Spring Break
Column: Helping to explain the pension plan
State Senator and State Represenatives speak out
Guest Columnists
Issue date: 6/28/05 Section: Opinions
The $30 million in savings from the pension changes are mainly to future state employees, state university employees, and downstate teacher's retirement funds. Conveniently, the plan leaves judges, legislators, and Chicago teachers' pension plans untouched! However, there are some changes to current employee's pension systems.
First, the legislation authorizations a new early retirement option for downstate teachers and administrators with increased contributions from both the teacher and the local school district. Secondly, the authority to determine the money purchase option interest rate for SURS participants has been transferred from the SURS system to the Illinois Comptroller - giving the Comptroller the power to determine whether the money purchase option for current SURS employees maintains its current interest rate.
These changes aside, the big worry for all employees (current, future, and retired), as well as the taxpayers, should be the long-term stability of the system and the total cost to repay the pension dollars that were "borrowed." As noted above, the long-term cost to the taxpayers to pay back all this money is astronomical. But don't take our word for it, State Teacher's Retirement System Director Jon Bauman recently noted that the net cost to repay his system will be $13 for every $1 borrowed. In the meantime, by shorting our already under-funded pension systems, the systems are forced to sell off assets to their current expenses.
This brings us to you yet another concern with this plan. When a pension funds asset-to-liability ratio dips below 30% it is considered insolvent. A pension raid of this magnitude will seriously set back their asset-to-liability ratio and force them to immediately sell assets to cover the costs of the shorted money. Our state's pensions are already the most under funded of any state in the nation and this plan will only make it worse. The good news is that they ought to be able to withstand this shortfall without falling below the 30% threshold; however, should the stock market crash, or real estate values plummet, it is hard to see how they could withstand a "double whammy," so to speak, to their portfolio.
First, the legislation authorizations a new early retirement option for downstate teachers and administrators with increased contributions from both the teacher and the local school district. Secondly, the authority to determine the money purchase option interest rate for SURS participants has been transferred from the SURS system to the Illinois Comptroller - giving the Comptroller the power to determine whether the money purchase option for current SURS employees maintains its current interest rate.
These changes aside, the big worry for all employees (current, future, and retired), as well as the taxpayers, should be the long-term stability of the system and the total cost to repay the pension dollars that were "borrowed." As noted above, the long-term cost to the taxpayers to pay back all this money is astronomical. But don't take our word for it, State Teacher's Retirement System Director Jon Bauman recently noted that the net cost to repay his system will be $13 for every $1 borrowed. In the meantime, by shorting our already under-funded pension systems, the systems are forced to sell off assets to their current expenses.
This brings us to you yet another concern with this plan. When a pension funds asset-to-liability ratio dips below 30% it is considered insolvent. A pension raid of this magnitude will seriously set back their asset-to-liability ratio and force them to immediately sell assets to cover the costs of the shorted money. Our state's pensions are already the most under funded of any state in the nation and this plan will only make it worse. The good news is that they ought to be able to withstand this shortfall without falling below the 30% threshold; however, should the stock market crash, or real estate values plummet, it is hard to see how they could withstand a "double whammy," so to speak, to their portfolio.
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