Writing at Forbes, Elizabeth Bauer asks if Illinois’ public retirement system is a pension fund or a pyramid scheme. The evidence doesn’t look good. Despite electing a new governor, Illinois seems to be using the same old tactics to plug its pension holes. Bauer explains:
Illinois’s new elected officials and their advisors simply don’t believe that it matters that public pensions are pre-funded. They view pension funds as something that exists on paper, and pension reporting as a nuisance to be avoided where possible, and ignored otherwise. Through their actions — and indeed their words — they are showing that they think of public pensions as pyramid schemes, in which new participants pay the retirees’ pensions. And while that’s true of Social Security, it’s a terrible and terribly harmful approach for state-employee pensions.
What justification do I have for saying this?
First, Prizker plans to revise the funding schedule from a target of 90% funding in 2045 to 90% funding in 2052. But it’s not just a matter of redoing the math for a standardized formula, like refinancing a mortgage and adding more years to the payoff period. His office reports a reduction in contributions of $878 million in the 2020 budget, relative to what existing law would require. But the office has not made available the underlying contributions, and even Ralph Martire, executive director of the Center for Tax and Budget Accountability and member of Gov. Pritzker’s Budget and Innovation Committee, said on the February 20, 2019 edition of Chicago Tonight (about the 18 minute mark) that
he didn’t publish enough material for us to weigh in on those pensions and either support or not support what he did. One major concern we have is they reamortized, changed the ramp, the payment schedule, and they didn’t point out what the new payment plan looks like, so I don’t see what that new ramp is and we want the state to go to a level dollar so it doesn’t always have this increasing payment obligation. That’s what strains the fiscal resources.
Sure seems as if “change the target funding schedule” is really a rationalization for yet another pension contribution reduction to plug a budget hole.
Read more here.
I have warned readers many times about the dangerous techniques being used to cover up the rampant under-funding of pensions in American states and municipalities. Read here for more:
- Underfunded Pensions and a Devil’s Bargain
- California Pensions Continue to Make Headlines
- A Japan-Sized Hole in U.S. Pensions
- Pensions are Still Hiding from the Truth
- Dangerous Rules Make American Pensions Riskier
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