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
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.
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.
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