Your State's Pension Liability

[Sunset]

Quote:

Originally Posted by pb4uski Yes, you have quite the mess in Illinois. The pension mess and four of your last seven governors have been incarcerated! (as of 2013). Not many other states can make that claim. My sister has a home there and they can't wait to get out once my BIL retires in a couple years. I suspect that ultimately we'll hear a giant sucking sound of people leaving, which unfortunately exacerbates the problem.

Not only that, but the State tax was raised a few years ago to 5% to help pay off some of the debts, however instead the debts continued to rise.

Now the tax rate has been lowered to 3.75% by the new governor, since the increase only really went to increased spending.

My belief is the tax rate will need to jump to 10% and they will need to tax all pensions to pay off these generous (pay + pension promises) made in the past. This will be constitutional, as the retiree's get their pension at the full amount, then have to pay taxes on it, the actual pension is not reduced.

Count me in as one of the sucking sound makers

[Sunset]

Quote:

Originally Posted by utrecht Most people couldn't tell you the funding percentage of their own pension fund. Alot of people couldn't tell you their 401 balance to within 10%. Do you really think people in Illinois know that much about the State pension fund that they aren't a member of? My guess is the ones who do know will just stay and gripe about it. I can't believe large amounts of people would uproot their entire lives and move just because of that.

For the people who do pay attention, they will quickly realize the 2011 number of Unfunded Liability/Capita: $6,505 is complex.

Since a good portion of folks in IL are poor, it means the folks who have saved for retirement/have a good job will be paying the poor folks share.

So the people with lots of savings could easily face an extra charge of many multiples of that number. Personally I will not be paying $6K or $30K for some folks pension plans when I don't even have any pension.

What I save in paying will generously more than cover the cost of a move

[Dash man]

Eventually, the constitution will need to be modified again to undo the unintended consequences. Hopefully the Illinois economy will not be in a death spiral before then.

[theoldcoach]

It's never a crisis until it's a crisis. Here is an excerpt from a report about the history of pensions in IL done by the IBHE in 2013.

"Before the 1970 Illinois Constitutional Convention, the pension rights of most state and local employees, for whom participation was mandatory, could be modified or abolished by the legislature at any time. At the time of the Convention, the Pension Laws Commission reported that SURS was 47% funded, General Assembly Retirement System (GARS) 68.5%, State Employees Retirement System (SERS) 43%, Teacher Retirement System (TRS) 40% and Judicial Retirement System (JRS) 32.3%. Noting the difference in the level of GARS funding and that of the other plans, public employees successfully lobbied for inclusion of the Pension Clause."

I am sure that the combined ratio in 1970 was higher than the current ratio, but this shows that the crisis is far from new. Legislators knew it then, and chose to continue underfunding. Actuarial data suggests that Tier II is OVERfunded. The $100 billion question is how to do we get from here to the long run of actuarial data?