The inflationary pressures on retirees on a public pension.

In a blog post by my retired colleague John Dillon, written in 2019, John gave us some of the history of our teacher pension’s 3% compounded yearly benefit increase.

He began by quoting former TRS trustee Bob Lyons:

As past Illinois Teachers’ Retirement System Trustee Bob Lyons observed, “In the 21 years from 1969 through 1989 there was only one year that inflation was less than 3.3% and the average annual rate of inflation was just over 6.2%.  In making the decision in 1989 to change our annual increase from three percent simple to three percent compounded, the members of the General Assembly made what they felt was a reasonable assumption that inflation would continue and that it would grow at the rate that it had been for more than 20 years.  Since state pensions had not kept up with inflation they would provide a necessary increase, but they did not ask anyone to pay for it because they assumed it would not really be expensive.  The change would cost the state, but they assumed it would still run behind inflation. And growing inflation would mean the state would collect more tax revenue.”

Anticipating further elevated inflation rates, the General Assembly granted a change from 3% simple to 3% compounded COLA in 1989 to the retirees in TRS. 

Since 1990, (high of 4.1% in 2007 and low of .1 in 2008) the average inflation rate for the country has been overall 2.4%.   As Mr. Lyons writes, “The reality is that the change from 3% simple to 3% compounded did just what it was supposed to do and it has more than protected us from inflation.”

And he’s right.  On average, thus far, we are looking back nearly 30 years with a .6% positive break.  And in our current media environment of people turning on each other rather than to each other, this COLA correction seems unacceptable to those who criticize the Illinois “Pension Problem” as simply an issue of too many benefits. The finger pointing by the Tribune and other anti-union organizations ignore the truth: the cost of pension would not be so overwhelming if there were no debt payment as a result of decades of avoiding payments.  

Again, It is important to note that our TRS pension is fixed. It does not change from year to year regardless of any change in the Consumer Price Index or other measures of inflation.

This is not true of Social Security, which teachers do not receive and can vary based on changes in the CPI.

In 2022 it is expected that the Social Security benefit may go up by as much as 5%.

Our teacher pension monthly payment will go up by the same amount it has gone up for two decades. There will be no change.

There is a myth that retirees’ living costs go down. We no longer have to pay the cost of working and working has definite expenses.

The truth is that the government’s official CPI fails to keep seniors on a par with the inflation we actually experience. 

The cost of goods, including prescription drugs, housing, health insurance, food, and various taxes go up for the elderly.

Even for those receiving a Social Security benefit have lost 33% of their buying power since 2000.

Among the 10 fastest-growing costs cited in the a survey of retirees were prescription drugs, homeowners insurance and property taxes, several food items, and Medicare premiums.

It is true that some retired seniors own their own homes and are are protected from the rising cost of housing – to the extent that they have fixed-rate mortgages or own their homes outright – but are still are subject to rising costs of property taxes, insurance, and maintenance. 

Many retirees are exposed to the volatility of rental rates, which have been on a tear in recent years and show no signs of abating.

I have written extensively on the health care costs that Medicare does not cover such as dental, hearing and vision.

And yet our pension benefit adjustment remains unchanged from year to year.