The state employee pension fund problem is the ‘first tier’ (Part 2)

In recent months there has finally been a lot of coverage of the sorry state of Illinois’ government employee “pension” funds (they’re actually more like life-time employment funds). The newspapers and private watchdog organizations have done a good job outlining the problem. For decades, under both political parties, there has been chronic over-promising and underfunding of the systems.

The solution offered by most politicians and by some private organizations, however, has focused mostly on the creation of a “second tier,” where new hires would no longer be promised exorbitant pensions that the taxpayers can’t afford to pay.

That second tier is put forward like it’s a fix – when it’s only really a way to avoid angering the taxeating mob of state government employees and retirees that got in on the scam and who demand that the kids and grandkids pay up no matter what.

There is only one plan that I’ve seen which honestly deals with the problem that is the “first tier.” You have to fix the tier that was over-promised and under-funded for decades.

The plan comes from Bill Zettler, a business owner who has spent more years researching the excessive government salaries and pensions than almost anyone in Illinois.

Others might have spent time in similar research, but the important difference between Bill’s work and theirs is that he realized from the start that salaries, benefits, and pensions are not only unaffordable, but they are far more generous than what’s received in the private sector.

Others who study this bloated and bankrupt pension system have viewed it as just another entitlement that taxpayers have to pay whether they like it or not. Bill Zettler’s proposal faces reality. And believe me it is modest – because the solution I prefer is to force the system into the bankruptcy courts like the United Airlines employee pension plans of years ago.

Bill Zettler is compassionate. He’s seeking a solution that tries to pay out as much as governmentally possible to pension recipients. I’m not as nice. If it was my plan, I’d tell all those who have been participating in this wealth transfer scam to wake up and smell the red ink. Irresponsible and economically immoral behavior has consequences.

The plan wasn’t funded. Political failure means that many state employees won’t be able to enjoy cushy retirement years spent on the public dole.

Here is the outline of what Bill Zettler proposes:

How to Save $5 billion in 2011 in Pension and Health Care Costs

Ninety-five percent of Illinois workers are not eligible for the gold-plated state pensions and health care benefits available to K-12 teachers, university employees and state employees. So why do the 95% have to pay for retirement benefits for the 5% that are superior to their own? And shouldn’t the 5% pay into the system as least as much for their superior retirement benefits as the 95% pay for their own inferior retirement benefits?

1. Increase Employee Pension Contributions.

SAVINGS: $700 million/yr, $54 billion over 35 years.

2. Eliminate the Pension Cost Of Living Allowance.

SAVINGS: $180 million per year, $13 billion over 35 years.

3. Sell State Assets.

SAVINGS: $20-30 billion off of the $80 billion unfunded liability saves at least $900 million/yr, $70 billion over 35 years.

4. Consolidate Five Pension Systems Into One.

SAVINGS: $30 million over 5 years but anti-corruptive and a huge increase in transparency.

5. Make High-salary School Districts Pay Their Own Pension Costs.

SAVINGS: $1.6 billion of 2011’s $5.3 billion pension contribution.

6. Use Cash Buyouts To Lower Pension Obligations.

SAVINGS: 2,500 buyouts/yr would save about $500 million/yr.

7. Make public employees pay for 50% of their health-care premiums pre and post retirement.

SAVINGS: $1 billion/yr in 2010,  $65 billion over next 35 years.

Bill Zettler’s work is recommended reading.