The Dumpster Fire of Illinois Public Pensions is Still Smoldering

[Clone]

I would love to see some data on the percentage of public employees who are still 'spiking' their pensions, and the amount of pension increase spiking pensions provides as of 2018. Oh, there should also be a good definition of what exactly is meant by the term 'spiking'.

Here was one article regarding spiking of teacher pensions by giving them a large raise in their final year. https://www.chicagotribune.com/news...on-spiking-rauner-schools-20180619-story.html

In the past, some districts routinely negotiated and awarded outgoing raises for retirees of up to 40 percent as a way to pad their pensions for life. That expense got sent along to the state, which means taxpayers throughout Illinois are paying, and paying, for these districts’ willingness to give away Other People’s Money. But not anymore. School districts can still award generous pay increases in the final years of a contract, but they’ll have to tap into their own funds and write a check to the state to cover the cost of their largesse.Some are doing just that.

A recent analysis by the Daily Herald’s Jake Griffin found that from 2015 to 2017, 86 suburban districts paid more than $2.7 million total in penalties for violating the previous 6 percent per year cap. Statewide, including that suburban contingent, school districts were charged a total of $11.2 million in penalty costs.

During that time period, according to the Daily Herald, Elgin Area School District U-46 paid $436,542 in fines. Community Unit District 300 in Algonquin forked over $312,949. And Lincolnshire-based Stevenson High School District 125 paid $133,178.

Give outgoing raises for the purpose of spiking pensions. Looks like the school boards are not concerned about the taxpayers future burdens.

Step 1. Eliminate the ability to spike pensions. If nobody is actually doing it, then there should be no opposition, right?

Step 2. The old concept was that civil service jobs paid less because of the better benefits. If the jobs pay has been market adjusted, then perhaps the level of benefits needs to also be market adjusted.

Step 3. Adjust the future benefits for future employees to be more appropriate to the market.

We (the voters) do not seem to be able to hold politicians accountable for responsible governance. I don't know how you unwind the fiscal mess that exists. Change the formula, and inflate your way out of the bind, I guess. The folks who did not game the system are the most at risk. The school janitor who is just getting by is a very different case then someone who retired at 52 with 110% of their salary.

 

[OldShooter]

Dallas has a new set of rules for retirement like what you are suggesting. The result is that Dallas police officers are leaving to go to other cities with more expensive homes with a higher tax rate to help fund their pensions. Now this month Dallas has to hire 250 new police officers because of officers leaving and existing officers not willing to work overtime because it wont hep their pension. Just to get people to apply now Dallas had to increase starting pay to 60k a year. so now 21 year olds can make 60k in their first year without a degree.

I don't have any trouble with that. The job market is called the job market for a reason. Offered pay should be adequate to get a decent-sized pool of qualified applicants but not more than this. It should also be high enough to retain the majority of qualified staff, though there will always be turnover. The situation will sort itself out.

 

[hopefullyoneday]

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

That is now being done is most places in Texas. Unfortunately now to get qualified people to apply for public service positions cities have to increase their starting pay. Which in the end it will probably equal out to the same pension benefit if they would have just left the benefits alone. But now payroll just went up and overtime rate just increased so now more taxes to pay for payroll instead of pensions. All you did was rename the problem.

 

[samclem]

Just to get people to apply now Dallas had to increase starting pay to 60k a year. so now 21 year olds can make 60k in their first year without a degree.

If that's what it costs to get qualified applicants, then that's what it costs. It seems preferable for a city to pay what it costs at the time of the requirement rather than to underpay today and encumber future taxpayers by allowing "spiking" or other practices that push these costs off on future taxpayers (or, puts the employees at risk of less-than-promised benefits in the future).

 

[hopefullyoneday]

From what I have read there are two big problems here:

1. Allowing unused vacation pay to be included in the pension calculation.

and (or am I wrong?)

2. Only using the final year to calculate the pension benefit.

FWIW, my pension is calculated using an average of my 5 highest years earnings. Like I said, I worked for the wrong government organization.

Or maybe not, since my pension is more securely funded at about 85%.

Using the final year could also hurt. My highest year was 3 years ago. My calculation use to be 3 highest years w/overtime. Now its highest 5 base pay. And i am stuck where i am at unless i want to start over a whole new career in another field.

 

[hopefullyoneday]

I don't have any trouble with that. The job market is called the job market for a reason. Offered pay should be adequate to get a decent-sized pool of qualified applicants but not more than this. It should also be high enough to retain the majority of qualified staff, though there will always be turnover. The situation will sort itself out.

True, but now you just increased payroll. Payroll is payed for by the citizens. Also all Dallas police officers and firefighters just got raises across the board for all ranks and years of service because of the increased starting pay.
In my opinion in the end if cities pay a higher wage and decrease benefits it will still equal lower pay and higher benefits. Either way taxes will get raised to pay it.

