Pension debt stabilization with Tier 2 is a pig in a poke.

From today’s Capitolfax.

The most news-worthy item to me was about the state’s pension debt. A slide was presented to the agencies showing that by next fiscal year the state will have more employees in the much less costly Tier 2 pension program than in Tier 1. “That’s why the trend is our friend,” Hynes said. “If we just continue to make the same payment, over time, the demographics are going to work in our favor.”

Hynes explained that the “same payment” didn’t mean the dollar amount would level off, but payments would remain at about 25 percent of the state’s budget into the future. While that’s a huge chunk of the budget, “75 percent of a growing revenue pie is still a lot of money to do the things we need to do and want to do,” Hynes said. And planning will be easier. Of course, that assumes no major revenue crashes and no successful legal action on Tier 2.

A few observations from this retired teacher.

When Hynes says “demographics are going to work in our favor,” he means retired teachers like me are dying.

When the state reports, a little too gleefully in my opinion, that in the next fiscal year there will be more teachers in Tier 2 than Tier 1, it may be that Covid has been working on the pension debt with way more effectiveness than the state legislature. We are dying at a faster pace.

Rich Miller takes from a report by Pew that IIlinois has been showing more pension payment discipline. But that in no way means that the legislature has been making their full actuarial payment to TRS.

Investment returns have been good. And Tier 2 teacher contributions have reduced the rate of the increase in debt and liability. But the legislature still shorts the system in every budget it passes.

Assuming no major revenue crashes and no legal action on Tier 2 is a pig in a poke.

When Tier 2 members of TRS reach retirement age their pension will be so pitiful that it will not meet federal requirements. It’s what is known as safe harbor.

Lawsuits will be filed.

It is likely they will be successful.

It will blow state and local budget stability to smithereens.

2 thoughts on “Pension debt stabilization with Tier 2 is a pig in a poke.

  1. I just left an AFSCME-R Zoom. The speaker was talking about pensions. One person who is running against Gov. Pritzker–Rep. David Bailey (R) from southern IL had introduced SB 10, which would eliminate the pension clause.
    People, join retiree organizations NOW! (IL Retired Teachers’Assn, AFSCME-R, Jane Addams Sr. Caucus, IL Alliance of Retired, etc.) There is strength in #s &, once again (or should I say “still”) we’re in for a huge fight.

  2. I fear I may never be able to fully enjoy my retirement with the constant worry what of our state legislators are up to with regard to the pension benefits I earned. When, if ever, will it ever end?

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