Illinois Pension Reform

[ERD50]

... Sure there are people making 6 figures here but that is an extremely small sampling. ...

Define 'extremely small'.

Since I like actual numbers, I took the time to look at our school district, and found that of those with 25 years or more in the system, 4.76% had pensions above $100,000. The median for that 25 years plus group was $70,975.

That is well above the median household income in Illinois ($56,576), and of course, there may be a second income in that household.

For the purpose of this discussion, I have no interest in whether anyone thinks that is fair/unfair, earned/unearned, etc. I'm just reporting actual numbers, and they are not 'middle class'.

Public database here:

Champion Pensions

-ERD50

 

[haha]

Define 'extremely small'.

Since I like actual numbers, I took the time to look at our school district, and found that of those with 25 years or more in the system, 4.76% had pensions above $100,000. The median for that 25 years plus group was $70,975.

That is well above the median household income in Illinois ($56,576), and of course, there may be a second income in that household.

For the purpose of this discussion, I have no interest in whether anyone thinks that is fair/unfair, earned/unearned, etc. I'm just reporting actual numbers, and they are not 'middle class'.

Public database here:

Champion Pensions

-ERD50

You are being naughty again ERD50.

 

[HFWR]

You are being naughty again ERD50.

In some circles, naughty IS nice...

 

[ripper1]

Define 'extremely small'.

Since I like actual numbers, I took the time to look at our school district, and found that of those with 25 years or more in the system, 4.76% had pensions above $100,000. The median for that 25 years plus group was $70,975.

That is well above the median household income in Illinois ($56,576), and of course, there may be a second income in that household.

For the purpose of this discussion, I have no interest in whether anyone thinks that is fair/unfair, earned/unearned, etc. I'm just reporting actual numbers, and they are not 'middle class'.

Public database here:

Champion Pensions

-ERD50

Are we just talking about teachers here or all state public employees? Anyway I guess you have all the answers with your facts and figures.

 

[nun]

I know several people who are just starting their careers in the Illinois public sector and are quite excited for the 401K plan that will now be offered (court challenge pending I think?)

The DC plan won't be a 401k as that's for businesses, it will probably be a 401a DC plan.

Interestingly I have an MA state 401a DC plan and have the opportunity to use the balance to buy into the state's defined benefit pension. It looks like a good deal, as long as MA doesn't go bankrupt.

 

[meierlde]

An extremely important distinction is that Illinois refuses to declare bankruptcy, fully open their kimonas, and allow the courts to reorganize state finances as would happen with a private company before turning over pensions to the PBGC. Maybe some day in the future.......

.

It is not clear that a state can declare bankruptcy. The current federal code only covers sub units of states (cities, school districts, special districts, counties ...). The law does not provide for a state bankruptcies. However there is old precedent for state bankruptcies in In and Oh in the mid 1830s they spent wildely on canals roads and the like. As a result these states had to work out things with their creditors with no federal involvement.
There are issues of who is is sovereign in such a case the state or the federal government.

 

[youbet]

It is not clear that a state can declare bankruptcy. The current federal code only covers sub units of states (cities, school districts, special districts, counties ...). The law does not provide for a state bankruptcies. However there is old precedent for state bankruptcies in In and Oh in the mid 1830s they spent wildely on canals roads and the like. As a result these states had to work out things with their creditors with no federal involvement.
There are issues of who is is sovereign in such a case the state or the federal government.

If Illinois would at least declare bankruptcy with the intention of opening the books for review and ask for help in determining how their creditors should be ordered in sharing whatever funds are left, then the comparisons to private businesses declaring bankruptcy and turning pension obligations over to the PBGC would make more sense. In fact, if the old precedent did not hold and Illinois could not be declared bankrupt in order to free itself of debt, "something" would happen. Myself, I'd like to see fed troops in the streets of Springfield and Chicago.

It doesn't seem like the executive or the legislative branch in Springfield wants to have the world see what they're wearing under their suits. And this is true whether it turns out they can achieve the formal status of "bankruptcy" or not.

 

[aja8888]

If Illinois would at least declare bankruptcy with the intention of opening the books for review and ask for help in determining how their creditors should be ordered in sharing whatever funds are left, then the comparisons to private businesses declaring bankruptcy and turning pension obligations over to the PBGC would make more sense. In fact, if the old precedent did not hold and Illinois could not be declared bankrupt in order to free itself of debt, "something" would happen. Myself, I'd like to see fed troops in the streets of Springfield and Chicago.

It doesn't seem like the executive or the legislative branch in Springfield wants to have the world see what they're wearing under their suits. And this is true whether it turns out they can achieve the formal status of "bankruptcy" or not.

My gut feeling is it would be another GM situation and same outcome all over again...

 

[youbet]

Define 'extremely small'.

Since I like actual numbers, I took the time to look at our school district, and found that of those with 25 years or more in the system, 4.76% had pensions above $100,000. The median for that 25 years plus group was $70,975.

That is well above the median household income in Illinois ($56,576), and of course, there may be a second income in that household.

For the purpose of this discussion, I have no interest in whether anyone thinks that is fair/unfair, earned/unearned, etc. I'm just reporting actual numbers, and they are not 'middle class'.

