Illinois Racing Against California for Biggest Pension Disaster
We've noted that California's modestly bipartisan efforts to reform public employee pensions have collapsed and the state's pension program is now giving a big thumbs up to workers spiking the system with a host of bonuses. But the Washington Times wants to remind us all that Illinois is just a big of a disaster and efforts to reform pensions there have been just as problematic:
If the Illinois Teachers Retirement Service (TRS) had to pay out all of its pensions today, it could only afford to give its members 40 cents on the dollar.
Yet the number of six-figure pensions TRS has been doling out has increased 24 percent this year compared to last, with about 6,000 retired educators collecting more than $100,000 annually, according to records obtained by Open the Books, an online aggregator of local spending that tracks educator salaries, pensions and vendor spending.
The group's Labor Day report found more than 100,000 retired Illinois educators had been paid back what they invested into the system just 20 months after leaving work, a financial burden linked to union collective bargaining, which can cost taxpayers $2 million or more per teacher over the course of retirement.
Just as in California, Illinois passed some very modest reforms to the pension system, only to have them challenged by the unions. A judge has approved a temporary injunction blocking implementation.
The Washington Times piece helpfully explains how this crisis is a result of behavior by all sides. To the extent the pension crisis gets talked about at all, the debate comes in two flavors. Either the fault is due to the workers milking the system through pension spikes, driving up obligations to amounts that are simply not reasonable; or the fault is due to politicians raiding pension funds or failing to pay their share in favor of spending the money on crony capitalism projects like stadiums. The reality is, both complaints are true (and there are even more reasons for the crisis than just the two). It's important to note that union leaders and pension fund operators knew full well that the pensions were underfunded and were fine with it because they benefited in the short term:
TRS is Illinois's biggest retirement reserve, making up half the state's pension funds. For years the state legislature allowed the pension to go underfunded so it could spend money on other things. State educators and union executives used the borrowed cash to hire more teachers, boost salaries and improve local facilities.
Read the whole story here.