Illinois Racing Against California for Biggest Pension Disaster

We’ve noted that California’s
modestly bipartisan efforts to reform public employee pensions have
collapsed and the state’s pension program is now giving a big
thumbs up to
workers spiking the system with a host of bonuses. But the
Washington Times wants to remind us all that
Illinois is just a big of a disaster and efforts to reform
pensions there have been just as problematic:

If the Illinois Teachers Retirement Service (TRS) had to pay out
all of its pensions today, it could only afford to give its members
40 cents on the dollar.

Yet the number of six-figure pensions TRS has been doling out
has increased 24 percent this year compared to last, with about
6,000 retired educators collecting more than $100,000 annually,
according to records obtained by Open the Books, an online
aggregator of local spending that tracks educator salaries,
pensions and vendor spending.

The group’s Labor Day report found more than 100,000 retired
Illinois educators had been paid back what they invested into the
system just 20 months after leaving work, a financial burden linked
to union collective bargaining, which can cost taxpayers $2 million
or more per teacher over the course of retirement.

Just as in California, Illinois passed some very modest reforms
to the pension system, only to have them challenged by the unions.
A judge has approved a temporary injunction blocking
implementation.

The Washington Times piece helpfully explains how this
crisis is a result of behavior by all sides. To the extent the
pension crisis gets talked about at all, the debate comes in two
flavors. Either the fault is due to the workers milking the system
through pension spikes, driving up obligations to amounts that are
simply not reasonable; or the fault is due to politicians raiding
pension funds or failing to pay their share in favor of spending
the money on crony capitalism projects like stadiums. The reality
is, both complaints are true (and there are even more reasons for
the crisis than just the two). It’s important to note that union
leaders and pension fund operators knew full well that the pensions
were underfunded and were fine with it because they benefited in
the short term:

TRS is Illinois’s biggest retirement reserve, making up half the
state’s pension funds. For years the state legislature allowed the
pension to go underfunded so it could spend money on other things.
State educators and union executives used the borrowed cash to hire
more teachers, boost salaries and improve local facilities.

Read the whole story
here.