Wednesday, February 16, 2005
Who is the most responsible state budget maker?
Live from the Capitol on Blagojevich budget address. The big problem is the public pension system. It is out of control. Who will tame the beast - and just as importantly, who will get public credit for financial responsibility to be entrusted with control of state government? So far the Governor is at least half right. Today he is calling for new retirees to have a scaled down pension with things like a 2 percent annual adjustment instead of a 3 percent bump and an end to the special sweeteners for this cop's widow and that group of prison guards. Those are long overdue steps already strenuously resisted by most of the unions. Imterestingly the GOP is apparently allying themselves with the teachers unions and rejecting the responsible pension position - but the GOP position is still murky. So far the person who deserves the most credit for pension responsibility is Speaker Madigan who single handedly blocked the teachers early retirement option that would cost the state just shy of a billion - essentially financing the past instead of the future because those pension dollars do not buy young teachers or schoolbooks for needy kids. But Speaker Madigan essentially gets no credit for his do the right thing move, certainly not from the Tribune editorial page which pays attention to things here. Can the Governor with his superior messaging skills and easy access to a statewide bully pulpit get the credit that eludes Speaker Madigan? Let's find out.
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3 comments:
Dan, the hit to annual pension increases is actually pretty huge. Although the guv said he's limiting them to inflation (I presume that's where you got the 2 percent), that's not even close to what he's really proposing. He wants to base the inflation-based increases on the first $12,000 of someone's salary if they're eligible to receive Social Security (non-teachers) and the first $24,000 of workers who aren't eligible for Social Security (teachers).
Well, you can imagine what a teacher retiring in 35 years is going to get to catch up with inflation. Two percent of $24,000 a year is $480 a year. At a time when $480 will probably buy you half a week's worth of groceries. With no index to inflation.
Not to say pension reform isn't needed, but you can see why the unions are pissed.
Anon -- I don't see it. I'm not following your post. How many teachers retire at $24K? I suspect the answer is not very many. Starting salaries, as I understand, are in that range.
Exactly. If Blago's plan were in force today and you retired at $80k (a nice round number), you'd get, say, $60k a year in your pension at 75 percent. (Actually, it's more complicated, but bear with me).
After one year, you'd get an increase in your benefits. Suppose inflation goes up 2 percent in that year. You would assume, by the way Blago described it, that would mean you'd get $61,200 ($60k * 1.02).
That's not how it works though. In fact, you'd get $60,480 ($60k + $24k * 1.02). And the year after that, you'd get $60,960. And then $61,440. Cuz each year you'd be limited to the inflation times $24k.
Fast forward 35 years when this thing actually kicks in. You retire at $350,000 cuz of inflation. You still only get an increase of inflation times $24k every year.
That's ridiculous.
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