I doubt that state employees from previous generations realized that they were agreeing to skim all this money money off of their children and grandchildren, but, nonetheless, here we are. It's a situation where it's going to be impossible to do justice to everyone. But it's going to be important to minimize the injustice. That is probably going to require some concessions on the parts of pensioners - if they don't take a scale back, it's just going to put Illinois on a downward spiral as its most economically productive citizens and businesses emigrate. That's a worse path. It will lead to pensioners suffering an even worse kick in the pocketbook, and create a lot of collateral damage for working people in the process.
The same goes for employee benefits. Something is ok. Luxury is not.
If there is a reasonably comparison between employee pensions and private industry "executive compensation" should be a massive red flag. Being a civil servant should not be about the money.
Its just that pensions are more direct and easy to see.
Illinois has shown that it will willingly take from the people in order to pay current as well as deferred payments to government workers. Below is a link to an article and research that shows that Illinois was far above normal government pay.
From the article below, I quote, "Not only do state workers in Illinois make more than the private-sector workers who pay their salaries, the average pay for state workers in Illinois is out of step with their peers in the other 49 state."
ARTICLE: https://www.illinoispolicy.org/press-releases/state-governme...
RESEARCH PAPER: https://d2dv7hze646xr.cloudfront.net/wp-content/uploads/2016...
My best guess is that Illinois will default (in some manner) on these pensions. The next recession, combined with net population drop, will doom the state's finances beyond repair if they aren't already too far gone.
I'd also recommend looking through this to see how negligent their political leaders have been over the years:
Well that was not the case with California's 1999 pension reform, where pensions were retroactively increased by 50% overnight.[0]
That kind of money doesn't just appear out of nowhere. Many of these cases were transparent scams and the people involved knew it.
[0] http://www.sandiegouniontribune.com/opinion/sd-calpers-menda...
Defined benefit plans are at best a deferred time bomb and at worst a deferred time bomb with a short fuse.
> State employees in the past accepted lower salaries in exchange for this future benefit.
So? If they were that concerned about the future benefits they should have received a defined contribution plan that pours the money into an employee controlled sinking fund. Nothing stops the State from declaring bankruptcy and reneging on its end of this deal.
It may sound callous but if the alternative is raising taxes to the point that nobody is left in Illinois, is that really an alternative? Sometimes you have to amputate an arm to save the patient.
> Taking away that pension now would be theft from these people.
Agreeing to these outrageous pensions with no way to pay for them is theft from all current and future tax payers. This is a scamola run by politicians to buy votes from public sector unions and it needs to end.
Residents didn't directly sign up for these debts. A series of corrupt Democrat politicians who used theses pensions to buy union votes are responsible. While I admit the thought of their personal assets being seized to pay off these obligations does make me smile, I also don't think that'd be legal.
Similarly, it's not the personal assets of the rest of the citizens of Illinois that would be at stake here. There may be an argument for the sale of public assets, owned by the State itself, to cover some part of this in a bankruptcy hearing but I'd imagine there is going to be significant legal challenges to that as well. The optics of literally selling our children's public inheritance to pay off these corrupt deals is not going to play well with the electorate.
The counterparty for these pensions is not the individual residents of the State. It's the State itself, and possibly a subordinate institution. Sinking funds for current employees of those institutions are fair game. Similarly, the rest of the country is not responsible for these debts either.
Isn't this the public sector equivalent of letting a startup pay you in equity? While it may have been characterized as more secure than personal investment, agreeing to this compensation scheme doesn't remove the burden of risk, particularly when the 'startup' offering to pay you later is state government.
Owing a defined-benefit pension is a legal obligation to provide a future revenue stream. It's more like a bond than a stock, and debt generally has priority over equity.
The state has money. The government doesn’t.
It’s no small thing to suggest that people should view the legal obligations of their governments with skepticism. That we should anticipate, and account for the risk of, government default in our employment plans.
