'Insane' even by Illinois standards?

[KingB]

A labor leader in Chicago is expected to receive pension payments of nearly $500,000 a year, while another could get about $438,000 a year...

$500,000 in pensions: 'Insane' even for Illinois? - US news - Life - msnbc.com

"It's highly unlikely that the federal government would ever bail out a spend-thrift state. Therefore, Illinois needs to fix this on its own,"

And part of how to do this is by raising our property taxes. I recently received my tax bill and it went up by 12% - a $1K increase, this after our property values have gone down. Most of the tax are for the school district which don't get enough aid from the state.

 

[ERD50]

Yes, it is insane.

The insane part is, this guy worked for the city for years at a moderate salary. He retired, then worked for the union at a $240,000(!) annual salary. And it is that $240,000 that determines the pension he gets from the city(!?). Let the Union pay that pension if that's who gave him the salary - what it this insane tie-in between the Union and the city? Here's a little more info from linked articles:



1-day rehire nets $158,000 pension for ex-labor chief - US news - Life - msnbc.com

Gannon, former president of the Chicago Federation of Labor, was able to take a long leave from a city job to work for a union and then receive a city pension based on a high union salary. That arrangement is allowed under a state law signed by Gov. Jim Thompson on his last day in office in 1991, according to an investigation by the Tribune and WGN-TV.

More at: One-day rehiring nets former Chicago labor leader a $158,000 city pension - chicagotribune.com

Sounds worthy of a protest, no? One with specific actionable items.

-ERD50

 

[clifp]

Yes, it is insane.


Sounds worthy of a protest, no? One with specific actionable items.

-ERD50

I predict in a few years we will see storied about Blago's pension as he organizes the prison workers and makes himself the head of the prison local.

I wonder if Rahm or President Obama's IL pension will be based on their White House salaries.

As far as protesting goes I am looking forward to the pictures

 

[Mulligan]

Let's see.. Illinois well known financial problems, under funded pension systems, and it seems all the time there is released articles about extremely high pensions in state. I read last month an HS English teacher in Illinois had an almost $150,000 year pension. It doesn't take much imagination to see the possibility of the common pensioner (who I'm sure are the vast majority) who has a very modest pension to sustain themselves being the one holding the bag at the end. I have a pension and support pensions, but at some point there probably should be a max cap to protect the system, the common pensioner and also the taxpayer shouldn't there?

 

[check6]

My union had to reimburse the company 100% pay plus an additional 28% over ride to cover pension and medical when an employee did union work. I do not understand how these city governments allow this to happen.

 

[Bimmerbill]

I always shake my head when I read about stuff like this.
I just want in on the action.

 

[Texas Proud]

I hope this does not get to political, but IMO if there are any pensions out there where the final pension is not based on the average salary that they get from the gvmt it needs to be changed...


I remember in Houston a police chief got a big pension bump when the outgoing mayor gave him a big raise... there was a big stink about it, but the city counsel could not do anything about it in time.... all he needed was one paycheck and it was set...

I also find it amusing that these people can defend this with a straight face... like they deserve it....

 

[ziggy29]

I hope this does not get to political, but IMO if there are any pensions out there where the final pension is not based on the average salary that they get from the gvmt it needs to be changed...

There is no question in my mind that loopholes like these need to be closed and the practice of "pension spiking" should be banned pretty much everywhere.

 

[donheff]

It is infuriating but your anger seems somewhat limited to me. The far great pension ripoff is the corporate pension plan ripoffs that destroyed well funded employee pension funds to the benefit of high level execs and CIOs. If you want to really drive yourself over the wall, read The Retirement Heist, How Companies Plunder and Profit from the Nest Eggs of American Workers, by Ellen Schultz. I read about it on another thread around here and got it from the library. It turns everything you thought was the case with "unfunded" employee pension funds upside down. The rapacious destruction of top corporate execs is horrifying. By contrast, this union ripoff almost seems trivial.

 

[Texas Proud]

It is infuriating but your anger seems somewhat limited to me. The far great pension ripoff is the corporate pension plan ripoffs that destroyed well funded employee pension funds to the benefit of high level execs and CIOs. If you want to really drive yourself over the wall, read The Retirement Heist, How Companies Plunder and Profit from the Nest Eggs of American Workers, by Ellen Schultz. I read about it on another thread around here and got it from the library. It turns everything you thought was the case with "unfunded" employee pension funds upside down. The rapacious destruction of top corporate execs is horrifying. By contrast, this union ripoff almost seems trivial.