Public database here:

Champion Pensions

-ERD50

Excellent work ERD50. Although it doesn't make much sense to compare the retirees from a plush school district like yours with the entire state. How does the median pension for your school district compare to the median household income for the residents of your school district. That would be more meaningful.

 

[haha]

Excellent work ERD50. How does the median pension for your school district compare to the median household income for the residents of your school district. That would be more meaningful.

Should one median pension (no longer working) really be compared to median household income which will mainly be households with at least one and maybe more active wage earners? I never expected my income cobbled together from savings during my working years to equal my active earnings, why should a government worker expect this?

You can get lot when you are holding the whip, but sometimes the whippees get it away from you. Then it's time to expect change.

Ha

 

[youbet]

Frankly, I think it would probably make sense for states with serious corruption issues like Illinios to move to a more pay as you go system like a 401k. That way the politicians have fewer ways to deceive the public.

Every time I hear about the stuff going on in Illinios, I'm thankful to live in a different state. Minnesota may not be perfect, but our political leaders manage to stay out of prison.

+1

There are a lot of gov't retirees thinking that right now. We all hear stories about folks in Illinois who were awarded juicy pensions due to some sort of political connection. Or folks who were able to work the system to receive very generous pension payouts. We don't here much about the average public worker who had no opportunity to spike their pension, worked hard and effectively for a normal wage for their job and, in the end, are receiving a pension that few would challenge as overly generous. Yet, those same everyday folks are sitting there with no SS and seeing the GOP, the Dems, many conservative business organizations and many conservative citizens rallying to have their pensions eliminated or reduced. It has to be a scary thing.

Sadly most (IMO) of these everyday folks don't feel comfortable managing their own futures and therefore don't like the concept of a 401-type arrangement. Hence they leave themselves at the mercy of the politicians from both parties, business lobbying groups and many citizens. Not a good thing, IMO, to have that many people wanting to eliminate\reduce a pension you've already earned and are retired.

If it was up to me, public employees in Illinois would join SS, have a 401-type plan and a modest DBP pension (similar to the current fed situation).

You are fortunate to be living in Minnesota. You have no idea how bad it is here. You might think you understand from what you read and hear. But you can't get the real feel of it unless you're here with your feet in the hot coals.

 

[NW-Bound]

My best friend hates the Federal government with a passion. He keeps arguing that more rights should be given to governments at the local level. I counter that what the Fed does is under more scrutiny and local governments can be more abusive and corrupt, and many have certainly been.

Looks like I am right...

 

[youbet]

Should one median pension (not working) really be compared to median household income which will mainly be households with at least one and maybe more active wage earners? I never expected my income cobbled together from savings during my working years to equal my active earnings, why should a government worker expect this?


Ha

Dunno Ha. The pension vs median income is really ERD50's comparison. I was just suggesting that if he's going to compare pensions from his high tier school district vs state wide median household incomes, perhaps he should also compare pensions to median incomes within his own school district. Otherwise, I agree with you and have no clue what point was being made.

Why did you ask me why a gov't worker should expect "income cobbled together from savings during my working years to equal his/her active earning?" I'm not a gov't worker and, like you, I didn't/don't expect that to be the case.

In any case, it's clear one can profess to always "be looking at the numbers" but pick the numbers and do the analysis in a manner which guarantees the desired results.

 

[haha]

My best friend hates the Federal government with a passion. He keeps arguing that more rights should be given to governments at the local level. I counter that what the Fed does is under more scrutiny and local governments can be more abusive and corrupt, and many have certainly been.

Looks like I am right...

In this one case perhaps. But there are many states much better governed than the federal government.

 

[NW-Bound]

True. I stand corrected.

PS. Think of the Fed like index investing. You'll get the average, and that eliminates the risk that you may get something a lot worse.

 

[haha]

Dunno Ha. It's really ERD50's number crunching technique. I was just suggesting that if he's going to compare pensions from his high tier school district vs state wide median household incomes, perhaps he should also compare pensions to median incomes within his own Fat Cat school district.

In any case, it's clear one can profess to always "be looking at the numbers" but pick the numbers and do the analysis in a manner which guarantees the desired results.

Interesting question. But really, should a teacher in Beverly Hills or Bel Air or Holmby Hills reasonably expect to be able to afford a home in Beverly Hills? Maybe she could rent, or drive a few miles south across I-10?

Ha

 

[ERD50]

Excellent work ERD50. Although it doesn't make much sense to compare the retirees from a plush school district like yours with the entire state. How does the median pension for your school district compare to the median household income for the residents of your school district. That would be more meaningful.

If you have a source for that state-wide, Ill try to take a look. The one I know of (through championnews.net) forces you to select a district. I'm certain our district is above the average in salary, but far from an outlier. But I think my point will still stand, a significant number of these pensions are above 'middle class'.

And as I've said before, I do think that any adjustments that are determined to be needed should try to protect pensions to PBGC levels, plus maybe some adjustment for what SS would have provided (but they never paid into SS, so maybe not?).

