It took an act by Moody’s Investors Service on Friday, January 6 for Governor Quinn to announce on Tuesday, January 10 that he would push for major pension reform this year.
On January 6th Moody’s down-graded the state’s bond rating from A1 to A2, giving Illinois the worst credit rating of any state in the nation after Illinois failed to take steps to implement lasting solutions to the severe pension underfunding.or improve its chronic bill payment delay.
Moody’s A2 rating downgrade affects both the state and taxpayers because Illinois will need to pay higher loan rates on the money it borrows.
The downgrade came just five days before Illinois planned to borrow $800 million to pay for an ongoing road, school and bridge construction program.
Illinois does indeed face a gloomy state budget prediction. Projections show that government employee pension costs will rise about 43 percent over the next three years. The state’s five programs that provide employee retirement benefits are $85 billion short of what they will eventually need because of years of under-funding and weak economies.
As it stands, the Illinois TRS (Teachers Retirement System) is the worst funded pension system in the country with its $40 billion unfunded liability, representing only part of the total $77 billion that the TRS owes current retired teachers and all active teachers who have not yet retired.
Despite the astronomical amount of the TRS unfunded liabilities, why then is the Illinois Retirement Fund being invested in risky investments (betting on higher returns), despite similar risky investments which netted investment losses in fiscal years 2009 and 2010 (Reported in Crain’s Chicago Business on Dec. 19, 2011)?
It would be prudent for Governor Pat Quinn to become familiar with the Illinois Policy Institute’s new three-part series which was released on Friday, January 6th, “Pensions vs Schools”, as he prepares to sign into law what Quinn has referred to as a major crackdown on lucrative public pension abuses.
For all practical purposes, Quinn’s signing of the new pension reform law, reported in an Illinois Statehouse News article, might stem the fragrant pension abuses uncovered in the past few months, but it represent only a tinkering around the edges of the reform demanded byIllinois’s runaway pension system. Real reform must apply to teachers already in the retirement system, not just new hires.
Highlights found in the Illinois Policy Institutes three-part report, “Pensions vs. Schools,” shared as a preview with IPI members and friends on Thursday, January 5th by Ted Dabrowski, IPI’s Vice President of Policy, include:
- In higher education — In recent years 80 cents of every new state dollar were spent on retirements leaving less for the classroom, resulting in the need to cut programs, reduce class size, and reduce the teaching staff in school districts across the state.
- In PK-12 — Unless the system gets reformed, by the year 2029, nearly 50 percent of state funding of schools will go toward retirements, despite ample spending by the state for education.
The IEA (Illinois Education Association) lacks credibility in suggesting that teacher pensions are typically quite modest.Illinoisteachers often collect a starting pension of $60,756 a year. With retirement possible as age 55, their initial pension grows at a 3 percent annually rate.
”Normally, when a teacher retires, his or her pension is calculated based on this formula: The retiree receives 2.2 percent of his or her final average salary for each year of service, up to a maximum of 75 percent of the final average salary. Final average salary is calculated by the adding the four highest years of pay together in the last 10 years and dividing by four.”
As a resident of Lake Bluff in NorthernIllinois, Lake Forest High School District#115 teachers rank first inLake Countywith an average salary of $106,457 as reported in the 2011 Illinois Interactive Report Card. These generous salaries do not even reflect additional compensations which could include special bonuses, compensation given for extra duties performed, or payments of both health insurance and TRF contributions.
In an act that could only be called illogical, uncaring and shameless, in November of 2011 Lake Forest High School teachers were walking the picket line during ongoing contract negotiations, urged on by union representatives, demanding higher salaries with a message that they deserved more!
Teachers in the Zion-Benton School District126 recently settled its four-day teachers’ strike. Granted, their salaries do not equal some of the wealthier school districts inLakeCounty. The average teacher salary in District 126 is $65,000, which is not unreasonable considering the rather generous pensions received upon retirement. It is noteworthy that teachers with employment of less than five years in District 126 did not favor striking.
It is also necessary to consider the tax base of District 126, which has been depressed ever since Exelon prematurely and unwisely closed the Dual Zion Nuclear Plant in 1998. The average wage of those who live in the District is $44,000.
According John Tillman, CEO of the Illinois Policy Institute, pension reform is essential if there is any hope of turning Illinois around as it tethers on the brink of insolvency.
All across the nation, taxpayers are footing the bill to pay for the generous salaries and pensions that teachers are receiving through union negotiations, raising teacher salaries beyond those received by those in the private sector whose taxes pay these salaries.
Is sacrifice no longer a politically correct word when applied to doing what must be done to ease the burden on taxpayers in a challenged economy? Despite a law in Illinois that prohibits Illinois teachers from enrolling in Social Security, Illinois teachers still come out far ahead of their private sector counterparts.
As far as spearheading a rendezvous with pension reality this year, Governor Quinn, why should Illinoisans believe you this time around when much needed pension reform has failed in past years? Besides, how willing will legislators be to vote for reform, which surely will call for the unpopular reduction of benefits in an election year, when every legislator’s seat is on the ballot.
Governor Quinn, we need real reform here inIllinois. And to union officials, why should your members live “high off the hog” while private sector workers are being asked to tighten their belts?