Discover more from Fred Klonsky in Retirement
Illinois cutting retiree health care subsidy and the death solution to the whole public pension issue.
The state's teacher unions are all in.
The state of Illinois has a public pension debt of around $150 billion. The debt exists for one reason and one reason only.
For decades the state has failed to meet their actuarial responsibility of funding the pension systems.
Even when they say the have passed a budget that meets their funding goal, it is not true. The way that works is that the legislature and the governor come up with a number pretty much out of their ass and budget that amount. But it is not the actuarial number. The actuarial number is amount that is necessary to pay off the debt. The interest on the debt accounts for something like six out of every seven dollars the state pays for pensions. So every year the liability grows.
Except for some years when the investment returns are good, like this past year.
But you can’t do long term financial planning based on one year of good market returns.
There is no political will in Springfield to address the pension problem in the long term.
That is because the members of the legislature just figure that in about 25 years all the teachers who are in current Tier I pension plan - the plan that is costing them the most - will be dead and the problem will be solved.
Tier II teachers, those hired after 2011, get much less, a reduced COLA and have to work way longer. Most won’t make it to retirement.
So forget about them.
The idea that legislators are waiting for me and other retired teacher to die may sound ghoulish, but remember, it’s the General Assembly of Illinois.
If all the Tier I teachers are dead, our pension payments become a budget surplus, baby!
This past week I got a letter from Jim Duffy, Chair of the Illinois Education Association - Retired.
The IEA is the state’s largest teacher union.
In recent days, complaints have been flying about state funding for TRIP/TRAIL and forecasting dire consequences for the TRIP/TRAIL insurance programs. We (IEA-Retired) sent out a statement about this on Jan. 25. Below is more information provided by IEA Lobbyist Will Lovett. One of Will's primary responsibilities is working with TRS and other pension systems involving our members. He also represents IEA on the TRIP/TRAIL Advisory Task Force.
The Governor’s budget proposal funds TRIP/TRAIL with $106.3 million from the state for fiscal year 2023. That amount is lower than the current year. However, the program is expected to receive $421 million from existing revenues and spend $398 million. If projections hold, the program will increase its end of year cash balance to $47 million. That cash balance is $22.7 million higher than the projections for the current fiscal year. IEA serves on the TRIP/TRAIL Advisory Task Force and firmly believes that the program will continue into the future without any fiscal uncertainty.
IEA Lobbyist/IPACE Consultant
Proud IEASO Member
No matter how many times I went over Will Lovett’s math I couldn’t see how the state budget could cut nearly $50 million from our retiree healthcare and end the year with a cash balance nearly $23 million higher than the current fiscal year.
Then the light bulb went off.
The current fiscal year is a pandemic year.
It has been widely reported that folks have been staying away from hospitals, surgeries and annual check-ups because of Covid.
Lovett is basing next year’s retiree healthcare costs on last year’s retiree healthcare costs.
On a pandemic year.
The IEA is going along with the cuts hoping that the program “will continue into the future without any fiscal uncertainty.”
Like a pandemic.
By the way, we don’t know how many of our retirees died because they didn’t get the medical care they needed out of fear of Covid.
The possible good news is who knows how much money that saved?