$10 Million Pensions Are Here – Top 100 Will Payout over $700 Million

Springfield fiddles while taxpayers get burned.

Where is the pension reform we have been promised by various and sundry politicians? Tom Cross’s SB 512 bill has been waved furtively in front of the Civic federation and some media outlets but there is apparently no action forthcoming in the near future.

See Tom Cross’s pension reform bill analyzed here.

In the meantime $400,000/yr pension checks keep going out every month unabated. No one in Springfield seems to care that multi-millionaires on the public-pension dole are being paid while cuts are being made to meals-on-wheels for poor seniors and home health care for the seriously disabled. This seems curious to me since the progressives always seem to rail about doing more for the poor and needy. Certainly the people on this Top 100 list are neither poor nor needy so where is the outcry from the left? The only people complaining are the tea-partiers and conservatives.

Obama wants to tax the millionaires – let’s start here in IL with the pension millionaires.

As it stands right at this moment IL pensions are not taxable at the state level. If we just taxed these Top 100 pension millionaires we could raise $900,000/yr and reinstate the meals-on-wheels for poor seniors.

If we taxed all state pensions where family income exceeds $50,000 we would get about $200 million/yr.

Keep in mind a $40,000 pension at age 55 with a 3% COLA will pay out over $1.8 million assuming an average life expectancy.

Come on progressives lets tax those millionaires and help the poor. Shouldn’t they pay a little more, their fair share?

Why do state retirees get 3% Cost-of-living-adjustments when Soc. Sec. gets zero?

Another give away to the politically connected is the automatic 3% COLA. It cost taxpayers $200 million a year and it’s compounded year after year. The COLA doubles all pensions in 24 years for absolutely no reason other than political favoritism.

If family income is less than $50,000 then COLA is same as Soc. Sec. otherwise you don’t get any COLA. That would save over $100 million/yr.

Why do state retirees get free health care?

Under current law, if you work 20 years for the state or state universities you get free health care when you retire in addition to free health care when you were working. If all state employees and retirees paid 40% of their health care insurance we would save $1 billion per year.

Why do public employees get retirement pay for sick-leave?

Right now teachers can receive up to 2 years sick-leave credit towards their retirement meaning their pension is increased by 4.4% for the rest of their lives. They average about 1.5 years per retiree so over time that would amount to about 3.3% of retirement cost or about $200 million per year.

No one on the private sector gets sick-leave credit so therefore no one in the public sector should get it.

Eliminate all salary spiking to rein in top end pensions.

As it stands the worst teacher in each school district gets an automatic 26% salary increase (compounded) over his last 4 years for no reason. I say worst teacher because all full-retirement teachers are eligible (there is no “judging” in our school system – heavens forbid) therefore if follows logically that the worst teacher and the best teacher and all teachers in between would get the 26% salary increases. This raises already absurd pensions by more than a quarter for the benefit of no one except the politically connected.

Teachers are not alone in this ripping off of the taxpayer of course. Politicians are famous for appointing retiring/ lost-the-last-election politicians to high paying state jobs and then transferring a short work period to the politician’s pension plan which pays 85% after 20 years.

And state employees such as state troopers jack up maximum overtime in their final year and then grab 80% of that final year as their pensions beginning as early as age 50. So far 28 troopers have retired at age 50 with pensions in excess of $100,000. A $100,000 pension at age 50 will payout an average of $5.7 million.

“Spiking” cost is hard to determine because it is hidden from view and very hard to track but if it is only 7% of pension costs that would be more than $500 million/yr.

We could save $2 billion/yr with these 5 simple non-pension-reform reforms.

$200 million/yr – Tax the pension millionaires.

$100 million/yr – “Adjust” the Cost of living adjustment.

$1 billion/yr – Health care: public employees pay same as private sector employees.

$200 million/yr – Eliminate sick leave pension payments.

$500 million/yr – Put a spike thru the heart of payroll spiking by eliminating it.

TOTAL = $2 billion

There are no public employees or jobs worth $5 million pensions let alone $10 million.

What follow is just the Top 10 estimated pension payouts. The Top 100 totals $702 million.

Several items to note:

  1. Compared to early retirement on Social Security none of these millionaires worked a full career.
  2. The state pension payout ratio “Payout to Contrib. Ratio” runs to over 40 times compared to Soc. Sec. max. 6 times. By limiting pension payouts to 20 times contributions we would save 50% on these public pensions. Who except the politically entitled would think 20 times is unfair?
  3. Every one of these Top 10 Payouts is a K-12 employee.

There is plenty politicians can do now without pension reform.

So what’s the hold-up? It’s the same old problem in IL – the politically entitled have more than enough political power to keep the entitlements coming regardless of what the taxpayer/voter thinks.

Perhaps only bankruptcy will solve the problem. If so the sooner the better.

See this link for all educators with pension payouts over $5 million.

Check your school district. See anyone you know?

Bill Zettler is a free-lance writer and consultant specializing in public sector compensation. He can be contacted at this email address.