The 1%: Illinois’ Pension Millionaires
More than 129,000 Illinois public pensioners will see expected payouts of $1 million or more during retirement.
Illinois is home to a small, powerful and protected class of wealth.
Their profits are immense. They bear little to no risk. And the state’s social safety net has been gutted to pay for their privileges, which are closely guarded by politicians.
These are Illinois’ pension millionaires.
Among the state’s 12.7 million residents, they constitute the 1%.
More than 129,000 Illinois public retirees will collect estimated payouts of more than $1 million each over the course of their retirements, according to new analysis from the Illinois Policy Institute.
No public-sector worker should be personally shamed for getting a great deal. Those who choose a life of public service deserve honor and praise.
At the same time, it’s crucial that Illinoisans understand these retirement benefits and call for reform. They have resulted in cuts to core services and constant calls for tax hikes across the state for more than two decades. They’re also pushing the pension funds toward insolvency.
Extreme payouts and early retirements are the norm across Illinois’ five state-run retirement systems:
More than 22,000 retirees in the State Universities Retirement System (43%) will receive an expected lifetime payout of more than $1 million, with 42% retiring before their 60th birthday.
More than 31,000 retirees in the State Employees’ Retirement System (51%) will receive an expected lifetime payout of more than $1 million, with half retiring before age 60.
Nearly 75,000 retirees in the Teachers’ Retirement System (68%) will receive an expected lifetime payout of more than $1 million, with more than half retiring before age 60.
The remaining pension millionaires at the state level are spread across the Judges’ Retirement System (nearly 900, or 94%) and the General Assembly Retirement System (more than 200, or 67%).
Meanwhile, the average 401(k) balance nationwide for people aged 60 to 69 is $195,500, according to CNBC.
These numbers can be difficult to believe. So they’re often spun. There are four common “buts” used to justify the status quo:
1) But these benefits attract top talent
In fact, these benefits have made important fields like teaching much less attractive in Illinois. That’s because in order to pay for the extreme benefits promised in the past, new teachers are enrolled in an unfair “Tier 2” retirement plan that is so lousy it will likely result in a lawsuit when the first Tier 2 worker vests on Jan. 1, 2021.
2) But these workers don’t get Social Security
In fact, almost all state employees in SERS are eligible for Social Security benefits on top of their pensions, which average $1.7 million for career workers.
For other public retirees in Illinois, trading million-dollar payouts for a Social Security check would be a serious downgrade. The average Social Security benefit for 2019 is $17,532 per year. And the earliest anyone can qualify for Social Security is age 62, with the full retirement age pegged at 67 for anyone born after 1960.
3) But workers paid into the system
The average state worker or teacher in Illinois retires before age 60, takes home a lifetime pension benefit of more than $1 million and contributes less than 10% of that amount to the system – the rest is covered by taxpayers.
4) But politicians underfunded the system
Illinois pensions were underfunded because they were overpromised. Like a teenage barback trying to front a monthly payment on a Lamborghini, state politicians have kicked the can, borrowed and lied to keep up appearances. Illinois state and local governments now spend the most in the nation – about double the national average – on pensions as a share of their budgets. Consider that the state spends about one-third less today, adjusted for inflation, than it did in the year 2000 on core services including child protection, state police and college money for poor students. During that time, pension spending increased 501%.
Paying more is not an option.
Backing reforms for a fair pension system should be the No. 1 priority for Illinois state lawmakers. And other states can show them how.
A pension constitutional amendment in Illinois that matches states such as Hawaii and Michigan would allow for changes to retirement ages, capping maximum pensionable salaries, and doing away with guaranteed permanent benefit increases in favor of a true cost-of-living adjustment pegged to inflation. All of this can be done without cutting a dime from the checks of current retirees. These changes to “future” benefits have been enacted in Arizona, where they had support from union leaders who realized pensions were in peril.
If Illinoisans work together, commonsense pension reform can ensure state government works for everyone.
Not just the 1%.
Sat, 01/25/2020 – 17:10
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