Over the weekend, the Sun-Times continued its investigative series on the state pension system. In the latest installments, the paper rolled out more examples of clout-heavy bureaucrats and pols who have retired from one job only to land another covered under a separate pension plan. Additionally, five dozen pensioners are collecting payments based on salaries from labor unions, lobbying groups, and other non-governmental organizations. While their reporting should certainly spur debate about how to close certain loopholes in the system, the Sun-Times leaves out important context, failing to point out yet again that rank-and-file workers -- the majority who pay into the pension funds -- aren't reaping anywhere near these sorts of rewards.
Yesterday, columnist Mark Brown attempted to imagine some potential legislative reforms that could bring the pension payouts "under control." Some of his suggestions deserve consideration. Raising the retirement age five years to 55, which is in line with most private sector jobs, could save the state money in the long-run. He also proposes taxing any retirement income over $75,000, which would "capture some of the excessive public pension income -- as well as more well-to-do private sector retiree benefits." Lawmakers could then use the resulting revenue to pay down the state's hefty and long-ignored pension obligations.
But one of Brown's ideas is notably off-base. "Next, we could get rid of the automatic 3 percent annual increases for government retirees," he suggests, "and replace it with a capped, inflation-based cost-of-living factor." In its original primer on the state pension system, the Sun-Times reporters laid the groundwork for this proposal:
It's rare for private pension plans to provide automatic raises. Social Security payments began automatically going up each year in 1975, but that's based on the actual cost of living, which has usually been less than 3 percent. And those automatic increases now face the possibility of being suspended for two years.
But the paper's suggestion that the state pension system offers more generous annual increases than Social Security is just plain false. Take a glance at the Social Security Cost of Living Adjustment stats to see why. Over the past 10 years, the average annual COLA increase was 3.03 percent. Stretch all the way back to 1975 and and the average is even higher (4.43 percent). The argument that the Illinois increases are too large simply doesn't hold water.
Let's be clear: Lawmakers and other powerful players in state government should not be able to abuse the system and bilk taxpayers for benefits they did not earn. But well-intentioned reforms need to be structured so as not to unfairly strip benefits from the state's honorable employees.
Comments
Anonymous (not verified) on Wed, 09/16/2009 - 12:23
The 3% yearly increases in retirement are paid for by state workers themselves. For eample, in the State Universities Retirement System (SURS), an employee contributes 8% of salary to the pension system, and part of this (I believe 0.5%) is specifically designated as providing for the 3% annual increases in retirement. I do not understand, ethically and morally, how you can rob someone of something that they have paid for. In any case, the Illnois Constitution specifically states that pensions are a contractual right, and benefits for current system participants cannot be diminished or impaired. As Blagojevich learned four years ago, when he made (and eventually dropped) a similar proposal, the 3% increases for current employees cannot legally be reduced.
Mary OK (not verified) on Wed, 10/28/2009 - 14:23
The current social security contribution is 6.2% on Salaries up to $106,800. This is matched by the employer and currently, the benefit one gets is capped out at about $25,000 annually. This doesn't count the Medicare tax. As you know, social security recipients can't collect anything until they are 62 and that is a discount off a full benefit at age 66. By the way, did you know that the social security benefit is based on a rolling 35 year average. If you quit working before age 62, they include $0 per year and these amounts could be included as part of the 35 years average - bringing the benefit down.
Morally, ethically, the state workers don't pay nearly enough for these lucrative benefits, which any actuary will tell you. They neeed to tax state workers for their COLAs immediately. These pensions are an insult to the rest of the taxpayers. Anyone who defends them is corrupt.
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