Why is the Illinois Family Institute publishing another article about state government employee pensions? Because excessive taxes in Illinois are putting a strain on Illinois families — and 25 percent of our state budget pays those overly-generous pensions.

Now, policy experts Ted Dabrowski and John Klingner have provided yet more evidence that “A dramatic rise in pension benefits — not funding shortfalls — caused Illinois’ state pension crisis.”

People like pension expert Bill Zettler pointing out that out a dozen years ago. Whenever I have the opportunity, I mention it as well in my articles. Did people believe Zettler or me? It doesn’t matter — now they must contend with Dabrowski and Klingner.

Their new report is linked here:

Illinois state pensions: Overpromised, not underfunded – Wirepoints Special Report

Wirepoints also has articles about it here:

Illinois politicians: stop guilting taxpayers

Illinois’ pension crisis: Incompetence or malice?

Here is just an excerpt from that last link:

The actual growth in benefits handed out to state workers and retirees since 1987 has dwarfed everything else in the economy, from incomes to inflation to population to the state budget. Multiples times over.

This has all kinds of obvious implications for the economy, growth, outmigration and most importantly, the lives of ordinary Illinoisans.

Pension growth — at nearly 9 percent a year for 30 years — is swamping everything else. It’s no wonder why Illinoisans in so many parts of the state are struggling with high taxes, weak job prospects and stagnant incomes.

Also, Dabrowski calls it corrupt (as I do):

[A] financial mess like this would normally be investigated. Any business that ignores or hides a massive liability for decades will end up on the brink of, or in, bankruptcy.

. . .

If this state were a corporation, think Enron or Worldcom, all kinds of regulators would be sniffing around and asking all kinds of questions. How did lawmakers get this so wrong? Was the extreme growth in benefits due to incompetence or was it purposeful?

“Though the odds of a real investigation happening in Illinois are zilch,” Dabrowski writes, “it’s still worth asking the right questions.”

The answers are easy, as Bill Zettler wrote in his book. The system is a scam, orchestrated and carried out by those betting that taxpayers will never learn just how ridiculously high the retirement benefits are for many saintly teachers, school administrators, union officials, and various other groups employed by our governments.

Illinois continues to make national news due to its inability to do basic math. Here are a few examples:

Rising Tax Rate Can’t End Illinois’ Economic Drought
Yet leading candidates to replace Gov. Bruce Rauner think the only problem with the state’s income tax rate is that it doesn’t go high enough.

In Illinois, Public Pension Funding Cannot Keep up with Pension Benefits’ Growth
Pension benefits have grown six times more that state revenues, 8.4 times more than household incomes, and 9.5 times more than inflation. A major driver of this benefit growth is collective bargaining, which allows government employee unions to negotiate with public officials over pay, benefits, working conditions, and other matters. Unlike in the private sector, where employers have strong incentives to rein in labor costs, public sector unions face relatively little employer resistance to their demands, since both sides in the negotiations are employed by government.

Here are two quick things from Pension Pulse:

The Pension Storm Cometh?
Public employee unions have managed to extract promises from state and local governments that are simply impossible to keep. And those governments have been papering over the extent of their obligations with accounting assumptions that are so overly-optimistic as to be deceptive.

In this article, Pension Pulse touches on the legal wrangling over the pension systems:

The way the courts interpret the pension promise may be legally sound but it is economically absurd.

Who made this “legally sound”? Our AWOL conservative elected officials at all levels, who have failed to bring attention to this kind of excess.

I must say, though, I love the use of the word “absurd.”

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Before citing a few facts and linking to a few articles from the Illinois Policy Institute, let me outline reality in simple terms: the pensions systems cannot be fixed. They need to be shut down, taxpayers should be cut free from the scam, and the state government should get out of the pension business. After decades, it has proven incapable of being trusted with tax dollars for employee pensions.

Some may think my position is extreme. I would argue that anyone pretending that the systems can be salvaged is dreaming “sweet dreams that leave all worries far behind” them.

They need to wake up. Bankruptcy laws exist for just this kind of  circumstance. The system is insolvent. Period. It’s not even close.

