The Illinois pension payout system is like a family having an older sibling who, at seven, got $10 a week and a three percent yearly raise. Three years later they accidentally had you. At this point your brother was earning $10.93; fast forward to when you are seven and want to get on this plan. Your brother gets 13.94 a week while you have to wait until you are eight because the funding isn’t there. Welcome to the Illinois pension family. Would unsustainability be enough to find a new family?
Illinois has an expansive pension system and is the model state for what not to do. The unsustainable aspect is the three percent a year cost of living adjustment, a state policy which does not accurately reflect the cost of living in Illinois. It may reflect the cost of living in Chicago, where over the next few years minimum wage will be increased to $13 an hour. However, if the cost of living went up 30 percent over 10 years, I wouldn’t want to live on this planet anymore.
Glenn Poshard is part of Gov. Bruce Rauner’s transition team. Poshard receives $189,979 in retirement pensions and did not cheat the system; the system cheated itself. Poshard worked 30 years in three state pension positions to receive his pension. However, old thinking on pensions may influence Rauner to not go full throttle on pension reform. He has already announced that he won’t be touching pensions for emergency services.
Politicians have helped run the state into the ground, although looking at the most recent statistics combined from the Illinois comptroller’s website and the Illinois policy center the estimated debt doubled from approximately $45 billion to over $97 billion from 2012 to 2013. Pension debt makes up the vast majority of Illinois debt and although reforms are being made, they have political consequences.
Labor Unions will not be as supportive of Rauner because of pension reform, in fact there are already a few court cases involving unions and pensions which the Illinois State Supreme Court is considering.
The younger generation is paying for pensions on multiple levels: State pensions are going through restructuring with employees having to wait longer to buy-in to the pension program. Additionally, they won’t have that same three percent yearly increase.
Ultimately, if the state is unable to set aside money for sustainable growth of taxes through tollway fees and other means of income it will mean higher taxes.
For a young person coming into the workforce out of college this does not sound promising. Even though I won’t necessarily be working for the state, I may be forced to contribute taxes to balance the pension system. Illinois debt is primarily pension debt, which will only continue to grow with the cost of the yearly living raises unless it is capped off or people die. It is a change I do not have the patience for.
With the problems arising from implications of mismanagement and mistrusting politicians, labor unions and others affected by state pensions will most likely oppose pension tier restructuring. They will most likely not support those who are trying to enact financial reform. The lack of trust in politicians deters people from voting.
The easy way out for a young person would be to leave Illinois. It is very tempting, not just because of the cold weather. For someone who has already bought into the pension system, it is sustainable to live in Illinois. For someone who has not bought into the pension system it is less sustainable. Personally, I never planned on living in Illinois long term. I would much rather be in Georgia or Tennessee because of the cost of living and climate. The time to buy into the pension system has definitely passed and so I would advise those hoping to work for the state to live elsewhere.