Have not read the book... but I did know someone who worked for a company that did plunder a good number of pension plans... after awhile he decided to change jobs....

Back in the 80s, there were some companies that were bought just because their pension plan was so overfunded... the buying company could close it down, pay off the loans they took to buy the comapny and then sell what was left for a tidy sum....


But the other side of that coin is the employees were given everything they were promised.... and some got even more since if you were not vested you became 100% vested at the time they closed down a plan... sure, they were not getting the same going forward, but who said things do not change

I am sure there are a few people who see that the state is going to try and change the law and are hoping they can cash out before it happens...

 

[MichaelB]

All pensions - public, corporate, union alike have been subject to abuse and bad behaviour by "the few". It is shameful how some people exploit others and how they are helped in that task by those that should be protecting, not enabling.

The real damage is not the abuse by the few but the pension loss that so many suffer. Most people receiving corporate, union or public pensions get very little, earned fairly what they get, and are portrayed harshly as a result of this abuse.

 

[ziggy29]

All pensions - public, corporate, union alike have been subject to abuse and bad behaviour by "the few". It is shameful how some people exploit others and how they are helped in that task by those that should be protecting, not enabling.

The real damage is not the abuse by the few but the pension loss that so many suffer. Most people receiving corporate, union or public pensions get very little, earned fairly what they get, and are portrayed harshly as a result of this abuse.

Not only that -- it's not about pensions and unions per se but that there are abuses and loopholes that are the real problem but are all too often (IMO) used as ammunition against the concepts entirely.

What I find egregious in this case is that not only is the taxpayer getting skewered, but in a sense the "rank and file" in these unions is getting victimized twice -- once by the guy who was supposed to be looking out for them but made their pension fund less solvent, and again by a public who will often scapegoat all pensioners because of the abuse of a few.

 

[FIREd]

I am usually pretty indifferent to the pension debate, but this is truly insane.

 

[Bestwifeever]

I think the disconnect between the employing body and the pensioning body is key.

The "3-or-5-or-whateverr-highest-year average X whatever variable = pension" led to the employing body granting big raises in the last three years (because the pension law didn't say they couldn't) or the employees boosting their own salary with personal funds to achieve a higher average (because the pension law didn't say they couldn't). All tidy and legal, but against the spirit of the law if there is such a thing. Had the employing bodies been managing their own pension funds, perhaps there would have been a sense of fiscal responsibility and accountability in the end-career raises or the personal spiking.

 

[samclem]

. . . The far great pension ripoff is the corporate pension plan ripoffs that destroyed well funded employee pension funds to the benefit of high level execs and CIOs.

"Yabut", the big difference is in who pays. If a private corporation wants to plunder their pension plans, that's not a public issue (unless it gets to the point that the PBGC gets involved). This Illinois situation looks like some type of unholy union/govt alliance whereby a person can legally raid the government pension fund. If the union wants to have a corrupt system, that's between the leadership and the members. But who represents the taxpayers of Illinois when these decisions are being made? The same pol who just won an election courtesy of union support? It stinks.

 

[Mulligan]

I think the disconnect between the employing body and the pensioning body is key.

The "3-or-5-or-whateverr-highest-year average X whatever variable = pension" led to the employing body granting big raises in the last three years (because the pension law didn't say they couldn't) or the employees boosting their own salary with personal funds to achieve a higher average (because the pension law didn't say they couldn't). All tidy and legal, but against the spirit of the law if there is such a thing. Had the employing bodies been managing their own pension funds, perhaps there would have been a sense of fiscal responsibility and accountability in the end-career raises or the personal spiking.

While I am not knowledgable enough to determine what percent of a pension fund is effected by this, I agree this certainly is a problem. The employing body can spike the salary to get them to stay on longer. That cost is short term. The pension body which generally can't set any laws is the entity that is stuck long term with the payout problem. Our system just recently capped a maximum 10% yearly increase in final years to tone this down, so it must have been a problem. A 10% yearly cap increase for same position pay in public work still seems very generous and still open to a little abuse, though.
On a humorous side note, yesterday a friend of mine who is a school superintendent told me he asked an older teacher who started her career later in years if she was going to attend the retirement informational meeting. She said she said she only had 7 years in and wasn't close enough to benefit from it. He asked her that he thought she had taught longer than that. She replied- Well I have taught 12, but the first 5 don't count because those are the vesting years. Sounded to me she should have been the first in line to learn about her retirement!

 

[Leonidas]

The employing body can spike the salary to get them to stay on longer. That cost is short term. The pension body which generally can't set any laws is the entity that is stuck long term with the payout problem.

