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Monday, February 26

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The Mechanics
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State Budget Fri Mar 26 2010

New Pension Changes

Do the changes "help"?

Yes and perhaps no.

Financially over the long haul increasing the age in which people can retire at full retirement benefits will reduce the overall financial impact of state pensions over time.

The big question is how is the state going to recognize the savings.

Under Governor Blagojevich, when changes were made in the financing of the state pension systems the legislature would recognize multiple years worth of "savings" in a single year and use that "savings" to shore up a current budget.

Back in 2005 they made some changes to pension financing and used the "savings" to avoid making payments into the system even though the savings would be realized until several years down the road.

As an official put it back in 2005,

Gov. Rod Blagojevich has a plan for reforming teacher pensions that he says will save millions -- millions the state can begin spending to balance next year's budget.

That idea, says the head of the Illinois Teachers' Retirement System, sounds more like it came from the mouth of a teenager.

"It's kind of like as if my 17-year-old daughter says to me, 'Dad, I might have a baby-sitting job a week from Tuesday, so could you give me 40 bucks now?'" TRS's Jon Bauman said. "It just never makes sense to spend money before you have it. And that, in effect, is what this is all about."

So it's a positive step in the right direction.

The question will be how the state legislature decides to handle the "savings" when it is budget crunch time.

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Oh Dear / March 29, 2010 10:25 AM

These legislators have no idea how to make the difficult decisions that are needed to bring the state's financials back into some state of solvency.

This is a body that is designed to float gov't largess into a bubble of its own making. To ask them to credibly change their mission would be like asking the same from Fannie Mae, Standard and Poor's, and the heads of Lehman and Bear Stearns circa 2003.

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