 

[Ronstar]

I believe pension calculations are based on base pay. But I have heard that some govt workers forgo raises a few years before retirement in exchange for a big raise in the pension calculation years.

 

[OldShooter]

True, but now you just increased payroll. Payroll is payed for by the citizens. Also all Dallas police officers and firefighters just got raises across the board for all ranks and years of service because of the increased starting pay.
In my opinion in the end if cities pay a higher wage and decrease benefits it will still equal lower pay and higher benefits. Either way taxes will get raised to pay it.

Well, of course. But there is no alternative. If I advertise a job with specific pay and benefits and do not get a decent pool of qualified applicants my only option is to increase the offer. That's where you are with your Dallas cops, increasing the offer until there are enough qualified applicants and making sure that pay is high enough to retain most of the good people.

Admittedly, public employee unions make working with market rates difficult. AFIK most teacher contracts pay all types of teachers on the same schedule, then the school boards cry because they can't find STEM teachers at the same price as second grade teachers. A while back I read about a city firefighter job where they had 50 applicants. That means the offered pay was unnecessarily high, driven there I'm sure by the union. So this is not easy but if government moved in this direction you would probably see tax savings on many overpaid jobs.

 

[Clone]

Using the final year could also hurt. My highest year was 3 years ago. My calculation use to be 3 highest years w/overtime. Now its highest 5 base pay. And i am stuck where i am at unless i want to start over a whole new career in another field.

I believe my pension was based on the average of the three highest years of my last 5 years of service. It was the straight salary, without performance bonuses. The new plan (for folks hired perhaps 15 years after I was hired) is a different type of calculation. Their pension will be less. The company does provide a greater match on the 401k. The plan I was under would match $1 per $1 on the 1st 6%. The new plan will match $2 for $1 on the first 2%, then $1 for $1 on the next 4%.

 

[Chuckanut]

I realize that in a discussion of the Illinois pension problems my situation doesn’t count for much since I did not retire from Illinois. Nobody ever offered me a big pay raise In my last year or two so as to spike my pension. [emoji33] I offer my experience only to show that other states don’t follow the Illinois way of doing things.

 

[beowulf]

At least in IL, the problem is that adequate contributions were not made when they needed to be made (many years ago). The correct thing would have been to make those contributions, and raise taxes at that time. In that way, the voting public would have a say in it at least. I suspect that the public would have shot down the increases, and when they realized it was required to fund these pensions, they would have asked for pension reform back then. Or accepted a cut in services, or a combo.

ERD50-

I guess where you live in Illinois, the public gets to vote on state and/or local budgets. I know of no state that allows the public to directly vote on a state budget (CA with their tax limit is a different story - they still don't get to vote on each budget). Not sure about counties and cities/towns. In VA, no one ever gets to vote on a specific budget. You elect your representatives and they vote. I think that's true of most jurisdictions. So exactly how would the public shoot down tax increases? By voting in new reps at the next election cycle?

In the interests of cutting down on reposts, I left out the part where you make an analogy to paying for pensions years after the employee was promised them being the same as being asked to pay more for a TV years after it was bought. Both you and I know that's a totally invalid and ridiculous comparison. In one case you are talking about raising the price of an item after receipt and in the other you are referring to a contractual agreement (promise) to pay benefits as part of a wage package. The fact that taxes may have to be raised or services cut has no nexus to your TV example.

I've locked horns with you several times on this issue and you seem to have an intractable belief that pensions for current employees and retirees should be cut prior to raising taxes or cutting services. I don't have a problem with changing pension benefits for new or employees that have only worked a short time, but I do not understand your animosity towards the pensions of current employees and retirees. It's as if you were burned by this in a private company and want to share your pain, or that you just don't like public employees.

 

[rk911]

...Nobody ever offered me a big pay raise In my last year or two so as to spike my pension....

that practice *officially* ended years ago

 

[rk911]

.... I don't have a problem with changing pension benefits for new or employees that have only worked a short time, but I do not understand your animosity towards the pensions of current employees and retirees. It's as if you were burned by this in a private company and want to share your pain, or that you just don't like public employees.

the problem in illinois is that the state constitution prohibits any reduction in retirement benefits. that’s the gist of the wording, not the precise text. i seem to recall a measure passing one or both chambers a few years baxj that would switch new employees to a defined contribution plan from a defined benefit plan but the state supremes rulled uh-uh. so the hole continues to grow.

 

[H2ODude]

I realize that in a discussion of the Illinois pension problems my situation doesn’t count for much since I did not retire from Illinois. Nobody ever offered me a big pay raise In my last year or two so as to spike my pension. [emoji33] I offer my experience only to show that other states don’t follow the Illinois way of doing things.