And it's not just a case of spiking salaries to keep experienced employees on the job, but the governmental employers frequently have tried to weasel their way out of agreed upon obligations to the pension systems.

My system started working with the employer in the 1990's, when we were 100% funded, to address anticipated future funding issues. The city pleaded poverty and got the pension system to agree to allow them to gradually increase to the new contribution rate over a 6-year period. While the ink on that agreement was still wet, the city gave the union a contract that threatened to bankrupt the pension. Then the city claimed it couldn't pay its already too-small contribution and played hardball trying to reduce the already too-small amount they were paying into the system.

It was a case of playing the pension system against the employee's union to underfund everything and keep a steady level of employees without the expense of hiring new ones in a good economy. Eventually the union supported the pension board's lawsuit against the city to force it to comply, but it was ugly for a while.

 

[donheff]

But the other side of that coin is the employees were given everything they were promised.... and some got even more since if you were not vested you became 100% vested at the time they closed down a plan... sure, they were not getting the same going forward, but who said things do not change

Not really. The companies took an "over funded plan" (i.e. one that could effectively pay what was expected by its participants) add in a pile of unfunded executive pensions and then close out the whole lot. The employees got what they had already earned --- way, way different than what they expected since they were approaching high earning years and high multiple pension calculation periods. The companies got to capture the "over funding" as earnings and got to capture take the immense liabilities that would now never be realized as earnings. And, guess what. They got to blame the employees and the unions because pensions were supposedly a problem.

 

[donheff]

I think the disconnect between the employing body and the pensioning body is key.

The "3-or-5-or-whateverr-highest-year average X whatever variable = pension" led to the employing body granting big raises in the last three years (because the pension law didn't say they couldn't) or the employees boosting their own salary with personal funds to achieve a higher average (because the pension law didn't say they couldn't). All tidy and legal, but against the spirit of the law if there is such a thing. Had the employing bodies been managing their own pension funds, perhaps there would have been a sense of fiscal responsibility and accountability in the end-career raises or the personal spiking.

I was blown away to discover how this ruse worked too. Raiders bought companies with good pension plans for the rank and file. Then they moved mid managers and execs (with vast unfunded liabilities) into the "over funded" rank and file plans. Then they offered the mid managers and execs "double nickles" (5 years service, 5 years age) to retire (which they could do because the fund was "over funded" so the $ was available for such buyouts). After the downsizing they froze the pension plan and captured the suddenly reduced liabilities as income (which could be dribbled onto the books quarter after quarter to meet 'expectations"). Then they slashed promised life time retiree health benefits because it was cheaper to litigate than pay (ERISA doesn't permit damages). Or they slowly cut health on the argument that they were in financial trouble tricking the unions into letting it go by (past practice) after which they slashed benefits to nothing. Then they packaged up the devastated divisions (including the empty pension fund) into a subsidiary. Then the subsidiary went bankrupt and gave the CEO a $45M package.

There is a whole consulting industry available to show corporate execs how to play the system so they can remain "legal" or close enough to legal to profit from these despicable practices.

 

[donheff]

Apologies for my ranting. If you haven't figured it out, Retirement Heist pissed me off about corporate greed more than anything I have previously read. And I have read all of the recent books on how Wall Street took down America. How these management dogs ripped of American workers is so despicable I am amazed some of the private sector people who were devastated by these practices didn't bring their guns into headquarters.

I am sure there is at least some modicum of a story on the other side. I welcome the more cool headed on the forum to read this book and then inform me of how it is not accurate. In the meantime, I am ready to "occupy" something.

 

[ERD50]

Apologies for my ranting. ....

IMO, no apology needed. These are issues where injustices are going to get us worked up. And it's not really a 'rant' since you are providing references, not just bellyaching (assuming the ref is credible, which I don't know for certain, but will take at face value for now).

But I was starting to wonder, what does this have to do with the OP subject of municipal pensions in Illinois? It's not like 2 wrongs make a right.


And I do wonder, are the problems in the private sector as bad (in total magnitude) as those in the public? While the OP highlighted some extreme and relatively rare occurrences, 'spiking' in general is a very wide-spread problem. But I don't have any numbers at hand for now, just asking the question.

How these management dogs ripped of American workers is so despicable ...

And there are people who wonder that about some too-powerful Unions also.

I welcome the more cool headed on the forum to read this book and then inform me of how it is not accurate.

I hope someone does, I assume I'm excluded?

There is a whole consulting industry available to show corporate execs how to play the system so they can remain "legal" or close enough to legal to profit from these despicable practices.

