Z-Gram 06: Pension reform needs deeper cuts – IL pensions cost 3 times Indiana’s.

Every Illinois state politician needs to take a look at pension costs relative to other state especially those adjoining Illinois. That is because the adjoining states are where many businesses and wealthy people are going to move to avoid the inevitable higher taxes being proposed in Springfield with the current so-called “pension reform”.


As my research shows (see here) the cost of very pension dollar in Illinois is 3 times the cost in Indiana. Obviously if politicians are really interested in making Illinois economically viable and competitive we cannot continue to over-pay and over pension 10’s of thousands of public employees. High-cost pensions always follow directly from high salaries and in addition to the 16,256 public school employees with salaries over $100,000 the State Journal Register recently wrote about the more than 6,200 state employees with salaries over $100,000. Not to mention the 1000’s at the university level which is not included in the other numbers.


Every public employee who retires with 33-35 years-service and a 4-year average salary of $133,000 retires immediately with a $100,000 pension. Those who retire with average salaries of at least $100,000 will have pension over $100,000 within 10 years of retirement. Since they can retire at age 55 that means before they are 65.


These outrageous salaries are the main reason I project 25,000 pensions over $100,000 by 2020 and my estimate may be too low considering the ever-increasing number of $100,000 salaries in the public sector.


The micro reforms being discussed in Springfield may slow the train down but will only delay, slightly, the inevitable fiscal train wreck.

1 Comment

  • Wolf says:

    The Public Sector Pensions at Federal, state and local levels are an absolute fraud on the taxpayers. Any analysis of these pension plans shows that based on investment, contribution and return plans that no more than $44K annually should be paid and that is under the absolute ideal conditions. Here the taxpayers pay for the normal market risk and losses as these high Beta plans under perform the plans 8% returns. Add to this the 3% to 4% annual COLAs that are not based on any reasonable or actual CPI plus the 50% over compensation at the base salary and the 26% to 40% inflating of the final salary prior to retirement. The fraud is fully document ed in the plans and the Public Sector Labor Agreements. There may be some difference between states but based on any Public Sector operation the same fraud is evident and that does not even consider the 50% over staffing and compensation levels that are part of the normal operation levels. Today the restructuring and reform of the Public Sector operations at the Federal, state and local levels would return over $2.5 Trillion annually to the private sector and taxpayers and eliminate the deficit today. This is the biggest fraud ever perpetrated in the history of the World.

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