11 thoughts on “Forbes post, “Is Gov. Pritzker Clueless Or Reckless On Pensions?”

  1. I live in Illinois, and now that Pritzker has become Governor of this state my wife and I are on the great migration of leaving. Illinois has lost a great deal of tax revenue from people moving. He has raised the gas tax to one of the highest in the nation and hear is the kicker its going to increase every year with a vote. Pritzker has done everything with taxes he promised that he would not do. I don’t like his ideas and he dose not have a clue of what he is doing. Pritzker is a yes man to a former Governor who is in prison for now but I’m sure will be released before Pritzker is out of office. I wrote to Pritzker to tell him why we are leaving and he don’t care. His idea of saving this state is to raise the taxes, coast of living (only state to jump on the $15.00 hr min. wage) Illinois will be as high or worst than California with out the industry to support it. He will refuse to redo the pension system or place a fair tax reform for Illinois. The belief is keep doing businesses as we always have and the tax payers will pay.

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  2. Jane is great! You state “In fact, pension spending (including contributions to pension funds and repayment of pension obligation bonds) consumes 25.5% of all general revenues.” Do you know what this percent is compared to – say ten years ago?

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  3. Jane,
    Any chance you could do some digging on his comment “buying out people’s pensions to save money”? I have the feeling this is going to cost us money. The amount of the payout is so small relative to what a retiree leaves on the table it makes me very suspicious of how we ended up with this new “cost savings” law. As I see it, for the most part the only person that would take this deal is one that knew they were going to die in the near future. Otherwise why take such a huge haircut? So in this new scenario it seems likely will have money going to a pensioner that exceeds what the state would have paid under the old system that did not offer a lump sum. Very few politicians are focused enough on saving us money to come up with this one. However, there are plenty of union leaders that would try to get additional money in the event of member’s unfortunate premature death. After all being able to retire at full benefits at 55 within the prior system and dying prematurely forfeits a lot of payments versus dying at the projected actuarial lifespan of 84. The origin of how this became the new law would give us insight as to the chances of this saving or costing us money. I would be interested also in knowing the actuarial assumptions that allowed Pritzker to talk up his “cost savings”.

    The man has actually made the pension system worse by adding back the outrageous 24% spikes. My guess is this new “cost savings” may be a cost penalty.

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    1. Actually, I can’t lay my hands on this at the moment, but there has been a study that’s shown that this buyout program has had very few takers, and has “saved” very little money, even when taking into account only the usual mortality tables and not trying to guess how many people took the benefits early because they knew they were going to kick the bucket soon.

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  4. I was reading your link on Tier Two Retirement systems and I wonder if you could explain how a Teacher retiring with a Tier Two pension could have less benefits than a Social Security retiree. The only thing I can see is the lower COLA payments . I believe that SS increases based on the COLA and its multiplied rather than added like in tier two. But would that alone cause it to be considered less generous than Social Security

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    1. Hi, Paul —

      There are a couple elements of the pension that contribute to the low value. First, yes, the COLA adjustment has a significant impact, both the fact that it is “simple” rather than “compounded” and the fact that it increases at only half the inflation rate, with a cap of 3%. Second, pay is capped at a level that’s right now somewhat less than the Social Security cap, but will decrease in real (adjusted for inflation) terms each year, because it too only increases at half the inflation rate, with a cap of 3%. Over time, this will create, in real terms, this will have a significant effect. Third, the new system vests employees after working for 10 years, so someone who leaves after 9 years (leaving teaching as an occupation or moving out-of-state) will lose their entire accrual and be refunded only the contributions they made, without any interest. (I keep meaning to see how Social Security’s Windfall Elimination rules apply to them.) Even someone who stays longer, but doesn’t work a full career, is shortchanged, because Social Security indexes each year’s pay for average wage increases up to retirement, and private-sector systems in the US don’t.

      How does this all play out? You can look at the annual report for the Teacher’s Retirement System, where the actuaries calculate the “employer normal cost” for each year. It’s based on the actual value accrued to plan participants in any given year, and right now, it’s not surprising for the value to be low because the Tier 2 group consists of a lot of new hires. But even in 2046, this group has a *negative* normal cost, which means that the actuarial value of their benefit accrual (with the valuation assumptions) will be less than their 9% employee contributions — and that’s not even fully taking into account the impact of the pay cap because “pensionable pay” is pay up to the cap in that year.

      Hope this helps!

      On Sat, Jan 25, 2020 at 11:35 AM Jane the Actuary wrote:

      >

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  5. Thank you for the insight. Does the fact that the Legislator exempted themselves and Judges and now Public Safety officers indicate that they, the Illinois legislator suspect that Tier Two may in fact violate the Safe Harbor clause ?

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