We’ve seen some fun with Illinois pensions before: double-dipping public employees, union leaders who are not public employees cashing in with public pensions, outsized pensions compared to contributions…well, the money wall is being hit and so a variety of reforms are being considered.
Let’s look at one of the worst funded public pension plans in the country—the Teachers Retirement System of Illinois. It seems that in some districts, teachers aren’t making the plan contributions:
A new study by the Illinois Policy Institute, a free market think tank, said teachers in 416 of Illinois’ 867 school districts, not including Chicago, didn’t contribute anything to the Illinois Teachers’ Retirement System, or TRS, for the 2009-2010 school year.
The report added that 139 school districts paid a portion of teachers’ contributions to TRS for the 2009-2010 school year. Teachers in the remaining 312 school districts contributed to TRS directly from their paychecks.
TRS required the following contributions to the pension fund based on teacher salaries:
-Teachers giving 9.4 percent;
-State giving a matching contribution of 9.4 percent;
-School districts giving 0.58 percent.
Teachers can have their school districts cover their TRS contributions through contract negotiations with local school boards. In total, 554 school districts pitched in $400 million for teachers’ pensions during the 2009-2010 school year, according to the institute’s report.
Now, these moves are totally legit, and really, the teachers contributing versus the school district makes little difference from a total cash flow viewpoint. All of the “teacher contributions” are coming from the local school district budgets. It’s just a matter of accounting . . . in a rational sense. But people aren’t fully rational.
Having employees make the contributions directly gives them a feeling of ownership of pension funds, for one. It feels like “their money” when it is explicitly listed on their paycheck in that manner, in the way that many people feel like they’ve got ownership of some mythical Social Security benefit (btw, you don’t own anything in Social Security).
Regarding that union leader benefit, the city of Chicago is looking at union leaders cashing in on the public dime:
The city of Chicago is requesting information from officials for all four city pension funds about how they interpret state law regarding union officials’ city pensions, and what they know about potential abuses of the pension system, as the Emanuel administration steps into the firestorm surrounding labor leaders’ lucrative retirement deals.
The letters, sent Friday by members of the mayor’s staff to the executive directors of the police, fire, laborers’ and municipal employees’ pension funds, were obtained by the Tribune and WGN-TV.
Among the information sought by Chief Financial Officer Lois Scott and Comptroller Amer Ahmad are the names and union affiliations of those who are on a leave of absence to work for labor organizations, the pension contributions made by those individuals, the benefits they stand to receive from the city funds, and the names of any other funds that may provide pension benefits to the union leaders.
The letters specifically ask for “information about any potential abuse.” Scott and Ahmad, who are trustees of the city pension funds, requested that all the information be delivered by the end of next week.
I doubt they’re going to remark on that “potential abuse” part—this benefit is actually totally legal, and was explicitly written into law. This isn’t an overlooked loophole or unintended consequence—this is “working” exactly as intended.
But the money is running out, and this benefit definitely doesn’t look good.
So the state legislature is looking at getting rid of that “loophole”, specifically looking at TRS:
Illinois lawmakers are trying to close pension loopholes they created that are allowing union leaders to cash in on public pensions.
Legislation from state Sen. Matt Murphy, R-Palatine, and House GOP Leader Tom Cross, R-Oswego, targets these labor leaders who are collecting taxpayer-guaranteed pensions based on the time and salary they acquired while working for their unions.
Murphy’s proposal, Senate Bill 2499, takes action against education union leaders with the IFT and IEA as well as the Illinois Association of School Board, an organization that helps school boards with professional development and is indirectly funded by taxpayers.
The proposal seeks to prevent the leaders from using their jobs with the unions or association to pad a pension they earned inside a classroom or school building.
“The most glaring examples of what we’re trying to get to, frankly are in the Teachers’ Retirement System, where you have individuals who have worked for years for a union, who are using their time in the union and their final salary from the union, to set their public pension,” said Murphy.
Let’s not get our hopes up; the last major legislative session was a total tease in that regard: proposed reforms, and then nada.
If they don’t get in gear, public employees won’t get nada, but they’ll be getting a lot less than they expected by default.
And I do mean default.