funding strong schools & fair pensions: state representative linda chapa lavia northern illinois...
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Funding Strong Schools & Fair Pensions:
State Representative Linda Chapa LaViaNorthern Illinois Jobs With Justice
Funding Strong Schools & Fair Pensions:
Sponsored By:State Representative Linda Chapa LaVia
Northern Illinois Jobs With Justice
Fixing Illinois’ Revenue Problem
HISTORY–1915 TRS began (Dunne)–1939 Social Security or TRS (Horner)–1950 Trouble - 23% funded (Stevenson II)–1970 New Constitutional Protections
(Ogilvie)–1989 40 year payment (Thompson)–1995 50 year plan - 90% funded by 2045
History (con’t)
–2003 48% funded - $43B debt – State borrows $10B
(Blagojevich)–2006-7 Cut pension payments by $2B to
pay other bills–2008 Pension debt $42B 63% funded–2009 Pension Modernization Task Force
(Quinn)–2010 Tier II pension created
Illinois Constitution
“Membership in any pension or retirement system of the State, any unit of local government or school district, or any agency or instrumentality thereof, shall be an enforceable contractual relationship, the benefits of which shall not be diminished or impaired.”
Member StatsActive Members
• Average Age 42• Average Years of Service 12• Average Salary
$66,044.• Oldest Full-time Teacher 81
Member Stats (con’t)
Retired Members
Average Age 70Average Years Service 28Average Pension$46,452.Oldest Retiree 107
Pensions• 18 pensions (0.02%) are between $200,000 and
$250,000, [all administrators].
• 153 pensions (0.17%) are between $150,000 and $200,000, [primarily administrators].
• 1,985 pensions (2.26%) are between $100,000 and $150,000, [mostly administrators].
• 33,885 pensions (38.52%) are between $50,000 and $100,000.
• 51,920 pensions (59.03%) are below $50,000 (IEA).
• Of the 51,920 pensions, 17,269 are less than $20,000.
• The average statewide TRS monthly annuity after 29 years teaching is $3,565.
• TRS members DO NOT receive Social Security benefits for their years as an educator. Their sole retirement is their TRS.
• The state saves billions by not having to pay into Social Security, which private employers must do; teachers also pay a monthly premium for their healthcare (TRS).
Misconceptions• Teachers also get Social Security.Teachers do not get S.S. Converting to S.S. would cost the state more money and they couldn’t take pension “holidays”.• Teachers get free healthcare. The average cost is $560 per month for a retiree’s healthcare.
Misconceptions (con’t)
• A defined contribution plan would cost the state less money.
The PMTF found that defined contribution plans cost more. Nebraska recently reverted back to defined benefit plan after 20 years.
• Illinois’ pension benefits are overly generous.Illinois ranks in the bottom one fifth of all states for retirement benefits for state workers. US Census Bureau, Employee Retirement Systems of State & Local Government
Misconceptions (con’t)
• Illinois’ pensions are too costly.The normal cost across the 5 pensions is 26% under the national average. Bureau of Economic Analysis, 2008
• Illinois’ costs for education are too high.Illinois ranks last (tied with Nevada) for state funding for education.
• Illinois has a pension problem.No, Illinois has a revenue problem.
STATE RETIREMENT SYSTEMSFactors Causing Change in Unfunded Liabilities
FY 1996-2008
Salar
y Incre
ases
Investm
ent Retu
rns
Employer C
ontributions
Benefit Incre
ases
Change
s in Assu
mptions
Other F
acto
rs
-5000
0
5000
10000
15000
20000
1192.7 3022.28
18815.39
5795.02
-1660.12
8502.03
Millions
Total Increase =$35,668.29 MIL
Pension Modernization Task Force
Finding of Gov. Quinn’sPension Modernization Task Force
“In sum, the subcommittee finds that the current benefit structure is not the primary contributor to the current pension crisis; the main culprit is the State’s inability to fund its pension system according to actuarial principal.”
Findings of Gov. Quinn’sPension Modernization Task Force
“The cost to taxpayers of state-funded pension benefits is less than the private sector, and less than public pensions in neighboring states.”
Retirement CostsNeighboring StatesIndiana 12.85% Iowa
14.24%Kentucky 7.25% Michigan
11.8%Missouri 8.71%Wisconsin 10.6%
“Thus, the Benefits Subcommittee concluded that the future cost of TRS (6.63%) to Illinois is clearly not out of line with other states.”
Pension Modernization Task Forcewww.ilga.gov/commission/
Retirement Cost Comparison
PRIVATE SECTOR 10.6%• 6.3% Social Security• 4.4% Profit Sharing and/or 401K
TRS 6.63%• PMTF finding:Private Sector retirement costs are more costly than TRS.
The Future
• Teacher shortages• Increased burden on homeowners• Increased inequality of education across the
state• Negative economic effects• Poor schools produce a poorly educated work
force