Taxpayers contributed more than state workers

Taxpayers contributed more than state workers

To counter the rhetoric that Illinois’ public pension problems are the result of it taking so called “pension holidays” or “skipping payments,” I will show a different perspective, using actual data from Teachers’ Retirement System (the largest of the five Illinois pensions). But first we need to understand the pension’s “normal cost,” defined as the actuarially computed cost of the benefits expressed as a percentage of payroll. The IEA places a figure of 9.13 percent for normal cost, compared with the employees’ own pension contribution of 9.4 percent. The normal cost is what Mike Madigan wants to push from the state’s responsibility to the local school districts.

So, using TRS data, comparing the cumulative contributions for each the taxpayer and employee beginning in 1981, how many times has the taxpayer level dipped below the employee level? Not a single time! All through the 1980s and 1990s the taxpayers contributed more than the employees.

Now, if you were to Google “pension holiday” you would learn it refers to 2005 legislation allowing the state to contribute less over the next five years. Conveniently omitted from the rhetoric was the fact that over $4.3 billion of bonds were issued and turned over to TRS in 2004, so during the 2000s the taxpayers actually contributed over twice that of the employees. Overall, since 1981 the taxpayers contributed 1.6 times the employees.

What these “skipped payments” really refer to are the amounts above and beyond the normal cost that the state gets stuck owing. Since the normal costs are actuarially computed could this mean that the actual benefits paid are really much greater than the normal cost? Well, TRS conveniently admits as much in its “Retirement Guide” publication.

Mark Evenson

Palatine