Illinois' worst-in-the-nation pension crisis explained
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- Опубліковано 19 вер 2021
- Illinois' pension crisis touches every corner of the state. From public safety and service cuts in the Metro East, to a junk credit rating for the city of Chicago, to exploding property tax bills across the collar counties. Illinoisans now owe $45,000 in pension debt per household. But what's driving Illinois' pension crisis? And how did Illinois politicians let it get this bad? Senior Director of Budget and Tax Research Adam Schuster explains.
Learn more: illin.is/pensions
Thank you IPI for your consistent, accurate research and messaging on the pension crisis in Illinois.
The DNC will lie to its voters about how XYZ is destroying the pension funds …
Expect more taxes and inflation
“ In addition, if the pension fund does not meet its expected investment returns, which is necessary to ensure the fund has enough money to make its future payouts, the employer (Illinois taxpayers) also must make up the difference.
In summary, if there is not enough money in government-worker pension funds - for whatever reason - it’s the taxpayer who must bail them out. By 2045, taxpayers will be paying $16 billion into the state’s pension funds, over 4.5 times more than what state employees will be expected to contribute.
What about defined-contribution or DC plans?
In contrast, in a defined-contribution, or DC, plan such as a 401(k) plan, both the employer and the employee contribute directly into a retirement account owned and controlled by the employee. The amount accumulated by the employee during his or her career becomes the pool of funds he or she will use for retirement. Once the employee retires, the employer has no future obligation.
Today, nearly 85 percent of private-sector employees are enrolled in some form of DC plan. The public sector, on the other hand, continues to rely largely on DB plans.
That said, more and more states, most recently Oklahoma, are moving their workers onto some form of DC plan in an attempt to get their budgets under control and give workers more power over their retirements.”
I RAN from Illinois 6 years ago to Florida and never looked back. Best move I ever made.
Wow! Your legs must be really tired.😂😂😂
@@dentatusdentatus1592 Call me Gump.
It’s really sad. Some of my best memories were from my time in Illinois but who would go there knowing their tax dollars are so misspent?
Illinois is screwed. The last person to leave, turn off the lights.
BEST statement ever. We are all waiting for our Parents to die...then head for the hills.....Sorry folks....
You won't need to turn out the lights. The power will be shutoff.
The pension system wasn’t the problem. The problem was Illinois politicians stole from the different systems and never properly funded them. Some Illinois employees contribute up to 12.5% of their salary and they don’t receive social security. 12.5% is more than double what everyone contributes to social security. Unfortunately those facts are omitted from the story.
Politicians serving during the past few decades need to be locked up for official misconduct
Political manipulation of the funds alone is an incomplete picture of Illinois' pension crisis. It's certainly true that politicians borrowed liberally, but it is equally true that the unaffordability of the obligations ensured dysfunction from the very outset. Politicians cynically made promises they ought to have known taxpayers couldn't keep. In the Tier 1 system, retirees receive a 3% automatic annually compounding raise, a national peculiarity. Fortunately, moderate fundamental reforms could go a long way toward making the system healthier and more sustainable for all public retirees.
@@illinoispolicy partially agree. Began with Thompson and Edgar on generous pension packages without the funding. In the 2000s under blago, they literally quit contributing relying upon high market returns. 08-09 killed it. Illinois misspends in the interest of self preservation for the corrupt politicians. Unfortunately they've ruined a good state.
I was born and live in Michigan but some of my favorite memories are from Illinois. This is a sad story for me. I went to high school in Southern Illinois. I remember how I loved Chicago so much better than LA or New York.
Other states wish they had what Illinois has: Some of the best farm land in the country, world class universities, Lake Michigan, major river systems, transportation, etc. It is a shame the out of control pension crisis is sinking this great state.
Retired state employees need to take the haircut.
How do you propose that?
I couldn't disagree more. The State employees made a deal fair and square with the State. It's not their fault and they shouldn't be punished now because the State negotiators didn't make good deals for the tax payers. IPI is also in disagreement with your position.
@@willtillman1181 the deal was never fair. State employees should eat the bill
@@willtillman1181 get a job like the rest of us retirees so you can eat,, Your pension scheme is parasitic and we are the food.