Politicians who didn’t want to raise taxes (to increase pay, to attract workers) made promises of deferred compensation (which have to be higher to offset now vs. future). Voters bought it, -hook, line, and sinker-, and the entire state bought public services on credit.
I have a hard time pinning that on the guy doing largely unskilled work for the last 30 years of his life. He may be left holding the bag, but I’m not going to leave him with the blame.
It is a huge thing which should always be on people's mind. Government is the only player on the market who literally owns the rules of the game and can bend or completely change them in their benefit. Which means every promise from them should be viewed with extreme suspicion, as they are both the ones promising it and the ones charged with enforcing the promise, which means it is much easier for them to renege on the promise.
> I have a hard time pinning that on the guy doing largely unskilled work for the last 30 years of his life.
Government employees are not "largely unskilled work", and they are surely not voting against the current setup, as far as I can see. If they did, we could talk about something that is done to them against their will. Right now they are major part of the fraud being perpetuated. They are not some passive victim of some nefarious force, they are active and willing participants of the scheme. Try to cut those benefits or switch them to defined contribution or make them contribute enough to cover the deficit - and see how vocal they'd get.
By the way, startups do have to give you your shares, they just might turn out worthless. Governments promised USD, and were the safest borrowers around for a long time.
I think the truth lies somewhere between here, but the obligations probably can't reasonably be met, and probably never could.
It would be super-cool if the report was about this, but it's not. There's not a shred of evidence given that the compensation given to state workers was over-market.
We've also got some pretty egregious cases to consider, which suggest that there aren't any guard rails around the pension system. The highest-paid pensioner in the state was able to retire at 55, and receives more than half a million annually. Plus the state's better-than-inflation 3% COLA.
The big problem here is that we are expecting people to be bound to promises made by their predecessors, without ever being a party to those original negotiations. When one generation promises itself lavish benefits, to be paid for by future generations, they shouldn't be surprised when those future generations tell them to go pound sand. One of the big problems with the US model of government is that it never erected any enforceable barriers to kicking a can down the road long enough for it to become someone else's problem. It's just so easy to outvote the opposition, when they haven't been born yet.
So now we have this generational warfare, where the grandparents' generation took out loans, had a big party of borrowed prosperity, and then structured the payoffs to happen after they were all dead. Then the parents' generation decided they could only afford to have 2 kids instead of 3, and immigrants were no longer welcome, because jobs. Then that dead, skeletal hand finally reaches across the years to give young people a giant, bony middle finger, and then pick their nearly-empty pockets.
If those kids think school shootings are a threat to their lives, just wait until they graduate, and 80% of everything they earn is actually going toward helping the grandmas and grandpas pay for their little blue pills while breeding antibiotic-resistant gonorrhea in their luxury retirement communities. They'll want those guns back, when they're out nationalizing the assets of retirees, and herding them into assisted-living ghettos, chewing through property portfolios in order from eldest to youngest. That's what springs to mind whenever I think about Illinois's pension problem: "Screw you, you entitled assholes; you're going to get what's coming to you, and it isn't money."
They're also one of the few sectors of our working economy readily represented by unions.
My take on this is not that the public sector somehow struck it rich, but that the rest of us--those of us in the private sector--have had the screws put to us for a long long time, and that's why the public sector now looks fat and happy.
They didn't strike it rich, we struck it poor.
Since they can't attract candidates as effectively (frankly, that nice pension plan isn't nearly enough to make up for the crummy salary relative to what I can earn elsewhere), they aren't getting as many opportunities to hire really ambitious people. This has repercussions that play out in all sorts of ways, but, being a tech guy, the one I am most aware of is that acquaintances complain that the city often relies overmuch on low-tech and highly manual procedures for accomplishing basic tasks, because nobody is really motivated to streamline them. That results in lower per-employee productivity, which, in turn, increases the headcount requirements. Which, I'm guessing, increases overall labor costs relative to what they could be otherwise.
