State pension problems being solved on taxpayer’s backs

Even the Democrats in Springfield are seeing that there is little hope for an easy solution to the over $80B pension shortfall, considering the pension calculations are based on a return on investment that is greater than any currently available.

Unions can shout all they want, according to Scott Reeder of the Illinois Policy Institute, in his guest column in the Rockford Register Star, but the unions are partially responsible and played a role in creation of the deficit by agreeing to increases that couldn’t possibly be paid for without large increases in state income taxes.

Scott writes that the pension shortfall was caused by political pandering to the unions with both sides knowing there was no way to pay for the promises made. Even the 67% income tax increase this year wasn’t enough, with most of the increase going to the pensions.


I know few people able to retire in their 50s at three-fourths of their final salary — other than government workers. And that pension grows, compounding on itself each year.

For example, a worker who retired in 1993 earning $53,333 today can expect to collect $72,244 today in pension benefits. And that number continues to grow.

Less than one-fifth of private sector workers receive pensions. Most people rely on 401ks, IRAs or similar plans. No one guarantees us a certain level of retirement income. We are on our own.

Since Obama says the private sector is doing Ok, the taxpayers are the ones who are being forced to make good on the promises of the politicians, even though less than 20% of the private sector employees have a defined pension benefit.

Illinois voters are partially to blame for the broken promises. The voters are after all, the ones who keep voting for Chicago politicians for the statewide offices.

The unions complain that “We faithfully contributed toward out retirement – every paycheck. The legislators didn’t pay their part. It’s their fault and shouldn’t be resolved on the backs of the state employees.”


After all, taxpayers can say the same thing: “We faithfully paid our taxes — every paycheck. It was the state Legislature that skipped pension payments — not us. It’s not our responsibility to solve this problem either.”

The president of the Illinois Education Association, Cinda Klickna, also wrote a guest column in Register Star and writes that a guarantee that the state would pay it’s portion of the pensions is required – a tax increase wasn’t mentioned – but would be necessary.

In all the surveys quoted in the column, the IEA apparently forgot to ask the voters if they would mind another 67% increase in their state income tax to pay for public pensions that the private sector doesn’t even have.

She also believes that closing the tax loopholes on corporations, no pension cuts on current retirees and additional contributions on the part of the employees would raise enough money to reduce pension debt.

That remains to be seen, because government pensions are currently being dumped on the backs of the taxpayers, and just like Social Security, the politicians used the money for other things and placed all our pensions in jeporady. The taxpayers remain the solution for that pension as well.



  1. It’s not the public employees or the teachers who brought this problem on the taxpayers but as you point out the legislators who squandered their pension contributions and investments.

  2. One thing for sure, the legislators and Governor have no intention to lower benefits or increase employee contributions. The taxpayers are an easy target.

  3. Joe Melugins

    The pension problems are not because of too generous of benefits, or because of unions. The problems are a result of the State of Illinois as employer failing to make the employer’s share of retirement contributions for most of the last 40 years. Just think what shape Social Security would be in if the employers failed to contribute the employers half the last 40 years.

    Since 80% of the people in the pensions aren’t covered by Social Security, the State didn’t even contribute what it would have had to for Social Security. That means that McDonalds contributed more towards their part-time, high schools employee’s retirement most of the last 40 years than the State of Illinois contributed towards its state employees and teachers’ retirements.

    Wisconsin has the best funded state pension system out of all 50 states, despite the fact that their teachers and state employees have to contribute less that teachers and state employees in Illinois do.

    The Wisconsin legislature last year increased what public employees must pay toward their pensions. Before the law passed, workers paid less than 1 percent of their salaries in some cases nothing toward pensions. Under the new law, public employees pay 5.8 percent to 6.65 percent. Pension benefits themselves were not changed.

    Most Illinois public employees already pay more than that. Teachers contribute 9.4 percent to their pensions, state university employees pay 8 percent, judges pay 11 percent and legislators pay 11.5 percent. State employees pay 4 percent if they also contribute to the Social Security system and 8 percent if they do not.

    The difference is that Wisconsin made the employer’s contribution every year. And how did they have enough money to do that?

    Individual income tax rates:

    Illinois: 5% (after being 3% for 20 years, We all benefited from an artificially low 3% income tax rate for the last 20 years – but it wasn’t enough to pay the State’s bills or for the State to make its pension payments.

    — 4.6 percent on the first $10,070 of taxable income.
    — 6.15 percent on taxable income between $10,071 and $20,130.
    — 6.5 percent on taxable income between $20,131 and $151,000.
    — 6.75 percent on taxable income between $151,001 and $221,660.
    — 7.75 percent on taxable income of $221,661 and above.

    • Ted Biondo

      Thanks for all the data Joe, but I have to reply to a portion of your comment, “Just think what shape Social Security would be in if the employers failed to contribute the employers half the last 40 years.”