@@willtillman1181 Federal government defaulted on my Social Security by raising my retirement age from 65 to 67. How would making changes to Illinois pension plan be any different? Didn't it start with police and firemen could retire after 20 years of what is considered a hazardous job. Then secretary's say it's not fair, why can't I retire in 20 years too? Then everyone retires at 40 and collects for 40 years. I read an article 20 years ago about Illinois pensions. It said the actuarial liability for the pension system for 40 retired public school workers was ONE BILLION dollars. I live in Connecticut, we are not too far behind you :>
I love your content and want to see you guys on tiktok and Instagram and watch your viewer base grow
Wow! This was excellent presentation and information.
Thank you so much for watching! Be sure to subscribe to our channel. We publish informative content like this here weekly.
"It's not the pensioner's fault" ... How? If someone told me I'd be able to retire early and then collect an exorbitant amount of money the rest of my life ... from a fund that I myself contributed very little into ... I would have told you to go pound rocks because it's too good to be true and wouldn't be sustainable!
Illinois has high property taxes but traditionally had a low income tax. Politicians didn’t fund their pension system and often “borrowed” from the systems. This guy is telling half truths
Only fool’s make promises ! We need some austerity measures with pensioners in Illinois. That’s the only way to get this under control.
One thing is for sure they better figure it out because if they end up
Not being able to fulfill promises there is going to be a Big issue
What do you mean government workers are not to blame ? They don't have to take the money. They are 100% to blame.
It literally is their retirement plan how they will live in retirement
@@timnewman8690 Tim, do you think there pensions are $2,000.00 a month. Try $10,000.00 a month. have you looked into there gigantic salaries. They retire as millionaires and get over a million after retirement.
@@timnewman8690I care as much about their retirement as they care about mine.
He failed to mention the decades of reduced funding which did not help either !!!
Over 80% of real estate taxes are contributed to public sector pension funds
Most other private sector employees have to create their own retirement plan
Good luck
So I agree with all of this but is it at all realistic to have a vote on pension reform? From what I’ve seen legislation that tried to reform the pension the IL Supreme Court struck it down. I can’t help but feel cynical.
Considering that ipi managed to battle a massive $50m pritzker campaign and still get a big result with much less funding and a smaller team I think the IL Supreme Court is starting to feel the impact of the ppl they’re supposed to serve through Ipi’s efforts. Big ups to ipi for rocking the votes so far. Janus done, fairtax squashed and all the other individual efforts to make life easier for illinoisans, it’s a win win for all the Illinois citizens.
@@deksta21 appreciate your comment. I think the part that I'm sifting through is what's obtainable and able to change. I can't help but feel doubt when I see previous precedence with IL Supreme court striking down previous pension reform. It's something I'm genuinely wrestling with and I'm open to sound dialogue on it. Albeit, I will say there is a lot I don't understand regarding civics, the law, and reformation. I appreciate IPI for educating me about IL's history though.
@@yomommacello I think the biggest thing is to inspire action amongst illinoisans. I think most ppl feel they have no power to change the current state of affairs and so become complacent or beaten down by the big il govt. In reality if ppl band together under a single cause their voices become too loud to ignore. Check out the Lincoln lobby on Facebook. A good mix of ppl with varying ideas from all walks that come together to build a better Illinois through the power of their actions. There’s lots of resources on what the citizens of Illinois can effectively do to change the future of Illinois for the better.
@@orion3706 sounds like you have an agenda too. Care to fill us in?
I don't think a vote matters based on the election results.
You either have to move out of Illinois or hope a state bankruptcy clears the deck. Any federal bailout however unlikely will only be a temporary delay of the impending disaster.
Great messaging and it's a fight WE ALL NEED TO JOIN. I think it should be up for vote, though I think it will be difficult to overturn even then. You better believe those people receiving the lavish pensions will show up to vote against reform that will reduce their benefits....unless we can somehow get it through their skulls that voting for pension reform is actually voting to save the system itself. Maybe just include in the vote for no, that DCFS will now be dropping kids off on their doorsteps proportionate to the amount of funding their pensions hog to offset the expenses DCFS can't cover thanks to them.
A DCFS draft, but should only include public sector households. Put everyone on defined contribution plans similar to 401k, otherwise your local teachers, judges, and many other govt workers are stealing food off your plate. I have plans to move to Rock Hill, SC in next 2-3 years once kids are in school. No way I'm supporting this f'd up state any longer.