You're right, if the State can't declare bankruptcy there will always be an air of illegitimacy over any pensions adjustments. Without a third party looking into it, who can say where the pensions should have been in priority. And as you say, the politicians don't want any third party overseeing their deals, so we are right back to square one. It's ugly.

-ERD50

 

[youbet]

PS. Think of the Fed like index investing. You'll get the average, and that eliminates the risk that you may get something a lot worse.

I think that's a good way to look at it. While I'm hardly an expert on ALL state governments, there are some where I like what they're doing and how they do it and the integrity with which they operate more, generally, than I like the feds. And there are states, like my own, where just the thought of the politicians in power makes me cringe. Some of them are in prison right now, but apparently not enough. Apparently the rewards to be gained by participating in corruption are great enough to justify the risk of getting caught and having to spend some time in a low security slammer.

 

[youbet]

Interesting question. But really, should a teacher in Beverly Hills or Bel Air or Holmby Hills reasonably expect to be able to afford a home in Beverly Hills? Maybe she could rent, or drive a few miles south across I-10?

Ha

Dunno for sure. What do you think? I think they should be paid via the principals of supply and demand and should spend prudently on housing given their personal financial situation.

 

[eridanus]

Texas on the other hand, has no corporate income tax at all. So what does this tell us? Anything? What I'm saying is, it is more complicated than any single number. Big Picture.

Texas has no corporate income tax but it does have a franchise tax, which looks surprisingly similar. It's probably lower than Illinois' tax rate but it'd be a messy comparison and would be different depending on business type.

Yes,it is more complicated.

 

[youbet]

I'm certain our district is above the average in salary, but far from an outlier.

I doubt that is the case. I think it is less than "far from an outlier." Do you have any data at all?

But I think my point will still stand, a significant number of these pensions are above 'middle class'.

Well, as long as you are clear that the pensions to which you are referring are above average and come from a pool of retirees who worked for a high class suburban Chicago school district.

As far as the middle class thing...... Who knows what that means? It's ridiculous to even talk about. You and your neighbors negotiated salaries with your employees and willingly paid them evey pay period. Eventually, some of the employees retired and got pensions which you think are too big. Well, try starting over and actively engage your municipality, county and school district in a campaign to reduce public employees salaries and you'll achieve your goal. Lots of municipalites successfully execute the delivery of services and K - 12 education while paying much, much less than the typical pay rates in the Chicago suburbs. Why can't your town, county, school district do it too?

 

[youbet]

Given the current state of the state and the lack of pension reform coming from the politicians, I don't see how Illinois can recover from this. I know of some state jobs where there are 2 retired people for 1 worker. Given roughly 80% pension, that means that Illinois could be paying at least 260% of a normal salary for each current worker. I have to convince DW to get out of here.

You also need to start reading the paper or listening to the news.......

The Illinois legislature passed a bill yesterday which reduces the already earned pension benefits of most (not themselves of course) state employees. In 2011, they established a new, less generous, retirement benefit package for new hires going forward. Our politicians have "promised" that these "reforms" will lead to a fully funded pension system by the year 2045. That is, they say given these changes they can pay benefits due until then and simultaneously bring the funds up to a fully funded level.

Look at post #4 in this thread where a link to an article giving a summary of the legislation is posted.

You should probably still try to convince your DW to get out of Illinois though. It sucks on a number of levels. But they have passed so-called "pension reform" for most state employees. City of Chicago employees, Illinois Supreme Court Justices and Illinois State Legislators are exempt, of course.

 

[Theduckguru]

Just for reference, the kinds of pensions that many of these public sector employees get in Illinois puts them more in the top 5% income area, not the middle class.

I know a couple of retired, married teachers - their household income from their pensions is ~ $130,000 - $150,000, and before this law that was all 3% COLA'd for life. That is not middle class, independent of any opinion of 'fair' or not.

A more useful figure would be what is the median pension for someone who worked a full career. I don't have that number, but I'd bet it is above the 'middle class' definition, especially when you take into consideration retirement age and COLA value.

What about the middle class who has to pay the taxes to fund those pensions? IL income tax is a flat tax, BTW. Recently raised from 3% to 5%.

Plus, a 'win for MegaCorps' can mean more middle-class jobs in IL. It isn't always an 'us-versus-them' game.

-ERD50

Hear is a megacorp trader who disagrees with you. Disregard the political tax portion. Pay attention that megacorp is not going to do squat for middle class.

PIMCO | Investment Outlook - Scrooge McDucks

 

[ikonomore]

Reform is long overdue.

Look, I'm not against the public worker, as I'm a retired federal worker, but at some point Governments need to realign benefits to a more realistic and affordable level.

So you got your retirement and NOW there should be reform? OK then.

 

[Texas Proud]

Texas has no corporate income tax but it does have a franchise tax, which looks surprisingly similar. It's probably lower than Illinois' tax rate but it'd be a messy comparison and would be different depending on business type.

Yes,it is more complicated.

Yes, the franchise tax is a sneaky way of putting in a corporate income tax.... since they are prohibited by the constitution to have a corporate income tax, this is the best they could do....


So far, we still do not have an individual income tax.... but it has not stopped them from trying to get one every once in awhile...