/50 DB/DC plan. Many if not most new people choose the hybrid plan because it has less restrictive retirement rules and give one the opportunity to put more money aside and choose where that money goes. IMHO, it's a win for both the state (less future obligations) and the employee (a chance to invest more and earn more while still having a guaranteed minimum pension).

Really, reforming the public pension system while not easy is not that difficult. Many states have done it.

 

[ERD50]

I am curious. Was the Ill-in-noise pension system ever reformed at all? ...

New IL state employees, hired in 2011 I think, are under a much more conservative plan. This will help 25-30 years from now, and helps very modestly now as less is needed to be contributed fund those future expenses.

The State Constitution says something to the effect that benefits cannot be reduced. It is debated whether this applies only to earned benefits, or also to future benefits not yet earned for current employees. Some argued it even applied to people not yet hired (they lost)!

Private employees have definitely experienced changes to future benefits. Despite a lot of wailing (The Retirement Heist), changes to earned benefits are rare, with the exception of BK companies and high earners hitting the PBGC caps. Pilots were hit hard by this because of the forced early retirement rules.

-ERD50

 

[imoldernu]

Every time we get into a "who owes what to whom?" I think about my share of the debt, and go to the charts that break down the debt. I was a little surprised to see that my share of the Illinois debt is about $12,000 while those who live in Michigan owe less than $7500 to their state. New Yorkers owe more than $17,000 per citizen, and those who live in Wyoming, $4,000

State of Michigan Debt Clock

A few billion here, a few billion there, and ya know... ?

My share of the National debt is about $54,000. If it would help, and everyone else did it, I'd be happy to pay my share!

 

[Fermion]

My share of the National debt is about $54,000. If it would help, and everyone else did it, I'd be happy to pay my share!

I paid $57,500 in federal tax last year, so I have done my part!

 

[NoiseBoy]

I am an Illinois resident who is vested in one of the State's pension plans, although not the one for CPS. Currently I work in the private sector for a large company headquartered in Illinois so I try to see both sides of the pension funding issues here. As a point of reference, since roughly 2003, new employees at my megacorp only have a 401k option for their retirement savings plan. The company match is 6% (there are some rules around that) and of course employees also contribute 6.2% to Social Security. So, employees who want the maximum match will contribute at least 12.2% of their gross pay towards their retirement each year and the company will contribute the same amount. Using 59.5 for the 401k and 62 for Soc Sec, a private sector employee who doesn't have FIRE goals can expect to work 37 to 40 years before they can access their retirement savings.
When I look at the information about the pension plan for CPS that has been posted in this thread, I can see a number of things on the employee side of the equation that just don't seem to be sustainable. First, a 2% contribution rate is simply not enough. We can debate the relative pay of teachers, but who on this forum would expect to FIRE by only saving 2% of their salary? Next, the 3% fixed COLA is also another place where I think the rules could be tweaked such as using CPI-U instead. Lastly, the rules that determine at what age a participant can retire and receive a full pension need to be balanced with the longer life expectancies that are common today. The changes can be phased in, but to have any useful impact, they will have to affect some of the current participants.
Regarding the State skipping contributions in the go go 90's when the funding levels were 100%, I remember when our V.P. commented about how the pension plan portfolio for our megacorp was doing so well that the company did not need to make any contributions. I also recall co-workers quitting to become day traders. That was in 1998. In 2003 the company froze the plan to new participants and in 2011 they kicked out anyone who wasn't yet 40 and all benefits will be frozen on 12/31/2019. I made the cut both times so I am hopeful that they are done making reductions, but you never know. I know many long time employees who have been affected by these changes. I suspect this is because, when they hired in 30+ years ago, the promise of a future company pension as well as full medical benefits, caused them to spend most of their take home pay.
On the State's side of the equation, I am not sure what can be done. It's one thing to ask the State to meet its pension funding obligations, but to do so without modifying the rules for benefits seems likely to drive the State's budget over a cliff. I do wish there were more constructive ideas presented by both sides. As to how all of this happened, I remember a conversation I had with the director of the facility that I worked at for the State, and he said that the legislature found it easier to pass benefits increases than pay increases because they didn't have to pay for them right away. I guess that day has arrived.

 

[Gatordoc50]

It doesn't help the budget when retirees take their pensions and move to Florida or Texas to spend them.

 

[Chuckanut]

Next, the 3% fixed COLA is also another place where I think the rules could be tweaked such as using CPI-U instead.

Do you mean that a pensioner under this system gets 3% more every year regardless of the inflation rate?