      Joe, it didn’t matter for Social Security either. Sure our employers paid their half of Social Security along with out contributions but the government, Republicans and Democarts over the years borrowed every bit of it over what was paid out each year. Today, there is nothing but IOUs in a drawer in West Virginia. They aren’t even negotiable bonds. They are just serial numbers of IOUs of the money that was taken from Social Security.

      Today’s payments are being made by borrowing more money from China and others to make the payment over and above the contributions from workers today. The system won’t even be able to make 75% of the payment in 10 to 15 years and is totally bankrupt now even with the promise of the government to repay the Social Security money they have taken from the workers who have paid for decades.

      Joe we are in as bad if not worse shape than you guys. At least you are 40% funded!!!!

  4. Joe Melugins

    By Ted Biondo telling us that the tax money was used for other things rather than paying into the pensions, he is making it sound like Illinois is a big state government, spend happy state. That is just not the case.

    Illinois has the fewest number of state employees per capita out of all 50 states. Illinois is also in the bottom five of all 50 states in total state expenditures per capita. And Illinois is dead last among our neighboring states in total state expenditures per capita.

    Total state expenditures per capita

    Illinois: $3599
    Wisconsin: $6798
    Iowa: $5810
    Missouri $3857
    Kentucky: $5576
    Indiana $4004

    Source: http://www.statehealthfacts.org/comparemaptable.jsp?ind=32&cat=1

    • Ted Biondo

      All I know Joe is that the pensions have an $80 -$100B dollar shortfall. The Chicago Democrats have spent so much that medicaid payments are months behind, this state has the second worst debt of allo 50 states and it will be a race between Illinois and California as to which goes bankrupt first.

      Illinois is the second if not the worst spending state in the United States. Look at some of my earlier posts. They are the facts. Our state as been doengraded by Moodys and other investment firms raising our rates on bonds to keep the state running to some of the highest in the country.

      Illinois IS A BIG STATE GOVERNMENT, SPEND HAPPY STATE I don’t care what the percapita spending is. Where is your data? Mine comes from the Comptoller and Treasurer of the State of Illinois!

  5. JRM_CommonSense

    As I have suggested before, here is the proper solution to ALL ppublic pension issues.

    All public pension systems need to be terminated and restructured. What needs to happen is that all public employees (local and federal) have to be ‘bought’ into the social security system based on the quarters they have already earneded. Then, the controlling entities have to purchase annuities for the remaining obligations to individuals using the remaining fund values. From this point foward, all public employees will have a retirement system composed of standard SS rules, and complimenting 401k programs with some level of employer match..

    Think of all of the management fees that are currently paid by the taxpayers that could probably fill the funding gap in 5 to 10 years, and then disappear. There is no reason for public employees to have any different kind of a pension plan than normal tax paying Americans.

    To anyone who thinks that this will not work, it has worked for many, many years for normal working Americans, and the annuity concept has been employed by many, many companies that have discontinued defined pension plans and still kept their current employees whole. It is time to get with the program. Shifting the burden of outrageous public service pensions from one set of taxpayers to another is not the answer, nor does it solve the problem.

    • Ted Biondo

      JRM, I agree 100% with your solution of the public pensions – all for one and one for all!

  6. JRM, you are correct, but sell that to the Illinois democrat machine. The pretty much permanent 65% liberal vote of Illinois, composed of teachers union, construction unions (both of which have 180+ days off of the 365 day year) and the 15-20% uninspired, unemployed welfare minority populations of south Chicago or west Rockford, means the real middle class that work hard and get the shaft and have to work 40+ years instead of 30. I know of people that borrowed money their whole life to create a business, joined the union, and retired with a $5000 month pension at age 55, and filed bankruptcy with $500,000 of debt. They are sitting in the swimming pool now with over $50,000 a year for life. What suckers we are! No wonder the state is broke!

  7. What we REALLY need, is the elimination of public sector unions.

    FDR opposed them. George Meany — the former president of the A.F.L.-C.I.O — said in 1955: “It is impossible to bargain collectively with the government.”

    Government collective bargaining means voters do not have the final say on public policy. Instead their elected representatives must negotiate spending and policy decisions with unions. That is not exactly democratic – a fact that unions once recognized.

    George Meany was not alone. Up through the 1950s, unions widely agreed that collective bargaining had no place in government. But starting with Wisconsin in 1959, states began to allow collective bargaining in government. The influx of dues and members quickly changed the union movement’s tune, and collective bargaining in government is now widespread. As a result unions can now insist on laws that serve their interests – at the expense of the common good.

    Read the rest at: http://www.nytimes.com/roomfordebate/2011/02/18/the-first-blow-against-public-employees/fdr-warned-us-about-public-sector-unions

    Public sector unions started in Wisconsin. Hopefully, Wisconsin will lead the way to their demise.

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