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Illinois State pension cuts OK’d

March 26, 2010

Read about it here:  State pension cuts OK’d

This legislation passed the Illinois House 92-17 and then the Senate quickly passed it 48-6. Some highlights.

Under the plan, future employees in 13 retirement systems could not retire with full benefits until 67. Some now can retire at 55. Future employees’ pensions would be based on an eight-year average of pay rather than four years.

The measure also caps the amount of salary on which a pension can be based at $106,800; prevents someone from drawing pensions from more than one public retirement system, and limits post-retirement cost-of-living increases.

Both of those seem very reasonable.  Now we get to the interesting part:

The plan also gives Chicago’s public schools a windfall to address what could be a $1 billion deficit next school year by reducing the amount that must be contributed toward teacher pensions by $1.23 billion over three years. The measure also extends by 14 years the period when the Chicago Teachers Pension Fund must be 90 percent funded. It is now 74 percent funded.

This was the bone thrown to those who may have not approved pension modification legislation so quickly.  The legislation extends the time for getting the Chicago Teachers Pension properly funded – in other words,  it allows the government to not recognize the true debt on their balance sheet.   I’m all for paying teachers well and trying to improve the quality of teachers, especially in the inner city.  What I’m not for is to not be truthful about the commitments our government entities have made of our future tax dollars (work.)

So, this action by the state of Illinois is a bit less impressive than it first seems.  The reductions in pensions are only for newly hired workers and thus the reductions in government obligations are a few decades out.  Meanwhile, the current problem of the Chicago Teachers Pension is not only not being addressed, it is being further delayed.

All in all, this is a good stepNot a big step, but at least a step forward.  We need many more of these.

Overall, I guess this is a step in the right direction.

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