+1

My local gov pension is administered through the state and is pretty well funded. What bugs me, not for my sake because I never thought I'd stay anywhere long enough to get a pension so did my own thing, is the fact there has been no COLA adjustments as promised. I've been retired 8 years with none; preceding there were some up to 9%. So there were a lot of folks in the lower ranks who've gotten no increase in that time and I can only imagine it is pretty tough on them. Then I compare that to one city I worked for where it's a guaranteed 3% annually, and that's not even for police and fire.

Anyway, the point is that this stuff varies all over the place and some of the resentments seem a tad off the mark. It al just emphasizes that some politicians (the root issue) are just corrupt, ignorant, or only care about being re-elected. Or all three.

 

[ripper1]

I only read Spanky's post as a discussion of possible solutions, I did not read it as a personal attack against people with public pensions.

So if you read my post in that context, I don't think I am being dismissive at all, and certainly not "rudely". I might even say that you are being dismissive of Spanky's viewpoints. Isn't he entitled to his view, and to discuss it here?

He's just acknowledging that those people may not like to hear that "medicine". We are often told that we just need to pay taxes for these public pensions, when our pensions have PBGC limits - is that rude?

Just my opinion.

-ERD50

Too bad the Supreme Court said they have to follow the language of the constitution that cannot diminish or impair pensions. It's not the employees fault that the legislators took pension holidays and did not provide the proper level of contributions while the employees provided their 9% every pay check. [mod edit]

 

[rk911]

my illinois public pension is increased annually by 3% of the original amount. so if original pension was $1000 p/m the annual increase for the life of the pension would be $30. but my pension system (IMRF) pays out a 13th payment each July. the $ amount varies each year which is calculated after the June 1 pensions are processed in late May. The amount of the 13th payment is based on:

1. How much IMRF receives in employer contributions from a special assessment (.62%) on all IMRF employer!s payrolls, and

2. The total amount of all June 1st payments to everyone eligible for the 13th payment.

IMRF divides the first number by the second number.

the amount of the 13th payment, originally a compromise when a compounded 3% COLA was rejected by the legislature (but approved for most other Illinois public pension systems) has dwindled since first introduced in the early 90’s. IMRF reports that when first introduced the 13th payment was ~90% of the regular amount. in 2018 the 13th payment was ~28%. IMRF attributes this to more and more IMRF-covered employees retiring.

while a 3% compounded COLA would definitely be nice i saw an item online that reported ~25% of Illinois’ public pension debt is due to the 3% compounded COLA most of the other Illinois public pension systems provide to their retirees.

https://www.imrf.org/cmsmedia/files/multi-site-files/tax%20and%20topic%20letters/tl19.pdf

 

[Rianne]

58 former Illiinois state lawmakers collect 6 figure pensions. Why is it a surprise to anyone, that the people who make the laws also collect the pensions?

https://www.illinoispolicy.org/58-former-illinois-state-lawmakers-collecting-six-figure-pensions/

 

[steelyman]

There’s an Illinois-focused podcast called “State Week in Review” that may interest those who react to this thread and several similar threads that pop up from time to time. The Illinois budget/legislature and pensions are frequent topics:

https://itunes.apple.com/us/podcast/state-week/id1156670974?mt=2

 

[rk911]

the new illinois governor has stated he wants to see a graduated income tax which reportedly would require a change in the state constitution. i’m guessing if he’s sucessful in getting legislation or a constitutional convention the pols will tinker with more than a change to the state income tax.

Illinois Constitution

 

[Rianne]

There’s an Illinois-focused podcast called “State Week in Review” that may interest those who react to this thread and several similar threads that pop up from time to time. The Illinois budget/legislature and pensions are frequent topics:

https://itunes.apple.com/us/podcast/state-week/id1156670974?mt=2

I record all the state discussions, interviews etc. I view these podcasts/programs as therapy for the lawmakers. They examine their ideals, dreams and fantasy while shaming past political decisions and wrongdoing. We the people (The People of Illinois-a singular statement) sit and watch, agree/disagree, like/dislike, vote for/against, campaign/cold call/canvass-volunteer for the "savior" and hope for change.

Well, the solution is between a rock and a hard place. IMHO.

 

[Rianne]

the new illinois governor has stated he wants to see s graduated income tax which reportedly would require a change in the state constitution. i’m guessing if he’s sucessful in getting legislation or a constitutional convention the pols will tinker with more than a change to the state income tax.

Illinois Constitution

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.

 

[ripper1]

Too bad it will never happen with the Daley's off Illinois and their ilk that have 200k, 300k pensions.

 

[Rianne]

Too bad it will never happen with the Daley's off Illinois and their ilk that have 200k, 300k pensions.

Really? Daley is the only devil in this? Now that's naive.

 

[Ronstar]

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.

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

 

[Rianne]

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

It was an estimate given by a nonpartisan think tank. I only listen, I try not to judge.