More on the Public Pension Problem

From The Center Square:

Op-Ed: The 1%: Illinois’ pension millionaires

More than 129,000 Illinois public pensioners will see expected payouts of $1 million or more during retirement.

Illinois is home to a small, powerful and protected class of wealth. 

Their profits are immense.

They bear little to no risk.

And the state’s social safety net has been gutted to pay for their privileges, which are closely guarded by politicians. Sound familiar? 

These are Illinois’ pension millionaires. 

Among the state’s 12.7 million residents, they constitute the 1%. 

More than 129,000 Illinois public retirees will collect estimated payouts of more than $1 million each over the course of their retirements, according to new analysis from the Illinois Policy Institute. 

No public-sector worker should be personally shamed for getting a great deal.

Those who choose a life of public service deserve honor and praise. 

At the same time, it’s crucial that Illinoisans understand these retirement benefits and call for reform.

They have resulted in cuts to core services and constant calls for tax hikes across the state for more than two decades.

They’re also pushing the pension funds toward insolvency. Extreme payouts and early retirements are the norm across Illinois’ five state-run retirement systems:

  • More than 22,000 retirees in the State Universities Retirement System (43%) will receive an expected lifetime payout of more than $1 million, with 42% retiring before their 60th birthday.
  • More than 31,000 retirees in the State Employees’ Retirement System (51%) will receive an expected lifetime payout of more than $1 million, with half retiring before age 60.
  • Nearly 75,000 retirees in the Teachers’ Retirement System (68%) will receive an expected lifetime payout of more than $1 million, with more than half retiring before age 60.
  • The remaining pension millionaires at the state level are spread across the Judges’ Retirement System (nearly 900, or 94%) and the General Assembly Retirement System (more than 200, or 67%).

Meanwhile, the average 401(k) balance nationwide for people aged 60 to 69 is $195,500, according to CNBC. 

These numbers can be difficult to believe.

So they’re often spun.

There are four common “buts” used to justify the status quo: 

1) But these benefits attract top talent 

In fact, these benefits have made important fields like teaching much less attractive in Illinois.

That’s because in order to pay for the extreme benefits promised in the past, new teachers are enrolled in an unfair “Tier 2” retirement plan that is so lousy it will likely result in a lawsuit when the first Tier 2 worker vests on Jan. 1, 2021.

2) But these workers don’t get Social Security 

In fact, almost all state employees in SERS are eligible for Social Security benefits on top of their pensions, which average $1.7 million for career workers. 

For other public retirees in Illinois, trading million-dollar payouts for a Social Security check would be a serious downgrade.

The average Social Security benefit for 2019 is $17,532 per year. And the earliest anyone can qualify for Social Security is age 62, with the full retirement age pegged at 67 for anyone born after 1960. 

3) But workers paid into the system 

The average state worker or teacher in Illinois retires before age 60, takes home a lifetime pension benefit of more than $1 million and contributes less than 10% of that amount to the system – the rest is covered by taxpayers. 

4) But politicians underfunded the system 

Illinois pensions were underfunded because they were overpromised. Like a teenage barback trying to front a monthly payment on a Lamborghini, state politicians have kicked the can, borrowed and lied to keep up appearances. Illinois state and local governments now spend the most in the nation – about double the national average – on pensions as a share of their budgets.

Consider that the state spends about one-third less today, adjusted for inflation, than it did in the year 2000 on core services including child protection, state police and college money for poor students. During that time, pension spending increased 501%

Paying more is not an option. Backing reforms for a fair pension system should be the No. 1 priority for Illinois state lawmakers.

And other states can show them how. 

A pension constitutional amendment in Illinois that matches states such as Hawaii and Michigan would allow for changes to retirement ages, capping maximum pensionable salaries, and doing away with guaranteed permanent benefit increases in favor of a true cost-of-living adjustment pegged to inflation.

All of this can be done without cutting a dime from the checks of current retirees.

These changes to “future” benefits have been enacted in Arizona, where they had support from union leaders who realized pensions were in peril. If Illinoisans work together, commonsense pension reform can ensure state government works for everyone. Not just the 1%.

Austin Berg is a Chicago-based writer with the Illinois Policy Institute who wrote this column for The Center Square. Austin can be reached at


More on the Public Pension Problem — 10 Comments

  1. Calling someone a Millionaire because they make a million over a ten =- year period?

  2. That’s not what my 1099 said, but, maybe next year it will.

    That 3% annual increase, which I did not vote for, is the reason.

    As is customary when I discuss my pension, I thank you taxpayers.