So it's not that the state's salary and pension costs are high because employees are well-compensated, it's actually something of the opposite.
http://www.oprfhs.org/human-resources/documents/Over75KRepor...
At 50 names a page, you're on the bottom of the third page before you see the first person who isn't taking home six figures in base pay plus cash extra pay, before factoring in benefits.
These teachers are all part of the TRS pension plan and get lifetime pension at retirement. That's the jewel of the benefits package, but the rest of their benefits are pretty fucking excellent, too: cheap health insurance, huge numbers of vacation days.
Say what you will about the importance of teaching (and the fact that these comp numbers are perceived to flow right back into property values), these are not standard deals in the private market. They are, from the day you start your job to the day you retire, superior to the deal most private sector workers get.
Just curious, how does the teaching compare with other schools in other states. I've been saying for a while that teachers should have high salaries like that because for one it matches the rhetoric of "think of the children" / "children first", and that teaching should be a prestigious job in line with engineer, finance, doctor or lawyer. So here is a case were salaries seem to be in the ballpark of being "prestigious" would you say the quality of teaching and the environment in school is correspondingly better?
And they get 2 months of summer off.
Those aren't salary, but they are benefits that should be considered.
Somebody has to take the punch bowl away and make us pay what’s come due.
Why is it public-sector retirees in particular who must pay that price? Again, they have moral and legal claims on their pensions, and they (largely low and moderate income households) are not the primary beneficiaries of decades of low taxes that left state pensions underfunded.
Because they have voted in the politicians who perpetrated the fraud, and gladly bought into it. Public sector unions are one of the largest political donors.
There are four solutions to this problem: austerity (cutting spending and/or raising taxes), default (cutting benefits), borrowing and federal bail-out. At this point, the first postpones the second if borrowing or a bail-out aren’t options. (Borrowing explicitly postpones it.)
Note that “default” doesn’t mean unilateral cutting. It is politically negotiated, and may involve the state giving pensioners something in exchange for reduced cash benefits.
Attempting to elide the two together under one term fundamentally misrepresents the politics of the situation and makes two very different options sound equally unpalatable.
There are plenty of government unions that did bargain for lower salaries in exchange for higher retirement benefits, (for example, many teachers' unions did) but those unions won't be found in Illinois.
The trick here is there's nothing to "take away". These benefits exist only as promises - there's no funding for them. If I promise to you if you work for me for a decade I will give you a trillion dollars, and then turns out I don't actually have the trillion dollars, the theft - or, more precisely, the fraud - doesn't happen when the lack of the trillion dollars is revealed. It happened when I promised you the trillion dollars without having it. The theft from these people has already happened - that's what people fail to realize.
Except it's not true. Teachers in Illinois, for example, earn about $65,000 on average. In the U.K., which has high teacher salaries compared to the OECD, is around 28,000 pounds (roughly $42,000 at typical exchange rates). https://www.independent.co.uk/news/youngest-and-the-best-pai.... Same is true for police, etc.
Teachers only look relatively underpaid if you lump all college graduates together and look at average salaries. That number is heavily skewed, because many of our executives and professionals (bankers, doctors, lawyers, programmers) are paid multiples more than in Europe. That just means those people are paid too much, not that teachers are paid too little.
That's hardly shocking. My salary would go down if I switched from programming (which I've been doing for decades) to something else, too.
let alone far too many of the pension systems allow workers to game the system and end up with more in retirement than in service. there are many systems where the last three years pay can be used as the basis for the pension and stacking overtime and hoarding vacation are common place means of spiking the returns.
that is the abuse that bankrupts systems. the lower end government worker gets the shaft while the higher up politicians and police and fire rake in 100k retirements.
Defined-benefit pensions are a form of deferred compensation. State employees in the past accepted lower salaries in exchange for this future benefit. Taking away that pension now would be theft from these people.