Study: Civic Committee Pension Plan Could Cost Taxpayers $34 Billion More
Lawmakers Urged Not to Rush Civic Committee Plan
(firmenpresse) - SPRINGFIELD, IL -- (Marketwire) -- 10/19/11 -- The "pension reform" bill developed by a group of wealthy Chicago business people and endorsed by the Chicago Tribune could have cost Illinois taxpayers more than $34 billion additional dollars while destroying the pension system in which hundreds of thousands of teachers have invested their life savings.
That is the analysis of an in-depth study on the impact of Senate Bill 512 (SB 512) on the Teachers' Retirement System (TRS) conducted by Buck Associates, one of the world's leading actuarial firms that provides services to both private and public pension funds.
According to Illinois Education Association President Cinda Klickna, SB 512 would have destroyed TRS, the only retirement plan for most teachers. Illinois public school teachers are not eligible to receive Social Security benefits.
SB 512 was developed by the Civic Committee of the Commercial Club of Chicago, a group of millionaire CEOs. For years, the Civic Committee has waged a war against pensions for teachers, firefighters and other public employees. The Chicago Tribune editorial board routinely praises their efforts.
A recent Tribune editorial called the Civic Committee's financial calculations in support of SB512 "compelling, frightening, unassailable." However, a closer look shows the bill would have been a disaster for all taxpayers, and especially teachers, had it passed.
The study of the bill's impact on TRS found the Civic Committee's plan would have increased taxpayer costs for the pension system by 25 percent and, depending on assumptions about how participants in TRS reacted to changes, that percentage could increase to 52 percent over 15 years. Far from saving taxpayers money, SB512 would force the state to pay an additional $16.5 billion, that amount could escalate to $34 billion. In addition, it likely would have caused most pension system participants who have entered the systems in the last year to exit the system for a 401K-type plan while keeping new participants from ever signing up.
Because SB 512 is clearly designed to force an accelerating number of participants from TRS into a 401K-type plan, it would have caused contribution rates for the remaining participants to skyrocket, creating pressures on many to quit or retire. Ironically, SB 512 would also have forced the state to contribute additional billions of dollars annually in the first 15 years in order to comply with state law requiring TRS funding to be designed to reach 90 percent by 2045.
"If it hadn't been for some courageous legislators, Illinois taxpayers would have been stuck with tens of billions of dollars in unnecessary costs. TRS and the other retirement systems, which have already been damaged by the actions of past legislatures, would have been mortally wounded," Klickna said.
Pension systems operate with funding from employees and their employers. In Illinois, teachers and other public employees have always made their payments to the systems but the state has underfunded the pension systems for decades. It is that underfunding that has caused the Illinois pension problem.
Instead of having the state make its required contributions in full, lawmakers diverted money from the systems and used it to pay for other state programs.
Due to insufficient support, SB 512 was not voted on in the House or Senate last spring. However, the Civic Committee has announced plans to bring the bill back, possibly in a slightly different form, in the legislative session that begins Oct. 25.
According to President Klickna, two lessons can be learned from the examination of the Civic Committee's/Tribune endorsed proposal:
Ideologically driven partisans have revealed themselves as a whole lot more interested in scoring rhetorical points than they are in actually ensuring the stability and security of the state's retirement systems.
Any proposal to "reform" TRS (or the other Illinois retirement systems) must be thoroughly understood and independently evaluated before the Legislature even considers them.
According to President Klickna, "Regardless, of whether the Civic Committee was deceitful or merely incompetent last spring, the legislature should refuse to vote on any pension proposal until that proposal can be thoroughly reviewed and its impact understood."
"Our message to lawmakers is 'Evaluate before you legislate.' The stakes for Illinois taxpayers are too high to rush to judgment on this crucial issue," she added.
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Datum: 19.10.2011 - 13:14 Uhr
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