Illinois has racked up $96 billion in unfunded pension obligations, and that’s left some young people wondering what the state’s biggest political issue of 2012 means for their future. We offer a look at the distrust — and apathy — surrounding public sector jobs and Illinois' pension problems among the state's young workers.
Illinois has racked up $96 billion in unfunded pension obligations, and that’s left some young people wondering what the state’s biggest political issue of 2012 means for their future.
The state legislature is expected to meet in early January, before new General Assembly members are sworn in, to come up with legislation that will help close the billions of dollars in underfunded pension liability.
But, Joe Tedeschi, 24, a recent graduate from Northern Illinois University who is certified to be a foreign language teacher, isn’t waiting around to see what will happen.
After taking a hard look at the state’s troubled pension systems and talking with a handful of public school teachers, Tedeschi said he’s reconsidered his career.
The teachers Tedeschi spoke with during his studies said they expect to receive fewer pension benefits than originally planned. As a result, some teachers have had to teach for more years or pick up a part-time job after retirement.
“I’m 24 right now, so I’m going to be doing the same job until I’m into my 60s, and it still might not be enough for me to live comfortably,” he recalled saying to himself.
Tedeschi, now at DePaul University working on a master’s degree in international public service, said young people, especially those who plan to work in the public sector, should pay more attention to pension reform efforts because it will set a precedent for them.
People in his age group may suffer more in the future compared to those who are closer to retirement, he added.
“(Older people) already have ‘x’ amount of money put in. They might get certain amounts taken out because of policies or if they retire early, but they’ve already got a head start,” Tedeschi said. “We’re all just starting, and so many people our age don’t have jobs or even careers yet.”
How did we get here?
There are nearly 760,000 Illinoisans in the state’s five pension systems.
The five state-funded pension systems are for public employees, state university staff, judges, members of the General Assembly and public school teachers. These employees receive a payment from their employer when they retire.
The state, public employees, local school districts and income from investments typically foot the bill.
But for decades the pension systems have been underfunded.
A big chunk of the problem comes from the state not living up to its constitutional obligation to add money to the fund, said Robert Bruno, director of the University of Illinois-Chicago labor studies department.
“Seventy-seven percent of the unfunded liability, about two thirds, is a result of the state not making contributions into the fund,” Bruno said.
And those skipped contributions have resulted in ballooning pension payments. The state’s 2012 pension payment was $5.2 billion, which tripled the payment in 2008.
To put that in perspective, the state’s annual budget is about $33 billion a year.
Going forward, the state projects that $10 billion of Illinois’ 2025 budget will go toward pension payments. That could mean even deeper cuts to education, programs and other government services.
Most state employees do not pay into Social Security, but instead contribute to pension systems.
Last week, WBEZ reporter Tony Arnold looked specifically at why so many Illinois teachers don’t pay into the federal program, which was signed into law in 1935.
When the Social Security program began, it didn’t require federal, state and local government employees to be covered. But in the 1950s, Congress passed a law that would let state and local government workers opt-in to the program if they wanted to.
In short, most Illinois teachers don’t pay into the federal program, because their pension systems came before Social Security (The Chicago Teachers’ Pension Fund was created in 1895. The Illinois Teachers’ Retirement System in 1915) and they’ve had better deals, higher returns and more flexible contributions, Arnold reported.
In addition to Illinois, 13 other states, including Alaska, California, and Kentucky, exclude teachers from Social Security and instead have independent pension plans.
What to do?
As part of Illinois’ pension overhaul, Gov. Pat Quinn and House Speaker Michael Madigan want state universities, community colleges and school districts to pay more for their workers’ retirement costs.
Quinn separately called for employees to work longer and pay more toward retirement, among others controversial cost-saving measures.
Bruno said those approaches are “masquerading as reform,” because it shifts the burden onto schools districts, the state workforce and employers.
“It’s all about the expense side with no honest conversation about revenue,” Bruno said, adding that there needs to be viable revenue mechanisms put in place.
Tedeschi called the plan to pass more of the pension tab onto already struggling public schools “absolutely ridiculous.”
“It is neither smart, just, nor responsible to pass the burden onto institutions that will obviously not be able to afford it,” Tedeschi said. “If public universities and schools have to give up more money to fund pensions ... then there will be even less money to fund things that schools really need like books, technology, extra-curriculars and smaller class sizes.”
