Senate President Talks Pensionswith City Club of Chicago (Video)

Link: http://tinyurl.com/cullertonpension
Author: Illinois Senate Democrats
Title: Senate President talks pensions with City Club of Chicago (Video)
Publication: Illinois Senate Democrats Website
Date: March 19, 2012

On Monday, Senate President John J. Cullerton returned to the Chicago's City Club to provide his personal perspective on pensions.


Cullerton's speech put the Illinois pension system into perspective. The President reiterated his belief that existing public pensions are protected by the Illinois Constitution, but said there are other avenues that could draw down the state’s substantial retirement costs. President Cullerton highlighted possible reforms lawmakers could pursue that could potentially save the state millions.


The Senate President also provided the crowd of civic leaders with a visual explanation when it comes to the issue of the pension issue.


The Power Point presentation is available here: http://tinyurl.com/cullertonPPT


The video of Cullerton's speech is available here: http://tinyurl.com/cullertonpension


Comments from UIC UNITED's Bill Troyer: Dick and I heard the above give the best speech about pensions that I have heard.  He really laid it out from the past causes to a proposed solutions.  It was about 20-25 minutes not including Q & A.  One of the questions asked was if the speech going to be available on videotape and the answer was yes, and the source was his senate office I believe.  In this missive I will skip the back ground and go to his proposed solutions. There is essentially two.  First, He proposed for TRS only, to stop state payments of the employer portion of the pension and mandate that it be paid by the school district(s).  Second, He proposed

that the COLA  not be compounded as it is now. 

He did not say these changes would  not affect current retires nor did he say they would not.  He implied ( and I could be wrong ) that they would not.  And even if they would any changes would not be retroactive. Current SURS retirees would not be affected directly by the proposed TRS changes.  TRS is the biggest recipient of state funding and if the state would be no longer responsible for it it would be substantially less costly for the state to make the required contributions for SURS,the state employees, and the judges and legislators funds.   

How much would would compounding cost us?  As a test case I decided to run the numbers of my on case.  I have been retiried since 12/31/99.  I have received pension payments for a little more than 12 years.  My monthy pension has increased approximately 43%.  It is compounded.  If it had not been compounded it would have increased by 36%.

Another way to look at it is how long does it take to double your income by compounding vs not compounding.  Using 3% as the yearly increase it take 33.3 years to double without compounding and 24 years with compounding.

It costs us something, but not much by my estimates if they don't touch anything else, such as health insurance, and continue to make retirement income free of state income tax.


What Are You Doing to Protect your Future?

Join SUAA Now!

http://tinyurl.com/join-uicunited

Send Us Pension Related News Stories

Have you seen a good news story related to the State Universities Retirement System or pension reform that should be posted on our blog?  Please let us know so that we can get it posted!  Click here!


What Are You Doing to Protect your Future?

Join SUAA Now!

http://tinyurl.com/join-uicunited

Panel on Pension Policy for SURS Participants

Link: http://tinyurl.com/SUAA030912
Author: The State Universities Annuitants Association (SUAA)
Title: SUAA Mini Briefing
Publication: SUAA Website
Date: March 9, 2012

The IGPA (Institute of Government & Public Affairs) presented a proposal for a hybrid retirement system for employees of public universities and community colleges at open forums held on the three University of Illinois campuses.

Panel members included: Robert Rich, Director of the IGPA; James Paul, Assistant Director of the IGPA; Fred Giertz, Professor of Economics at UIUC and SURS Board Member; Avijit Ghosh, Special Assistant to the President at UIUC; Kappy Laing, Executive Director, University of Illinois Office of Government Relations; William Mabe, Executive Director, State Universities Retirement System; and in Chicago and Urbana, Jeffrey Brown, Director of the Center for Business and Public Policy at UIUC.

In his 2013 Budget Address on February 22nd, Governor Pat Quinn appointed a Pension Working Group and called for input from stakeholders in the ongoing search for a sustainable pension system for the State of Illinois. The IGPA met that challenge by first rejecting SB 512 out of hand as “punitive” and offering a model pension plan of “shared sacrifice.”

There are four key elements to the IGPA proposal. They are brought together in a mixing of defined benefits and defined contributions that would apply to all new employees and all Tier II employees.

First, the IGPA hybrid plan reduces the defined benefit by about a third – from about 2.2% per year of service to 1.5% per year of service. Money to pay retirement benefits would be derived from a defined contribution plan that increases the contributions from employees, requires contributions from the public universities and community colleges that employ them, and contains safeguards that ensure the State pays its portion.

Second, the IGPA proposal would peg the Effective Rate of Interest guaranteed by pension investments to levels paid at market rates (an estimated 2%).

Next, the IGPA calls for a re-distribution of the funding burden. The State’s contribution would be no less than what it would have to pay if State Employees were a part of the Social Security System or 6.2%. Employees’ contributions would rise from 8% to 11.5% of the normal pension costs. Then, for the first time in the recent past, public universities and community colleges would contribute up to 2.25%. Increases to employee and employer contribution would be phased in at no more than 1% per year.

This proposal does not increase the State’s costs, but the State would be required to pay a minimum of 6.2% annually with no possibility of a “payment holiday.” This is approximately 50% of the State’s current funding level and would save the State of Illinois $240 million over time. However that money would be earmarked to cover the unfunded pension liabilities of years past.

The fourth and final element of the IGPA proposal aligns the vesting schedule more with private business. Current Tier II employees are fully vested in the system at 10 years. If they leave the system prior to 10 years of employment, they lose their contributions and have no Social Security benefits accrued for that time. The IGPA proposes that employee vesting be phased in over a 2-6 year period in a step system so that the employee would be fully vested at 6 years.

The IGPA Pension Proposal is just one of the pension initiatives on the table. Governor Quinn called for the Pension Working Group’s recommendations to be on his desk by April 14th.

The prospects for a vote in either the House or the Senate will likely be delayed until after the November election. As Kappy Laing pointed out, 9 Representatives and 6 Senators are not seeking reelection. Re-districting has left many more seats contested. The election results will create a sizable number of lame duck legislators who will be more likely to make the tough call when it comes to pension legislation.

Likening Illinois’s pension dilemma with challenges face by Social Security, Jeffrey Brown paraphrased former Chairman of the Federal Reserve Board Alan Greenspan, “There are only 3 solutions to this problem. Somebody has to pay more. Somebody has to get less. Or we must find a way to repeal the Laws of Arithmetic.”

You can click to view the webcasts below:

UIUC Webcast
UIC Webcast
UIS Webcast

The UIC webcast, power point slides, the full IGPA report and IGPA Pension Proposal are available at: igpa.uillinois.edu/pensions.

What Are You Doing to Protect your Future?

Join SUAA Now!

http://tinyurl.com/join-uicunited

What Are Your Concerns?

What are your concerns?
What do you think of this blog?
PLEASE POST COMMENTS - let us know what you think!
Comments can be posted anonymously.

What Are You Doing to Protect your Future?
Join SUAA Now!
http://tinyurl.com/join-uicunited