Another critical issue is also ignored: Looking at just the teacher union contracts with local school districts, they are premised upon the fiction that government employees and government officials (in this case elected school board members) can legally contract not only with under-aged Illinois citizens, but also unborn future taxpayers.

If contract law is to be applied properly, all the past, existing and current contracts would be voided. There isn’t one of them that has been signed in the past few decades that was not predicated upon the fact that future generations would have to pony up the billions of dollars needed to pay for generous health care and pension benefits once the contracted employees retired.

There is also a serious U.S. Constitutional issue regarding the unequal treatment that is being given to government employees. You can read about it here.

Regarding the Illinois constitution’s clause regarding diminishing benefits, how about we apply those words the same way our state constitution’s protection of religious liberty is being applied to Catholic charities and adoption, marriage, and bed and breakfast owners.

The Illinois Supreme Court has ruled that Illinois taxpayers are on the hook for all the excessive benefits. Conservative legislators especially like to use the court as an excuse for failing to get real about the magnitude of the problem. The court should be ignored. We are not a country or state run by the courts, but rather by the people, and the Illinois Supreme Court doesn’t have the constitutional power to tax and spend.

If members of the Illinois Supreme Court would like to consult with Bill Zettler about common sense, I have his email address. They’d double their understanding of constitutional government in the process. The state’s constitution cannot produce a miracle. Economics always wins and if something is impossible, it won’t happen. Even if you’re saying it should from a seat on the highest court in the state.

As promised, here are just a few facts and a few links from the Illinois Policy Institute:

• The problem facing Illinois’ five state-run pension funds is the unaffordable pension benefits that have been granted to government workers and government unions over the past several decades.
• The generous rules on retirement ages, cost-of-living adjustments, or COLAs, and employee contributions have caused pension benefits to grow by more than 900% since 1987.

Some of the biggest drivers include the following facts:

• 60 percent of state pensioners retired in their 50s, many with full pension benefits.
• Over half of state pensioners will receive $1 million or more in pension benefits over the course of their retirements.
• Nearly 1 in 5 will receive over $2 million in benefits.
• Almost 60 percent of all current state pensioners can expect to spend 25 or more years collecting benefits, based on approximate actuarial life expectancies.
• Due to automatic, 3 percent compounded COLA benefits, those pensioners can expect to see their annual pension benefits double in size.
• The average career pensioner will get back his or her employee contributions after just two years in retirement.
• In all, pensioners’ direct employee contributions will only equal 6 percent of what they will receive in benefits over the course of their retirements.

Those are all from this article, which includes this:

The generous retirement benefits pensioners receive are fundamentally unfair to the taxpayers who are forced to pay for them. Private-sector workers are expected to fund the pensions of state pensioners who can retire and draw benefits in their 50s, who can receive annual pension boosts that can double their pension benefits over the course of their retirements, and who get back what they contributed to pensions after only two years in retirement.

Now tell me, how can Republicans and conservatives serving in elective office in Illinois not be motivated to do something after reading just those facts?

A few more links from IPI:

Pensions Over People
The pension problem was created and has been fueled by weak politicians — men and women who decided their next elections were more important than the next generation.

Each Illinois Household on the Hook for a $56K in Government-Worker Retirement Debt
In just six years, the total debt Illinois households are on the hook for has jumped to $56,000, or 31 percent. That’s a $13,000 increase for each household. Total unfunded debt for state and local governments in Illinois now totals $267 billion.

Illinois Needs to End the Third-Party Payer Problem for Teacher Pensions
Illinois’ teacher pension system is structured to allow local school boards to agree to generous contracts, knowing taxpayers across the state will foot the bill.

For even more enjoyable reading, focus on “pension spiking,” the use of unused sick days to ramp up pension checks, and compare how Social Security measures up to being able to retire in your late 50s and get a pension that is an average of your salary for your final four years. Oh, and compare Social Security cost of living adjustments with that of the state’s 3% COLA.

Again, for the latest and best information the current state pension crisis, peruse the many articles at the IPI website.

