Taxpayers Have Contributed 230% More Than Teachers Since 2001

An unending cascade of misinformation continues to come out of Springfield, union headquarters and the media so let me say it loud and clear:

 

We Taxpayers Have OVERPAID Into Pensions Not UNDERPAID. 

Let’s keep it simple:

Is $20.1 billion greater than $8.7 billion?

 

If the answer is “Yes” then we taxpayers have paid $11.4 million more for teacher pensions from 2001-2011 than teachers have.

 That’s 230% MORE.  

The way I look at it the taxpayers are due a refund with interest.

 

Teachers vs. Taxpayers

 

 

   
State Pension Contributions to TRS 2001 – 2010    
In millions of dollars

 

 

   
 

 

 

 

   

YEAR

Taxpayer Contrib. (Employer)

Teacher Contrib. (Employee)

Taxpayer to Teacher %

   

2001

                821

                643

128%

   

2002

                907

                681

133%

   

2003

            1,021

                732

139%

   

2004

            5,489

                769

714%

   

2005

            1,055

                762

138%

   

2006

                658

                799

82%

   

2007

                854

                826

103%

   

2008

            1,172

                865

135%

   

2009

            1,604

                876

183%

   

2010

            2,200

                899

245%

   

2011

            2,300

                910

253%

   

 

 

 

 

   

TOTAL>>

          18,081

            8,762

206%

   

 

 

 

 

   

Pension Bond Interest

            2,072

                   –  

 

   

Total Paid In

          20,153

            8,762

230%

   
 

 

 

 

   
SOURCE: Teachers’ Retirement System of the State of Illinois  
June 30, 2010 – 2011

 

 

   
Actuarial Valuation of Pension Benefits.    

 

SOURCE: Teacher Retirement System Actuarial Reports – June 30, 2001 & June 30, 2011

 

If the Teachers Retirement System loses $12 billion why do taxpayers have to pay for it?

The other dirty little secret we never talk about is how the taxpayer is responsible for every salary increase, every early retirement, every benefit increase and every dollar of investment loss. Which is exactly why we taxpayers (not the “state”) are contributing 400% more than employees this year.

 

Seven members of the 13 Member TRS Board of Trustees are current or former employees of the public school system.  So “teachers” are making the investment decisions for the TRS but the “taxpayer” (formerly known as the “state”) is required to make up all loses via higher contributions i.e. higher taxes. Taxpayers are also required to pay 100% of the interest on all Pension Obligation Bonds, an amount now approaching $1 billion/yr. Since they are in charge why aren’t teachers paying instead of taxpayers?

 

For more than a decade taxpayers have paid more than any reasonable system should require – 230% more in the case of TRS. Please note every single year taxpayers paid more than employees except in 2006.

 

Why are state pensions so expensive – the “Four Rules of Too”.

1. Retirement is “Too Early”:
State Police can retire at 50, teachers 54 and others at 55. Compare this with Social Security full retirement at 66. A person retiring at 50 will, on average, spend more time retired that he did working. That is very expensive proposition.

2. Pensions are “Too High”:
From a maximum of 75% of salary for teachers to 80% for State Police and University employees to 85% for legislators to 75% plus Social Security for state employees plus 3%/yr. COLA, pensions are very expensive to finance. When combined with early retirement, costs are off the charts.

3. Salaries are “Too High”:
Since pensions are percentages of salaries and are without any upper limit, high salaries lead to high pensions. State police earning $175,000, Phys Ed teachers $203,000 and school superintendents $368,000 have led to 5,400 state pensions in excess of $100,000/yr. growing at 25%/yr. This projects to 25,000 pensions over $100K by 2020.

4. Contributions are “Too low”:
About 99% of state employees pay less into their retirement system than we do into SS and 401K and they pay for fewer years since they retire earlier than we do. But they retire up to 16 years earlier (age 50 for troopers, age 66 for full Social Security) on much higher pensions so therefore they should be contributing much more than the private sector not less. Because they are not paying their fair share the extra cost must be picked up by the taxpayers of IL.

 

 

Illinois pension and retiree health care costs are creating an economic dead-end.

The Census Bureau just reported that Chicago now has its lowest population in the last 100 years. Mayor Daley says the new pension requirements for Chicago pensions will raise property taxes by 60% (Bloomberg Dec 21, 2010). Do you think raising property taxes by 60% will lead to more people moving to Chicago or moving from Chicago? Moving from Chicago of course.

 

Use the same logic for the state. Will potential new employers look at Illinois and see $1 trillion in pension and health care benefits owed to retired public employees over the next 35 years as a reason to relocate here or as a reason to relocate to Indiana, Wisconsin or Ohio? Anybody with common sense would choose someplace other than Illinois to relocate.

 

Do you think these numbers oriented businessmen will notice that this years $6.8 billion tax increase exactly matches this year’s pension cost ($6.2 billion) and retiree health care cost ($600 million)? Yes, I think they will notice.

 

Will the pension supporters’ whining that pensions are “owed” or “promised” have any effect on these decisions? Yes, it will have a negative effect.

 

If Illinois wants to avoid becoming a Michigan and Chicago a Detroit then comprehensive, meaningful pension reform needs to be completed soon. Decisions to come to Illinois or leave Illinois are being made every day.

 

Every day we avoid making tough pension cost decisions more taxpayers leave Illinois. Who is going to pay the pensions when all the taxpayers have left?

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