Pension funds worse than advertised

Yes, pensions were promised, and the Illinois constitution defines them as an unbreakable contract. However, the same constitution says that lawmakers cannot spend more than they take in. The taxpayers never agreed to a whatever it takes cost.

In most contracts if the buyer was not informed of the cost (or lied to), the contract can be deemed null-and-void. In this case, taxpayers were given a cap on property taxes, balanced budget in the constitution, and a promise that income taxes as is would be enough. Obviously we were not told the whole truth.

Pension funds are actually worse than advertised. If you remove the pension obligation bonds, and report assets as market value rather than smoothed value IL pensions are less than 40 percent funded.

I know, in reading letters to the editor, that teachers are under the impression that the root cause of the problem is the state’s lack of paying their “fair share.” First, this “fair share” or “fully funding” is misleading. The state’s share is defined using a formula based on current payroll plus an “amortized” portion. This “amortized” portion grows to cover any market losses (2008-2009 TRS lost 25 percent of market value) and increase in obligation (end of career salary spiking). The deal was unsustainable from the start.

My suggestion is that we need to change pensions (even past ones) so that the state portion is fixed, and payouts are adjusted based on the available funds in the pension.

Jan Shaw

Wheaton