Breeze-Courier | Taylorville, IL
weather sponsored by
Hickory Estates of Taylorville




Advanced Search
search sponsored by


LOGIN | SUBSCRIBE




KMRM

home : news : state news free June 22, 2018

   
6/2/2018 11:42:00 AM
Pension buyouts may not bring savings claims

CHICAGO (AP) — Illinois’ new state budget relies on more than $400 million in savings from a new pension buyout plan that finance experts caution is highly speculative and may not save as much money as lawmakers say.

The budget sailed through the Legislature this week on a bipartisan vote, and Republican Gov. Bruce Rauner, who’s seeking re-election in November, has said he’ll act quickly to sign it. It was a sharp contrast to recent years, when Rauner and majority Democrats deadlocked over a budget and the governor’s pro-business priorities, leading to the nation’s longest state budget impasse. 

The buyout plan is aimed at addressing Illinois’ roughly $130 billion unfunded pension liability and the state’s ballooning annual contributions to the funds. Protections enshrined in the state constitution have limited lawmakers’ options, with the Illinois Supreme Court declaring cuts to benefits unconstitutional.  

But the buyouts are voluntary, and there’s no way to know for certain how many people will take the state up on the offer.  

Often in deals like this, projected savings don’t materialize or plans cost more than originally stated, said Steve Malanga, a fellow at the Manhattan Institute, a conservative think tank.

“So it’s actually wise for taxpayers to be suspicious,” he said. 

Here’s a look at the plan, and what it could mean for Illinois’ budget:

WHAT IT DOES

The buyouts will be offered to people hired by the state prior to Jan. 1, 2011. Illinois plans to issue a maximum of $1 billion in bonds over three years to fund the lump sum payments.

One plan, for people no longer employed by the state, would provide a buyout estimated at 60 percent of the present value of their vested pension. The state estimates it will get enough state employees accepting the buyout to save $41 million in the fiscal year that starts July 1.

The second plan is estimated to save Illinois $382 million in the coming budget year. It would give retirees an option to have their cost-of-living increases calculated at 1.5 percent rather than the current 3 percent, compounded annually, in exchange for an accelerated benefit payment. 

WHAT’S IN IT FOR RETIREES   

Rep. Mark Batinick, a Plainfield Republican who’s been pushing the plan for several years, says he’s heard from many retirees who would like to receive a large payment that they can invest or use immediately, even if it means they get less money overall.

Some have health problems or family members with disabilities. Others want to get the largest portion of their promised retirement benefits at an age when they can still enjoy spending the money. 

“There’s a lot of reasons,” Batinick said. “The fact is, this is their money, and they should have the ability to do with it what they want.”

THE MATH

Batinick said the first, smaller program is similar to one implemented in Missouri last year. Illinois assumed 22 percent of people eligible for the buyout would take it — the same percentage as did so in Missouri. 

Candy Albers Smith, communications manager for the Missouri State Employees’ Retirement System, said more people took the buyout when it was offered again this spring, bringing the total participation rate to about 25 percent. 

Illinois estimated about 25 percent of employees retiring in a given year would take the second offer of a smaller cost-of-living increase, Batinick said. He said that’s a conservative estimate, noting private pension plan buyouts usually have participation rates between 30 and 50 percent, and that people taking the buyout are only taking out a portion of their future retirement benefits.

But Malanga says private pension buyouts tend to get more takers because companies are often distressed, and retirees fear losing their pensions entirely. Government pensions are far more secure, even in places like Illinois.

Comparing Illinois’ offer with Missouri’s is also risky. In Missouri, cost-of-living increases are set annually for anyone hired after 1997. In the past decade, the median increase for those covered by MOSERS has been 1.3 percent. The state also caps the total amount of the increases at 65 percent of the initial benefit. 

Illinois has no cap, and the Illinois Supreme Court has ruled that retiree benefits — including the guaranteed 3 percent annual increase — cannot be cut. Those factors could make Illinois’ buyout offer far less attractive than Missouri’s. 

BUDGET IMPACT

If Illinois doesn’t get enough people to take the buyout and the $423 million in savings included in the new state budget isn’t realized, lawmakers will have to cut elsewhere or run up more debt.

Malenga says that’s why it would have been wiser for Illinois to attempt the buyout separate from the budget

Batinick noted he tried to do just that for many years.

“It didn’t work,” he said. 







Article Comment Submission Form
Please feel free to submit your comments.

If you are looking for the SPEAK OUT submission form, you can find it by clicking here: Speak Out Form


Article comments are not posted immediately to the Web site. Each submission must be approved by the Web site editor, who may edit content for appropriateness. There may be a delay of 24-48 hours for any submission while the web site editor reviews and approves it.

NOTE: All information on this form is required. Your telephone number and email address will not be displayed or shared.
Submit an Article Comment
First Name:
Required
Last Name:
Required
Telephone:
Required
Email:
Required
Comment:
Required
Passcode:
Required
Anti-SPAM Passcode Click here to see a new mix of characters.
This is an anti-SPAM device. It is not case sensitive.
   

















Dr Paul The Dentist
Trinity Dodge Fixed
Springfield Sliders
NewsWebPagesOpinionPeopleObituariesAg & BusinessSportsContact UsLife
Subscriptions | Username & Password Reminder | Change Password | Life

Breeze-Courier & Printing | 212 S Main St. Taylorville, IL 62568 | (217) 824-2233 |
website@breezecourier.com

© Copyright 2014 Breeze-Courier & Printing. All Rights Reserved.
Original content may not be reprinted or distributed without the written permission of Breeze-Courier & Printing.

Software © 1998-2018 1up! Software, All Rights Reserved