Do you want single-payer health insurance? Have you considered the unintended consequences? If not, consider the ghastly mess that Illinois finds itself in as the result of creating five employee pension systems.
Illinois' Comptroller, Susana A. Mendoza, in her "Comprehensive Annual Financial Report for the Fiscal Year Ended June 30, 2016," paints a dire picture.
"The State’s largest liability is its net pension liability. The State sponsors five public employee retirement systems that are included in the State’s financial statements as pension trust funds.
"The State is statutorily required to make contributions to these retirement systems. ... During fiscal year 2016, the net pension liability ... totaled $116.024 billion, an increase of $7.359 billion from the fiscal year 2015 balance of $108.665 billion.
"During fiscal year 2016, all of the State systems were substantially funded in accordance with the statutory funding requirement. ... However, the State’s 50-year funding plan does not conform to the Actuarial Standards of Practice, and although the statutory contribution requirements were met, the statutory funding method generates a contribution requirement that is less than a reasonable actuarial determined contribution."
The Institute for Illinois' Fiscal Sustainability at the Civic Federation writes that for FY2016, the taxpayers of Illinois contributed $7,537,200,000 to the five funds:
1. $3,742,700,000 to the Teachers' Retirement System (TRS);
2. $2,044,900,000 to the State Employees' Retirement System (SERS);
3. $1,601,500,000 to the State Universities' Retirement System (SURS);
4. $132,100,000 to the Judges' Retirement System (JRS);
5. $16,100,000 to the General Assembly Retirement System (GARS).
For Illinois to make its $7.537 billion contribution to the five retirement funds means that a lot of Illinois taxpayers had to pay a lot of money so that retired state employees could have comfortable retirements. But as Comptroller Mendoza says, even with that $7.537 billion contribution, during fiscal year 2016, the net pension liability increased by $7.359, so as to stand at $116.024 billion at the end of FY 2016. Bottom line: The $7.537 billion contributed was about half of what was needed to keep the net pension liability from increasing.
So, how did Illinois get in this mess? It began with the best of intentions: "Illinois should provide a comfortable retirement for its loyal employees." Unforeseen factors then intervened. For example, the legislature found other "worthier programs" and began making reduced contribution" to the pension systems. By the end of FY2016, the underfunding created a "net pension liability" of $116.024 billion.
Then, of course, salaries increased. When I was sworn in as a judge in December 1974, circuit judges were paid $30,000 per annum. By the time I retired, at the end of 1999, $122,000. Judges who served 20 years earned a pension of 85 percent of their last day's salary. Did the legislators, who created the systems, envision that judges would be paid pensions on about $30,000? $122,000? It makes quite a difference.
To pay the 2016 state contribution of $7.537 billion to the five pension funds, the state has to tax $200 billion (at a tax rate of 3.75 percent) worth of income, earned by Illinois individuals and corporations.
If a retiree's pension is $170,000, his neighbors have to earn $4,533,333 (taxed at a tax rate of 3.75 percent) to pay that pension for one year. If a retiree's annual pension is $52,000, the neighbors have to earn $1,386,666 to pay that pension for one year.
I am forever grateful to my neighbors for paying my judicial pension. I have no doubt everybody who is receiving an Illinois pension feels the same.
At the same time, it is very clear that funding these five systems has created substantial unanticipated burdens on every Illinois taxpayer today -- and probably on their children for years to come, as well as on every Illinois Corporation.
So before you clamor for single-payer health insurance, or any other government program, think about the Illinois pension mess. Beware of unintended consequences.
Has Obamacare kept all its promises?
The idea of the omniscient state taking care of citizens' every need isn't new. The USSR tried it for 70 years, before collapsing. Oil-rich Venezuela embarked on a similar course in 1998. Today, the country is in utter turmoil.
Posted: QCOline.com June 11, 2017
Copyright 2017, John Donald O'Shea
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