I read your article today. … I am a retired teacher of 35 years.
I was required to put 10 percent of my income into the TRS pension. I did not have a choice. I did invest what little was left.
I get emails like this from retired teachers all across the state.
They are heart-wrenching.
Dedicated educators who have spent their careers teaching our children now find themselves caught in a failing pension system.
Their message is clear: “I did not have a choice.”
These educated professionals have been relegated to victim status by the state of Illinois. The politicians who caused this problem won’t empower teachers and other government workers to take charge of their own retirements.
I’ve often written of the desirability of transitioning teachers and other government workers to defined contribution plans and routinely receive emails from them that say something like: Don’t blame us; we didn’t choose to be a part of the pension system in the first place.
And they are quite right – they have been let down by the politicians who made promises of secure retirements.
But they haven’t been let down by Illinois taxpayers.
Those are the folks who sacrificed an extra week of pay beginning in 2011 just to pay for government retiree benefits.
And the taxpayers of this great state have faithfully paid in their taxes year after year.
And, yet, some would further penalize those taxpayers because politicians didn’t spend money in the manner that they promised.
It’s time to get politicians out of the pension business.
It also time to empower teachers and others to choose their own investments.
After all, we trust teachers with our children; why can’t the politicians trust them to make wise retirement decisions for themselves?
But how do you that in a manner that is fair to employees, retirees and taxpayers?
That is an especially difficult question when one considers that the state has an unfunded pension liability of $96 billion. And folks of all political stripes are talking openly about the future insolvency of the system.
That’s one of the reason’s I’m impressed with a plan my colleagues at the Illinois Policy Institute have come up with.
Here are the key differences between the Institute’s proposal and other plans being circulated in Springfield:
It rules out extending the 2011 income tax increase.
It protects pension benefits already earned by employees but ties all future earned retirement benefits to a 401(k)-style of defined contribution plan.
It pays off the unfunded pension liability on a level-dollar basis.
It reduces the fiscal year 2014 unfunded pension liability by $46 billion.
It reduces fiscal year 2014 state contributions to $4.7 billion, a nearly 30 percent drop from $6.7 billion under current law.
But also it is quite generous to the employees themselves.
For example, a teacher who starts his or her career at age 25 at a salary of $35,000 and receives a 3 percent raise each year can retire at age 67 with $1 million in the bank, based on an average annual investment return of 4 percent. With that amount, a teacher could buy an annuity worth $54,000 a year.
So, how does the plan accomplish these things?
It raises the retirement age to 67 for new and younger employees, and it halts all future automatic retiree cost-of-living adjustments for retirees until the system is fully funded.
State Rep. Tom Morrison, R-Palatine, has introduced legislation to implement the plan.
“This bill reforms pensions in a constitutional way,” he said in a news conference last week. “It protects the pension benefits workers have earned to date. The pension formula will simply apply to their current service and their current salary. They will receive a basic pension as if they had left government employment today.
“But in order to fully protect those benefits, we have to change how future benefits are earned. And while we’re making those changes, let’s do it in a way that empowers workers with real control.”
Sadly, through decades of mismanagement, we find ourselves in the midst of crisis.
Unless tough decisions are made, core government services, such as public safety, education and providing care for the most vulnerable in society, will face unacceptable cuts.