Chris Slaby, 23, a public affairs journalism graduate student at the University of Illinois at Springfield, said if the shift onto public schools and universities happens, there’s a good chance property taxes would rise.
That’s because downstate districts, like in Springfield where Slaby goes to school, would need to increase revenue to offset the increase in costs.
And that wouldn't be fair to downstaters, he said, adding that compared to Chicago, the rest of Illinois has low property taxes.
But is that fair for Chicago residents, Slaby asked.
“I'm torn on the issue,” he said. “I do believe in the concept that everyone should pay their fair share, but there are small downstate communities that would be better off using that money elsewhere.”
State Treasurer Dan Rutherford said taxes would be impacted in the future as a result of the state’s pension troubles.
And for those young people who may want to go into law enforcement, agriculture, teaching and numerous other public-sector professions, there will be less money available for them, Rutherford added.
“Everything we are talking about will have an effect on their future,” Rutherford said.
With the state in the shape it’s in, Illinois is becoming a less attractive employer and place to invest in for higher education, Bruno said.
And “that’s a terrible drain of talent,” he said.
Starting the conversation
Young voters faced the pension issue head on when they went to the voting booths on November 6.
On the ballot was a referendum that, if passed, would have amended the state’s constitution to require a super majority vote approval by the General Assembly to make any public employee pension increases.
Progress Illinois took an in-depth look at Constitutional Amendment 49 before the election.
About 56 percent of those who voted on the measure supported it, according to the Associated Press. But that wasn’t enough to meet the 60 percent approval for those voting on the measure, or a 50 percent approval of the total number of votes cast. Nearly five million people voted in the election, the article states.
The controversial amendment failed, but it confirmed to some, particularly the younger demographic, that pension talk can be confusing.
Nicholas Zahn, 23, a Chicago resident and founder of the online art hub Degenerate Art Gallery, said he received a pamphlet from the state in the mail prior to the election that explained the amendment.
He read the literature, but said he didn’t understand the measure’s implications, as pensions are not on his radar.
At the moment, the young entrepreneur said he doesn’t have middle class aspirations to health insurance or a retirement income.
“Since I can stay on my parents insurance until I’m 26, it takes a small bit of pressure off, but it’s still a worry coming from a family with medical debt,” he said.
And Zahn said he’d worry about retirement later.
“The entrepreneur in me wants to retire tomorrow, but it is too soon to speculate what the world will be like in 2040s,” he said.
So at the polls, Zahn, who said he’s more in tune with social issues, such as same-sex marriage, left the question blank.
Tedeschi said he voted ‘no’ for the amendment.
Like Quinn and Madigan’s proposal to shift more pension responsibility onto public schools, the amendment was “another do-nothing distraction from the real issue, and a sad attempt to pass the blame onto someone else,” he said.
Slaby echoed Zahn’s sentiment that in general people his age aren’t paying much attention to pensions or contributing to the conversation.
One reason, Slaby said, is that there hasn’t been an effective push at getting the information out to that demographic in an understandable and relatable way.
But maybe “Squeezy the Pension Python” will help.
Quinn launched an online pension education campaign (thisismyillinois.com) on November 18.
The government-backed site includes a video explaining the pension debacle, which features the now famous cartoon snake.
Slaby said he doubts young people will be interested in a government-made video about pensions, but out of curiosity they might watch it.
“If that’s the government’s plan, then it might just work,” Slaby said.
Cook County Commissioner Bridget Gainer, who started the Cook County-focused website openpensions.org, said Illinois is experiencing pension-information overload, with people from all sides of the issue interjecting their opinion.
“We are all Fox News and MSNBC, and there is no CNN,” Gainer said, adding that there needs to be more places that deliver just the facts while clearly explaining various solutions to the problem.
Gainer’s website, which estimates that Cook County’s pension will be bankrupt by 2038 if no changes are made, highlights a few reform scenarios, such as increasing the retirement age and changing retirees’ cost of living benefits, among other examples.
The commissioner, who also serves as chairwoman of the Pension Committee for the Cook County Board, said young people should be engaged in the hard issues the state faces because, ultimately, they are the ones who will inherit its problems.
“You’re not a baby anymore,” Gainer said. “You’re not a kid. You’re an adult. Participate in the world.”