Illinois has a deeply bankrupt pension system—it’s in the hole by $100 billion: a state is in the hole by $100 billion, not a nation—a pension system that’s the worst off in the country.
Their solution? A bill just passed that in total is claimed to save $160 billion over 30 years and fully fund the systems by 2044. That’s a bit over $5 billion a year on that $100 billion arrearage. And it naively, if not cynically, assumes that future state legislatures won’t change the thing for all of those 30 years.
Some specifics, with my comments: the bill
- pushes back the retirement age for workers ages 45 and younger, on a sliding scale
Why a scale? 20 years to a nominal retirement at 65 is plenty of time for workers to adjust plans.
- replaces annual 3% cost-of-living increases for retirees with a system that provides the increases on a portion of benefits, based on seniority
Why freeze the COL? If there’s to be one, why not tie it to inflation? Today’s inflation is in the neighborhood of 2%-2.5%. Larger COLs aren’t necessary.
- gives some workers the option of freezing their pension and starting a 401(k)-style defined contribution plan
Why only some? Why not move them all to 401(k) type plans? The private sector recognized the usefulness of such plans decades ago, and they make the workers more responsible for their own futures, instead of having government usurp that responsibility.
- has workers contributing 1% less to their own retirement
So workers will become even less responsible for their own futures than they were. Oh, wait—those plans….
Don’t expect this to have any effect on Illinois’ failed system other than to allow it to get worse.