  3. @dentbla good point. S

    Same argument is used by the leftists to describe private sector incomes above 200k.

    The same ones that are need to keep this ponzu scheme afloat.

    Prior to Trumps Tax reform, I was subject to a millionaire tax (AMT) that due to his fair reforms finally adjusted this tax to hit higher incomes closer to the millionaire.

    All should agree that pensions should be capped at average Illinois salary and increases should be capped at cost of living. Avg income while not working is still a fantastic deal from a perspective of a taxpayer who is actually funding this.

    Keep in mind while we would need expensive private insurance if we retired before Medicare eligibility, these retirees still have access to subsidized healthcare.

    Maybe we allow that to continue too?

  4. It is correct to call them pension fund millionaires, because in order to guarantee payment of annuity amounts, there needs to be an accumulated lump sum of at least, rule of thumb, 25 times the annual payment amount.

    With 3% COLA, that ratio rises even higher than 25x.

    In calculation of expected lifespan for Social security, there is a complete history of under-estimaing lifespans.

    We are now in an era of medical technology that will blow old life expectancy assumptions away by larger increments than in past miscalculations.

    The longer life expectancy will raise the 25x lump sum ratio enormously

  5. “These changes to “future” benefits have been enacted in Arizona, where they had support from union leaders who realized pensions were in peril.

    If Illinoisans work together, commonsense pension reform can ensure state government works for everyone. Not just the 1%”.

    Sounds like a plan—except here in Illinois the “union leaders” and its membership basically owns Illinois Politicians and their voting, there is no precedent that any Public sector Union, particularly teachers, is going to give an inch on anything they’ve been promised to be paid.

    Illinois truly has to go belly up, through the Pension Obligation not being funded before anything will change or be directed to be changed by Creditors/Federal govt.

    Wish it was different, but its grown too large, too greedy and too obtuse.

    Expect more Tax increases to fund it to keep the same Politicians in office who wont dare even mention it. Let the whole thing blow up and start over.

    Two teachers from two different School Districts live next to and across from me—retired at 58 and 60, new cars, motorhomes, multiple vacations, homes completely upgraded—ALL IN RETIREMENT.

    So much for cutting back when you quit working.

    I mean good for them, “they earned it” because it was the contract–other non teachers in the hood who retired, they’re Ok, but no extras, obviously both Private sector folks,with non pensions—I mean who gets a Defined Pension anymore BUT Public Sector?

    And we get to keep funding its bloatness until it goes belly up.

    Just the way it is and everyone knows it.

  6. Back in my day, entitlement scum would just stage a slip-and-fall in the beverage aisle.

  7. COLA is a part of the problem. Need to get rid of it or reform it to be
    no more than the COLA for Social Security. Here are SS COLAs since 2010:

    January 2010 — 0.0%
    January 2011 — 0.0%
    January 2012 — 3.6%
    January 2013 — 1.7%
    January 2014 — 1.5%
    January 2015 — 1.7%
    January 2016 — 0.0%
    January 2017 — 0.3%
    January 2018 — 2.0%
    January 2019 — 2.8%
    January 2020 — 1.6%

    Besides aligning Illinois COLA with SS, another reform ought to ask who needs or
    is deserving of a COLA. Why should retirees getting outrageously high pensions
    of $100,000 or more even get a COLA?

    Those in the private sector, if they are even
    lucky enough to have gotten a pension from the company they work for, very
    rarely are given even a single cola. So, a private sector person retiring from
    a company at age 55 with a pension of $50,000 will continue to get ONLY $50,000
    per year through his/her lifetime. If the person lives 40 years beyond
    retirement to age 95, than he/she will have to make do on that $50,000 per year
    every single year to age 95.

    Besides eliminating COLAS in Illinois, or capping them at no more than the
    SS COLA, another solution to the massive underfunding of Illinois government
    pensions is to only give COLAS up to pension amounts of $100,000. When $100,000
    is reached, then it is frozen at that amount until the death of the retiree. In addition
    nobody with a pension higher than $100,000 would receive any COLA.

    The biggest problem to we Illinois taxpayers regarding 3 percent COLA is the arithmetic
    of compounding. A government retiree (teacher, principal, etc) will double their pension
    In 24 years. So, a 55 year old retiree starting at $100,000 pension per year will be receiving
    Over $200,000 at age 79. And, a 55 year old retiree starting at $200,000 will be receiving
    $400,000 per year.

  8. Hush Mrs. Trumpion. And don’t you dare bring up that old rape case!

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