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|User Info||Oh Look, Biederman Agrees With Tickerguy!; entered at 2012-05-30 13:02:46|
I have some minor skin in this public pension game, as I have modest amounts in 3 different Illinois public pension funds. I am also on good terms with my local state rep, and have discussed the pension and budget issues facing this state a number of times. |
According to his calculations, at the present rate, in 2045, the entire Illinois state budget will be spent on pension payments. We agree that this is not going to happen. But, almost all of the proceeds from the recent 67% income tax increase is going into pension funds, and not to pay off past due bills. What he explained to my students is that there is some need for a basic safety net, but that has been abused considerably, especially in terms of eligibility for Medicaid and for the childrens' insurance program set up largely at the behest of our recently convicted governor. The state's income has been pretty flat for about a decade, and expenditures have risen considerably. "Borrowing" from the public pension funds to "balance" the state budget has backfired badly.
What I realized a long time ago is that the state will try to pay pensions to its workers as long as it can, as most of them are public union members. But, eventually the state government is going to have to allocate payments by a more simple calculus. Who is more likely to riot and burn down cities if they get stiffed on state government payouts, retired teachers and professors, or the underclass? The money is not there now keep paying both of these groups, pensioners and underclass at current levels, much less with a declining revenue base and cost of living adjustments. One of my friends, who is an expert in public finance, and an Illinois pensioner, told me several years ago that he expects to eventually be "paid" in IOUs. If I am lucky, I will just get most of what I paid in from some sort of lump sum settlement.