Disclaimer: I am a public employee pensioner, and have been on a pension board for numerous years, but I believe that this is a mess and unsustainable. Here is an additional issue; My understanding is that without COLAS or if the the law sets a limit on how much someone is eligible for in retirement , the employee then would become eligible for Social Security. Then the employer/employee will need to pay into that along with the the pension. Social Security doesn't allow a "pension holiday" which happens when the employer misses a contribution to the the fund on payday, many municipalities do it all the time. With Social Security the bill comes due every pay day and gets paid,( just like IMRF which is well funded.) Tier 2 addressed some problems but perhaps what is needed is additional tiers in order to move new hires off pensions altogether, and into a 401 or 457 plan along with social security. It is going to take time but it could be done. Anyone else have any ideas, because the politicians have nothing...
Thank you so much for your thoughtful note! We really appreciate you weighing in. If you're interested in our team's ideas, in the way of specific solutions, we definitely encourage you to read our plan here: www.illinoispolicy.org/reports/illinois-forward-2022-covid-19-makes-pension-reform-imperative-to-protecting-taxpayers-services-for-vulnerable-illinoisans/
@@illinoispolicy thank you I will read it
I'm a member of IMRF in Illinois. Its doing well currently at 94% funded. Why are all the other so bad?
Great question. IMRF is 94% funded because they designed a retirement plan where the contributions reasonably covered the cost of the benefits, and because they have always mandated full employer contributions. The biggest differences are they have a less generous per-year accrual rate for your pension and they have a 3% simple COLA, not compounding.
Some Illinois employees are paying 1/8 of their salary (12.5%) into the system. The state never held up their end and didn’t contribute their share. Pensions should only go to military and first responders.
Literally no benefit living in that state. Chicago is a dud, what on earth does Illinois attract or offer to out staters?
Whole think needs restructuring if it is to work long term, and neither want to negotiate a feasible plan. Let the state default like the City of Detroit, and have a reciever decide how to restructure the state.
Maybe inflation solves this problem
We appreciate your sense of humor.
I DO NOT LIVE IN ILLINOIS I moved out. Why did I move? Simple, I can't pay pension benefits to others when I don't have those benefits myself. Those I left behind are on the another Titanic. You are gong down and your only hope is a Federal money printing bail out. You are betting you life that you will get it. Good luck.
Just moved to indiana from Illinois
i'm sorry for the people paid in to retirement pensions but the truth is politicians has stole the money and are stealing the money so it doesn't matter how much you continue pay in don't expect it....higher taxes, higher real estate taxes... i live in s. illinois and i'm all for splitting the state but finances is a big stumbleblock
This information is not entirely accurate. Former Speaker Mike Madigan (D) and the Democrat controlled legislature initiated the pension in a contractual agreement with the employee representing unions. The Democrat controlled legislature redirected funding from the pensions to pork projects. Gov. Rod Blagojevich (D) all but emptied the funds of the general fund in grants and special interest payouts and paid nothing into the the pension fund while in office. Once again Speaker Madigan intervened and blocked a transition opportunity to 401k pensions for new hire state employees at the urging of the unions. The pork and special interest spending did not stop. Think about this. If your spouse continually spent more than you earned, wouldn't you take away the checkbook. Or, to the extreme, end the relationship? Term limits, better citizen oversight along with accountability may be helpful.
I do believe pension reform is inedible. The Tier II plan goes a long way to address this. What I don't believe is that anyone that is in the Tier I system should have their benefits cut. Fair and square, the pensioners along with the soon to come retirees and the Illinois decision makers agreed to the system that's in place now. You can't change the rules of the game in mid stream.
We agree! Fortunately, no serious person is demanding that pensions retirees earned fairly be slashed in any way. Our "Hold Harmless" plan would enshrine all promises made to workers and retirees while allowing state and local officials room to adjust the future rate of growth for benefits that have not yet been earned. The alternative is insolvency. We encourage you to check out our plan here: www.illinoispolicy.org/reports/illinois-forward-2022-covid-19-makes-pension-reform-imperative-to-protecting-taxpayers-services-for-vulnerable-illinoisans/
im 73 i hope every pension fails