This is exactly why I'd like to see all the pensions and other 'promises' done away with (private and public). I'm not knocking politicians when I say this (for once), it's just the nature of how things get done, but the fact is that a consulting industry and corporate execs are going to be able to run circles around any laws. It just takes too long to get things through Congress, those firms can move faster, and respond to change faster.

Put some % of salary in a fund with my name on it, let me decide what to do with it, and no corporate raider can take it from me.

-ERD50

 

[youbet]

This is exactly why I'd like to see all the pensions and other 'promises' done away with (private and public). I'm not knocking politicians when I say this (for once), it's just the nature of how things get done, but the fact is that a consulting industry and corporate execs are going to be able to run circles around any laws.

ERD50,

In Illinois, converting public DBP pensions to 401k-like products will eventually be necessary. The concept of "playing the system" and actual outright corruption is so common and so accepted, it is actually embedded in our culture. It's the way we are. And here in Illinois, they're cheered and admired for their skill and cunning at playing the game. It's only a few downstate hicks and outsiders that are outraged........

Despite recent legislation which limits spiking, public employee unions are already collaborating with state legislators to establish work-arounds. And, of course, it goes far beyond unionized employees as evidenced by the characters in OP's article.

Veteran employees are currently in an uproar. Yes, they can retire with their "promised" pensions. But the tacit, yet always expected, 20% - 50% extra from spiking is being limited.

I have to admit, the way these 2 guys, and the head of the pension board, worked the spiking game is clever and somewhat unique. The con artists are getting smarter and the con games more sophisticated.

 

[clifp]

Don

I checked out the book reviews on Amazons. The fact that it was WSJ reporter and not a Rolling Stones or Mother Jones reporter gives some credibility to your outrages. I'll put on my library list although I suspect that it will be a while before I get my hands on it. It appears from the reviews that there is another side to story. I certainly have followed the story of pension plan raid for a number of decades. It has been a stable trick of corporate raider that after conducting a leveraged buy out, to sell off any excess pensions funds. To the extent that saddled the public via the PBGG I am outraged.

However the reason I am not as outraged as I am with union boss collecting outrageous pension is the following.

• For the most part this is old news starting in the mid 80s peaking in the mid 90s and I guess continuing in the the early 2000 corporations have been replaced defined benefits with defined contributions. I suspect 90% of the time the workers got screwed. This has all been reported on for a long time in many cases in the WSJ.
• I fundamentally believe that concept of working for 30 years for an employer (public or private) and having them primarily responsible for a persons retirement regardless of companies or countries economic condition is horrible and dangerous idea which will make American companies and workers uncompetitive with the rest of the world. To the extent that greedy management hasten the demise of DB plans I am happy they did it.
• I expect corporation management to look out for their and the shareholders interests. At least in Silicon Valley expensive retirement plans were not a good recruitment or even retention tool, almost all the folks I worked with and interviewed preferred higher salary or more stock, or other benefits. So I can make a pretty strong case that ditching these plans were in the shareholder interests. Now it sucks that in many cases the main beneficiaries were folks in the C-suite and corporate raiders rather than shareholders. However, as shareholder I am pretty sure that I benefited from the lower retirement cost American companies now have from these tricks. I may not feel great about enriching myself at the expense of American workers losing retirement benefits, but hey I'm just a passive owner.
• In contrast I have gain nothing from these union pension tricks. In an ideal world I expect politicians to put the public needs first. In the real world I am ok with politicians doing things that help them get relected and also help the public. I'll tolerate them doing things that help themselves as long as the don't hurt the public. But I draw the line at doing stuff the helps themselves and screws the public. This union trick is so far over the line it should be criminal or at the very least confined to IL and LA.

 

[obgyn65]

Where were the auditors ?

I have to admit, the way these 2 guys, and the head of the pension board, worked the spiking game is clever and somewhat unique. The con artists are getting smarter and the con games more sophisticated.

 

[Tadpole]

One of the problems I note in the entire debate is that somehow people latch onto a few individual cases of people that were in a position to game a pension system. This seems to get applied to all pensions of the rank and file who are not in a position to game anything. It is not as often that the story that goes rabid is one about people having the rug pulled out from under them with pensions that would have been rather modest and hard earned. What is creepy is that one starts getting the similar questions about ways people's private retirement savings are decreased in potential value by forces larger than themselves like the zero return for years on simple savings accounts. No place to hide? No way to win? Sometimes I think I will see a giant clawback of any wages that were not spent as they were earned. (Just a paranoid thought.)