NPR’s web headline on a story this morning:
Shortfall Threatens Illinois Pension System
I would have put it differently:
Pension Shortfall Threatens Illinois Taxpayers
Here’s a nugget from the story that gives lie to NPR’s headline:
Illinois’ constitution protects pension benefits already guaranteed to state retirees and workers, so nothing already promised can be taken away. And many of the retired teachers, clerks, and others who live on a state pension now dismiss the notion that their pension benefits are overly generous.
In other words, individual pensioners have little to worry about. I’m not sure how it is in Illinois, but in Kentucky, workers have overly generous pensions. Here’s how it works for Kentucky. Other states vary this approach:
Multiply: (the average of your highest three earning years) * (a benefit factor of around 2.50%) * (years in the system).
Consider a state worker who never changed jobs in government, worked 27 years and whose “high three” average was $50,000. After working 27 years, he can retire with full benefits at any time without regard to age. In this case, he’ll qualify for more than two-thirds of his working salary for the rest of his life, excluding cost-of-living adjustments and, or course, the fact that many of these workers enter other pension-qualifying jobs and begin accruing a second pension while collecting their first pension.
Many of these generous promises come in the form of an “inviolable contract” that prevents any reduction in benefits to workers already enrolled in the pension system. Every new worker enrolled in the system is guaranteed the retirement benefit at the time of his employment. The benefits cannot be reduced under virtually circumstance.
This is a problem that vexes so many states, but the political calculus seems pretty intractable. The crisis isn’t here yet for most states, so states aren’t treating it like a crisis.