As a footnote — other top shelf organizations have researched and reported on the government employee pension scam. Here are just three examples (follow the links to learn more from each group):

Mapping the $100,000+ Illinois Teacher Pensions Costing Taxpayers Nearly $1.0 Billion
By Adam Andrzejewski, the founder and CEO of OpenTheBooks.com.

The Heritage Foundation

And this problem is not unique to Illinois — visit Pension Tsunami to learn more.

Read Part 1 — There is No Excuse for the Failure of Reform

Read Part 2 – The Illinois Pension Scam: State Officials (Including Conservatives) Have Known About it for Many Years

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Last time when we focused on the writings of government employee compensation expert Bill Zettler, I failed to mention that Bill had some great lines over the years, such as:

“Economics always wins.”

Despite the wishes and dreams of people on both the political left and political right, the day of accounting always comes. We are at that day right now as taxpayers face hundreds of billions of dollars in unfunded pension liability. (Read this if you think that under-funding is due to a failure on the part of taxpayers. It’s not.)

“If something is impossible,” Bill also said, “it’s not going to happen.” There is no way all the state pensions will be paid. In fact, those government employees who are already retired and collecting their generous pensions are stealing from future pensioners.

Were you aware of the fact that twenty-five percent of our state’s budget currently goes to fund government employee pensions? In other states the number is about four percent.

The math doesn’t work and cannot be made to work. If you want to learn more about just how bad the pension system currently is, I would encourage you to check out the annual pension study conducted by Taxpayers United of America. One of the best resources they provide is the list of retired government employees whose pensions are over $100,000.

Are you ready for this? There are currently 17,000 of them — and the number goes up every year.

Here are the leaders from each of the top five levels — $500k, $400k, $300k, $200k, and $100k:

Leslie Heffez’s current annual pension is $581,227. Leslie paid in $768,611, and can expect to get out $21,945,104 in lifetime benefits based upon life expectancy averages.

Das Gupta’s current annual pension is $494,773. It took only one year for Das to recoup everything he paid into the system, which was $475,331. He could receive $5,290,301 before the grim reaper comes calling.

Herand Acarian gets $392,682 every year. Not bad for having paid in only $628,987, and with a good long life, Herand could get back $6,843,239 or more.

Eddie Williams wins the $200k column, bringing in six times the annual average Illinois household income (which is approximately $50k) at $299,991. Eddie coughed up a whole $277,792 to invest into the system, and has already received $842,452 in benefits.  (Please read those numbers again.) If he stays healthy, he could cash in for as much as $5,527,649 over his lifetime.

After flipping through over four full pages of pensions exceeding $200,000, Rick Taylor tops off the $100-k’ers at an annual pension of $199,909. For the record, Ricky paid in $229,400, has already received $1,162,854 (he retired at age 56), and life expectancy charts could gift him $7,267,441 or more if he eats right and gets enough exercise.

Hello?

For the most up to date information about where the state’s pension systems stand now the place to go is the Illinois Policy Institute’s website. For several years now, their researchers have been firing off warning flares about the dangers ahead. How Republican and conservative state legislators, let alone our Republican governor, have failed to notice, is a mystery.

If they had noticed, the problem would constitute a big part of their message to their constituents and the hard working families around the state.

There are proposed reform bills, but they all fall way short. To be honest, it’s as if the authors are not reading the works of Bill Zettler or the Illinois Policy Institute.

As for Governor Bruce Rauner, he boasts continually about wanting to spend more money on the K-12 system.

Where does he think a lot of that money is going?

I’ll give you one guess. That level of ignorance is almost incalculable. More money for the worst run level of government in the state?

The solution is a push for universal school choice where the money follows the student. That is where the savings will come, as Illinois families will be freed from the government school monopoly, and move to more economical and effective education options. Short of that, Rauner will never fulfill his constitutional duty to propose a balanced budget.

If Republican leaders had truly noticed those IPI and Bill Zettler warning flares, they would have spent the past many years making sure that enough Illinois taxpayers would be informed and thus demanding that the problem be fixed.

Read Part 1 — There is No Excuse for the Failure of Reform

Up next: More about the Illinois pension scam.

