Illinois' "phony" pension obligation of $96 billion

Yet, $96 billion is the number that's usually cited as what's need to plug the unfunded hole in the state's public employee pension funds. Truth is, the unfunded obligation is way, way more.

The explain comes in this letter to the editor of the Chicago Daily Law Bulletin by Ann M. Lousin, professor at the John Marshall Law School:

First of all, that "$96 billion underfunded" figure is not relevant. That

Ann Lousin

Ann Lousin

figure, actuaries tell me, refers to how much money Illinois would need to pay the pensions if every single person in the five state pension funds who is eligible to retire really retired all at once.

Lousin explains that for such a thing to happen every state teacher, bureaucrat, judge and all other public employees would have to retire on the same day--an impossibility. She continues:

Yet that is the benchmark the bond ratings agencies seem to use. Worse, nobody in public life seems to be willing to say this publicly.

I have spoken with legislators, judges, and local officials about this, and they all agree that the "$96 billion underfunded" figure is essentially phony and useless. But they tell me that they don't want to say so publicly. Why not?

In my view, the really important figure is $7,746,872,413.

That is the amount the state apparently paid out last year in pension payments to annuitants — those who are already receiving pensions. I say "apparently" because I got the figures from the annual reports of the pension systems online.

This is astounding. Everyone is talking about how the Legislature and Gov. Pat Quinn need to "solve" the state's pension crisis, using the phony $96 billion number. Lousin is arguing for from transparency so that we can get a better estimate of just how much we--the taxpayers, the public employees and the managers of the pension fund investments--must generate to put the house in order.

Lousin offers a solution: Restore the income tax on public and private pensions payments, including social security.

In the gripe of a give-away spasm, the Legislature (without a dissenting vote) in 1984 removed pension income, no matter how high, from the state income tax. Apparently, no one was thinking about the dire consequences this would have on state finances. She said a tax accountant told her that the state is losing some $1 billion a year as a result.

She said:

Couldn't $1 billion dollars go a long way towards plugging the gap in pension underfunding? Public officials tell me that when they speak to groups of retired public employees, including teachers, the members of the audience say they would rather pay income tax on their pensions than have the legislature enact "pension reform."

Speaking as one who receives a Social Security check every month, I am willing to pay a state income tax on that amount (and I am the biggest cheapskate since Scrooge).

Makes sense to me. But Democrats will oppose it because it will "hurt" seniors and Republicans will oppose it because they're against any tax increase. In other words, it makes entirely too much sense.

Order my new historical novel, Madness: The War of 1812, from Amazon 

To subscribe to the Barbershop, type your email address in the box and click the "create subscription" button. My list is completely spam free, and you can opt out at any time.

 

 

Comments

Leave a comment
  • i am all for this proposal. however some people object to it because it would "only " bring in about $1.5 billion per year. I say every little bit counts. besides the people who are getting tax free pensions now , are the ones who voted for the politicians who created this mess over the last 30 years. they helped to create the mess and they should help pay for the cleanup. by the way, i fall into this category: retired , receiving social security and a private pension both free of state income taxes. so i say go right ahead and tax my retirement income. not happy about it but i would prefer to pay more taxes than have the State of Illinois violate the Illinois constitution by cutting state workers' pensions.

  • fb_avatar
    In reply to ejhickey:

    ejhickey, how do YOU know who I voted for all of these years? Maybe some state workers were able to "think on their own" and vote who they actually thought would do the best job. I can guarantee you that I didn't vote for Quinn!

  • 'but i would prefer to pay more taxes than have the State of Illinois violate the Illinois constitution by cutting state workers' pensions.'

    Well, after the state already raised current workers state income tax 67% in one year, this appears to be a fair statement.

    Good thing our state nurses aren't unionized, how unethical it would be if retired union members went in for their pension healthcare and all the nurses were on strike.

  • fb_avatar

    Seeing as how we do not contribute to social security as a state civil service employee, I am interested to know what mandates the state of Illinois is responsible for to the federal government when it comes to obtaining pensions funds for state civil service employees. The state of Illinois is still collecting these funds, just they are not contributing their share. Something just does not seem legitimate about this.

    Who else is not contributing to Social Security???? For the federal govenrment to have bought off on this, I would think that EXTREME measures should have been implemented to ensure solvency of funds. Have federal laws been violated?

    At a minimum, pensions accounts should be maintained at levels of employee contribution..

    ~peace

Leave a comment

  • ChicagoNow is full of win

    Welcome to ChicagoNow.

    Meet our bloggers,
    post comments, or
    pitch your blog idea.

  • Advertisement:
  • Subscribe to The Barbershop

    Enter your email address:

    Delivered by FeedBurner

  • Dennis Byrne’s Facebook Fan Page

  • Like me on Facebook

  • google-site-verification: googlefdc32e3d5108044f.html
  • Meet The Blogger

    Dennis Byrne

    Chicago Tribune contributing op-ed columnist and author of forthcoming historical novel, "Madness: The War of 1812." Reporter, editor and columnist for Chicago Sun-Times and Chicago Daily News. Freelance writer and editor.

  • Our National Debt

  • Twitter

  • Categories

  • Tags

  • Recent Comments

  • Monthly Archives

  • /Users/dennisby/Desktop/trailer.mp4
  • Latest on ChicagoNow

  • Advertisement:
  • Fresh Chicago News