Inflation, Social Security and the Madigan pension cap.
Illinois teacher retirees are losing money every month.
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I don’t have to tell you that the increases in the cost of things is on a three month inflationary roll.
At first the economists were telling us it was a temporary blip.
Now we have witnessed four summer months of rising prices and those same economists are arguing over how bad Christmas will be.
Some blame it on the break in the supply chain caused by the pandemic. Others on the increasing cost of labor.
Of course, the increasing cost of labor means that employers must pay more because many workers won’t go back to the old days with wages that won’t pay the rent.
Those retirees who receive Social Security and who received a bump in their benefit last year that was nearly invisible will see something quite different this coming year.
Social Security recipients will see a 5.9% cost-of-living adjustment (COLA) next year.
It will be the largest increase since 1982. The annual COLA that was announced on Wednesday by the Social Security Administration will go to more than 64 million recipients of Social Security.
The COLA can be one of Social Security’s best features because it responds to inflationary times like this.
It is an inflation adjusted annuity.
That is not true for those of us on an Illinois public pension.
Retired public employees in Illinois do not in most cases receive Social Security benefits.
Our teacher retirement COLA is not a real cost of living increase at all. Unlike Social Security, our increase is fixed and not tethered to inflation.
At 3% compounded each year, we are losing money every month.
We have been lucky the last couple of years because our annual pension increase and the consumer price index have been pretty much aligned.
But no more.
The cost of food and rent and gas have been hit hard by inflation and that is not exactly a discretionary expense for seniors like me.
For teacher retirees in the Chicago area whose pension, based on their career earnings, provides for an adequate retirement, the inflation losses have hit us but things are even worse down state.
The average teacher retiree in Illinois receives less than $50 thousand a year. An 85 year old retired teacher in southern Illinois is getting creamed.
The last time we went through a period of extreme inflation was in 1989. In response the legislature acted to change the yearly pension increases from 3% simple to 3% compounded.
It was something but not that big deal since the CPI was in the double digits.
A problem for teachers who are approaching retirement now is the Madigan cap on TRS pensionable salary increases.
The cap was the result of then-Speaker and Democratic Party boss Michael Madigan’s war on teacher pensions.
It was Michael Madigan - forced out of office by charges of corruption and sexual abuse by him and his associates - who tried to gut teacher pensions entirely.
The Illinois Supreme Court ruled the thievery unconstitutional.
Madigan also claimed that teachers were making out like bandits when our unions bargained extra increases in the final year or two of employment.
Madigan said it was pension spiking and blamed it for the hundred billion dollar pension liability.
It was a ridiculous charge. Pension payments were based on the average of a teachers final four years. An extra increase at the end of a 35-year career of teaching had little impact on the state’s pension costs as compared to the underfunding by the legislature.
But Madigan rarely had a close relationship with the truth.
He got his Democrats in the House and those in the Senate to cap pensionable increases at 6% - for a while at 3% - and any district that exceeded the cap would be punished by a hefty penalty.
For a veteran teacher facing retirement but who was still getting a step increase, taking on extra duty for a stipend or moving a lane as a result of professional development, it was not difficult for a bargained raise to exceed the 6% Madigan cap.
As in 1989, if inflation continues at the current pace, legislators need to start thinking about public employees in retirement and what we can afford to pay for basic stuff.
It may not be the most popular thing since public pensions have always been available as a convenient whipping boy for opportunistic politicians and the IPI.
Legislators can remove the 6% Madigan cap.
They can align pension increases more closely to inflation, as Social Security does now.
Perhaps they can show compassion and courage.