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In preparation for the recording of an IFA Spotlight weekly podcast, executive director Dave Smith asked me to do some research about the Illinois government’s employee pension problem. For me, it is not a fun topic to delve into because for a dozen years now I’ve watched elected conservative state legislators completely ignore the seriousness of the legalized theft that has been going on in Illinois for decades as it pertains to pensions.

Yes, legalized theft. How else can you describe someone paying into a fund about $154,000 over the course of their working years and then expect $2,200,000 in pension benefits from taxpayers during their retirement years? Those are just the Teachers Retirement System numbers, as you can see on the chart below from the Illinois Policy Institute.

Ever wonder why so many kids have trouble with math? From these figures, not even the math teachers seem to understand arithmetic. If they did, we would have heard from the thousands of them spread throughout the public (government-run) K-12 and college systems. Certainly with math that far off they would have organized and spoken up to warn of the coming collapse of the impossible scheme.

But nope. Nothing. Silence. Why should they mess with a good thing? Why not keep your mouth shut and profit handsomely off of the taxpayers?

Thanks to several sources, especially the Illinois Policy Institute, it is difficult to not be drowned in an ocean of terribly disturbing facts.

There are a handful of organizations that have done and continue to do great work on this issue. In the following articles I’ll focus on the Illinois Policy Institute and Taxpayers United of Illinois. In this post, I have to give credit to business owner and government employee compensation expert Bill Zettler. A dozen years ago Bill wrote a letter to the editor at the Daily Herald which was titled, “Yes, Illinois needs pension reform.” Here was the opening sentence:

Give ’em a million, save a billion.

From the article:

My new slogan “Give ’em a million and save a billion” comes from a simple mathematical fact. The average teacher in Illinois who retires after 34 years retires with a pension worth well in excess of a million dollars cash. So if we taxpayers just give them a check for $1 million when they retire (whatever happened to a gold watch?) we will save tens or hundreds of billions over the next 40 years.

That was 2005. As you can see from this IPI chart, the numbers have skyrocketed since. (Click image to enlarge.)

There is so much material that a book could be written on the topic. Actually, a book has been written. A few years ago, Bill Zettler penned “Illinois Pension Scam,” with a forward by the late Jack Roeser. Buy a copy and read some of what your conservative legislators have been ignoring since Bill started to provide a free seminar on what is one of the biggest crisis facing our state.

Over the years Bill investigated and laid out the facts from several angles — and each article could have and should have sparked outrage on a scale large enough to begin a movement to force reform.

Why didn’t it happen? There are several reasons. You can be the judge about which might be the leading factor:

• State legislators deal with a lot of issues, and asking them to learn about the Illinois pension scam is too much to ask.

• State legislators would rather avoid the controversy that would arise when they would confront the army of government employees who benefit from the Illinois pension scam.

• In order to win public support for genuine reform would require state legislators to learn how to become public opinion leader regarding the Illinois pension scam.

• Illinois legislators have their own generous pension plan, so they don’t want to rock the boat and thereby risk having their own pension thrown overboard.

Bill Zettler also knew how to write effective headlines. Here are just a handful of examples for your reading pleasure:

This first post is from 2007 — and because it’s loaded with numbers I just link to the first part. Note — even back then the numbers were outrageous. Conservatives in Illinois have had plenty of time to learn about it and make the case:

Total Pension Liability for One School District: D300

Does Your Employer Contribute $69,000 a Year to Your 401k Retirement Plan?
Answer: I don’t think so. And it’s not because your employer is greedy but simply because it would be impossible to pay that amount and stay in business. They would be bankrupt.

This one is from 2009:

Gov. Quinn: Raise Taxes on $10/hr Workers by 41% to Pay for $10 Million Pensions
73,000 State University Employees Pay Zero for Pensions or Healthcare

Did you know that? The fact is, the count is many times that number when it comes to cushy teacher contracts.

Bill asked a lot of good questions over the years — here are two:

Should A Public Employee Have A Yearly Pension Greater Than His Career Pension Contributions?

