2 thoughts on “Forbes post,”No, Illinois Hasn’t Solved Its Pension Crisis””
Jane,
A question about graphs, re: Wire points article “Illinois state pensions: Overpromised, not underfunded (June 27, 2018)
I believe I commented on your site and you were going to look into this. I think I see the big difference now, as it was confusing me before. There is a dramatic chart (There’s one graphic that perfectly captures the absurdity of Illinois pensions over the past three decades…Ted Dabrowski)
That sharply increasing red line is a red flag to budget watchers. Or red meat to pension reformers.
Also very misleading. Graph is titled “Pension benefit growth”, but the red line is labeled “Promised state benefits”…
Big difference. “Promised” is presumably that promised over the next (approximate) thirty years.
In the graph, they compare …
State personal income
State general revenues
Median household income
Inflation
Pension membership
Resident population
All for the year 2016
I say, to be consistent, they should compare actual pensions paid out in 2016 ($18.6 billion, according to Ballotpedia) Certainly not an 1100 percent increase. Not even close.
Dabrowski:
“Total pension benefits have grown at an annually compounded rate of 8.8 percent over the past three decades. Compared to 1987, benefits have grown 1,061 percent.
That growth is six times more than total state general revenue growth (236 percent) over the same time period; eight times more than median household income growth (127 percent); and nearly ten times more than inflation (111 percent).”
That statement is incorrect. Had he said total __promised__ benefits, it might be correct… if you believe his data and his math. I don’t have much faith in anything he says now.
———————-
No doubt pension benefits have increased in Illinois. They have increased just about everywhere.
So, what caused Illinois’ state pension crisis?
“I’ll give it away at the beginning: they’re in trouble because they’re not making the “required” contributions to the pensions.
Yes, there are all sorts of other reasons as well, such as spiking, early retirements, sluggish payroll growth, optimistic valuation assumptions, etc.
But ultimately the reason the pensions are so little funded is because the state didn’t put in enough funds.
And they knew it.
They knew it for years.
It’s not because of investment fees, though those should be more transparent. It’s not because of part-time board directors who get a lifetime pension for very little work, though that doesn’t help. (I’ll address why these aren’t significant problems in a later post.)
Jane,
A question about graphs, re: Wire points article “Illinois state pensions: Overpromised, not underfunded (June 27, 2018)
I believe I commented on your site and you were going to look into this. I think I see the big difference now, as it was confusing me before. There is a dramatic chart (There’s one graphic that perfectly captures the absurdity of Illinois pensions over the past three decades…Ted Dabrowski)
That sharply increasing red line is a red flag to budget watchers. Or red meat to pension reformers.
Also very misleading. Graph is titled “Pension benefit growth”, but the red line is labeled “Promised state benefits”…
Big difference. “Promised” is presumably that promised over the next (approximate) thirty years.
In the graph, they compare …
State personal income
State general revenues
Median household income
Inflation
Pension membership
Resident population
All for the year 2016
I say, to be consistent, they should compare actual pensions paid out in 2016 ($18.6 billion, according to Ballotpedia) Certainly not an 1100 percent increase. Not even close.
Dabrowski:
“Total pension benefits have grown at an annually compounded rate of 8.8 percent over the past three decades. Compared to 1987, benefits have grown 1,061 percent.
That growth is six times more than total state general revenue growth (236 percent) over the same time period; eight times more than median household income growth (127 percent); and nearly ten times more than inflation (111 percent).”
That statement is incorrect. Had he said total __promised__ benefits, it might be correct… if you believe his data and his math. I don’t have much faith in anything he says now.
———————-
No doubt pension benefits have increased in Illinois. They have increased just about everywhere.
So, what caused Illinois’ state pension crisis?
“I’ll give it away at the beginning: they’re in trouble because they’re not making the “required” contributions to the pensions.
Yes, there are all sorts of other reasons as well, such as spiking, early retirements, sluggish payroll growth, optimistic valuation assumptions, etc.
But ultimately the reason the pensions are so little funded is because the state didn’t put in enough funds.
And they knew it.
They knew it for years.
It’s not because of investment fees, though those should be more transparent. It’s not because of part-time board directors who get a lifetime pension for very little work, though that doesn’t help. (I’ll address why these aren’t significant problems in a later post.)
DON’T PAY THE BILLS, THE DEBT GETS LARGER”
Mary Pat Campbell, 24 Feb. 2016
Re: Illinois state employees
Dear Jane,
Are they required to pay FICA taxes?