In his new column for Crain’s, Greg Hinz tries to answer the question that has, for many months, perplexed those with a basic understanding of mathematics:
Is it possible to cut spending $2.2 billion immediately, save taxpayers $100 billion over 30 years, protect everyone who’s already retired and amortize $111 billion in unfunded pension liability without pushing current state workers and teachers into near-poverty when they retire?
The unsurprising answer is, “probably not.”
As IEA President Cinda Klickna and others have pointed out previously, if active employees are moved to a defined contribution (DC) plan, like a 401K, that means retirement contributions from the employer and the employee go to the DC, creating yet another revenue crisis for TRS and the other affected systems that are expected to pay benefits despite being owed $111 billion by the state.
As Hinz puts it, if the money going in is dramatically reduced, and retiree benefits remain unchanged, someone is going to get it “in the ear.”
That would be active employees, especially those in mid-career.
He quotes a union source as estimating that the plan would be very damaging for a “42-year-old assistant attorney general or Medicaid administrator, who could end up getting 42 percent less than he or she would in today’s system”.
“Clearly, the plan will create a very significant cut in benefits” for those still working, says the Chicago-based Civic Federation’s Laurence Msall, who has no position on the proposal. Or as state Sen. Daniel Biss, D-Evanston, the chief author of the plan pending before the Supreme Court, puts it, “The way the numbers work, someone is going to be absolutely hammered.” Biss, who says the plan is unconstitutional, suspects the biggest losers are mid-career workers whose salaries for Tier 1 purposes would be frozen for 20 or 25 years.
If you read the entire column (behind a paywall). It includes a chart showing the state’s debt to the systems would continue to increase (to $127 billion) until 2026 and will still be $87 billion 25 years from now!
Those who aren’t turning away in revulsion from this proposal have said it “begins the discussion.” That talk isn’t cheap, especially for those who’ve faithfully made their pension payments and who don’t receive social security for work covered by TRS, SURS and the other affected systems.