Should Part-time Public Employees with Partial Careers get Six-figure Pensions?

Bill covered many anecdotal examples — here are three:

Work for the State 5 Years, Pay in Zero, Get $130,000 Pension
Work for Yourself 45 Years, Pay In $260,000 Get $28,000 Social Security. Anybody see a problem here?

Is $224,000 Per Year Too Much Compensation for a Drive’s Ed Teacher?
How about $1,174 per day for an Art teacher or $149/hr for an English teacher?

Pension Insanity: $75,000 Salary Turns Into $155,000 Pension for One Kindergarten Teacher
I guess it’s OK though; it’s for the kids.

As Bill Zettler wrote in 2008, it’s time to  solve the Illinois public pension problem.

Bill Zettler’s archive can now be read at my website.

Up next: More details about the Illinois pension scam.

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It’s a sad tale of two cities.

The news out of Washington, D.C. this spring is that President Donald Trump and the Republican majorities in Congress plan on cutting taxes. The unsurprising news out of Springfield, Illinois is that General Assembly Democrats are planning to raise taxes.

Also not surprising is that there is a hot debate about whether the GOP tax cut efforts in D.C. can succeed. There is no debate, however, about Illinois Democrats’ accomplishing their mission. Especially when Republicans, including Governor Bruce Rauner, appear poised to help the Democrats.

What is also not debatable is whether raising taxes in Illinois will be enough to make ends meet in a state where spending continues to be out of control. It won’t be.

Sometimes a trip to dictionary.com is helpful even when we all know the definitions. The first word for today is “insatiable”:

• incapable of being satisfied or appeased
• not able to be satisfied or satiated; greedy or unappeasable

As in an insatiable hunger for more of your tax dollars.

Here are three synonyms:

• voracious, unquenchable, bottomless

No one will ever provide the liberal Democrats in Illinois enough money to make them happy. I offer as proof the Illinois government employee pension systems. If Republicans would just use some of that Bruce Rauner/Ken Griffin money to get the word out about how corrupt those systems are, maybe Republicans would start to win more elections here.

Here is the title of an article from the Illinois News Network earlier this week: Study: Illinois’ public pensions are worse off than state claims. From the article (and notice the use of the word “bottomless“):

Illinois has on hand only 29 percent of the funds needed to meet the promises made to current and future retirees. That’s the worst record of any state, and [Hoover Institution Senior Fellow Joshua] Rauh concludes that for the state to stop sinking further into debt, it would have to contribute more than twice what it contributes now.

Illinois now devotes nearly 25 percent of its state budget to the state worker pensions, so doubling that figure means close to half of the state’s revenues would have to go to pensions to avoid accumulating further debt.

“I think people increasingly understand that they’re throwing tax dollars into a bottomless pit,” Mark Glennon, the founder of the WirePoints website and a former venture capitalist and financial adviser, told Illinois News Network.

Putting more money in the current system is futile, according to Glennon.

“The smart ones already know the current situation, but they’re not honest enough to talk about it in public,” he said.

A dozen years ago pension expert Bill Zettler began talking about it — and both political parties ignored his warnings. Bill regularly pointed out the simple truth that if something is impossible — it won’t happen.

That’s our second word for the day: impossible.

In that same Illinois News Network article, Mark Glennon merely confirmed what Bill Zettler had to say many years ago:

The promises that have been made to retirees in Illinois eventually will have to be broken, and the pensions won’t be made in full, according to Glennon.

“Ultimately, I think that’s unavoidable …” he said. “The numbers are far beyond insurmountable already.”

Getting back to the word “impossible” — as I wrote nine years ago, we have two competing impossibilities. Right now there isn’t support to make the needed changes, and yet there isn’t enough money to meet the obligations.

How do we get to a solution? Until public support is rallied — solving the pension problem in Illinois is “incapable of being done, undertaken, or experienced.” It is “incapable of occurring or happening.”

The credit rating agencies understand the situation in Illinois clearly. Note this headline from Crain’s Chicago Business: “Illinois’ credit rating slashed to a cut above junk.” Need I define the word “junk”?

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