Don't reform pensions on the backs of pensioners

Opinion: Letters To The Editor

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On June 19, our state legislature reconvened in emergency session to deal with what everyone in the media calls a "pension crisis." It is as if this is the one part of the entire state budget that is causing all of Illinois' financial difficulties. It's not that simple! What we actually have is an overall revenue problem. Illinois just does not take in enough money to operate a well-functioning government.

My fear is that the multimillionaires from the "Commercial Club of Chicago" and think-tanks like them have managed to dupe many legislators and much of the media into thinking that cutting pensions — including my pension, for I am a retired state worker — is the most up-to-date thinking on the subject. Taking money away from the lower classes, for that is where we fit, is not the solution. If cuts are made to pensions, we will still have a huge budget crisis next year and for many years to come.

Taking money away from the lower classes only leads to greater poverty. Those of us in the lower classes spend most of our income in the local economy and thus revitalize it. The very rich will not do that. Many of them now park their money in the Cayman Islands, avoid taxes, and do not spend or invest it here.

I know that those who no longer have pensions, but only 401Ks which have lost a lot of money, may be resentful of those of us who do have pensions. Such an attitude is self-defeating. Less money to pensioners only leads to even greater contractions in our economy.

Here is where we stand as I write this. An alliance of unions representing public employees and pensioners has already made significant concessions to reach an agreement with Senate President John Cullerton, and that has already been passed by the Senate. But House Speaker Mike Madigan has so far refused to allow it to be put to a vote in the House of Representatives.

As a pensioner, I would be grateful to anyone who would call his/her state representative. Ask him or her to ask Mike Madigan to bring the Cullerton Bill to a vote in the House.

Patrick Dooley

Oak Park

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Posted: June 26th, 2013 9:47 PM

I too am lower class from our Cayman Isle yachtsmen. I supect many of our illinois brethren are. Thanks for seeing that. So how are you and your organization going to collaborate with the people with money so all us lower classes can spend our money locally? PS. Your whole letter sounded as hokey and flim flam as Mr. Haney.

Saw this coming  

Posted: June 26th, 2013 4:51 PM

Well said JMG. When I learned that the OP teachers unions helped themselves to such obnoxious preretirement pension-inflation "salary bumps", I lost alot of respect for the teaching profession and all sympathy for govt pensioners. The sense of entitlement to such institutionalized fraud is mindblowing. If the pension trough is running dry, its partly because preceding retirees did their best to gobble up more than their fair share.


Posted: June 26th, 2013 4:41 PM

IMRF is primarily reliant on investment returns. Whether or not that will continue to remain solidly funded for future generations remains to be seen. And taxpayers contribute 2x the amount than an IMRF pensioner contributes himself. That by far exceeds anything in the private sector (that's including Employer SS match and any 401k match). And IMFR math is biased as participant withdrawals will eventually exceed contributions. Unless it's propped up by investment gains. If not, we are overtaxed.


Posted: June 26th, 2013 4:22 PM

Pension spiking. When OP gave their 58 yo teachers 40% increases the last 2 years, where do you suppose the additional pension money is to come from? They made 85k and we boosted it to 130k and we expect small IL towns to pay? OP didn't add additional money to account for the difference. Heck our 2006 retirement class has most likely received more in payout than either side put in and they are only turning 65.


Posted: June 26th, 2013 3:56 PM

NO, the system was not designed to implode. Look at the IMRF. Participating government bodies were never allowed to take pension "holidays" or even short the payment in any year. Guess what? IMRF is solidly funded. The state systems would be in that enviable position IF the payments had been made each year, as legally required, but frequently ignored. Perhaps all the politicians who violated the law willfully should join recent governors in jail.


Posted: June 26th, 2013 2:29 PM

The author has a history of pro-govt union, pro-pension WJ op/eds that basically state the same thing...keep the <failing> status quo. The very pensions he relies on are heavily vested in private equity. So he expects guaranteed returns (required to keep the system afloat) when his investment is in something that is not guaranteed at all. Home values, timing the market...these arguments are moot. The pension system, as it exists today, in inherently designed to implode.

Mr. Middle  

Posted: June 26th, 2013 2:04 PM

Its complicated. Surely no one would suggest to divest at that age but some cashing in and moving to fixed income would be wise. At the same time from a period of 8/08 to 5/09 any new money should have been held. From that point on an investment of 60/40 would be my suggested path for someone of that age given that set of circumstances. From 1982 to now I have average a 10% return, the S&P 9.8%. But this is about state workers that where counting on 13% for as far as the eye could see.


Posted: June 26th, 2013 1:46 PM

So as a wise financial planner, you think it was a good idea for a 45 year old to move most of her $ out of the stock market and into t-bills in 2008?

Mr. Middle  

Posted: June 26th, 2013 1:32 PM

A wise financial planer would always diversify and an investment rule that has been around forever has been take 100 and minus your age. That's the % of your portfolio that should be in stocks. Also, in 2009-10 almost all planers from UBS to Amerprise advised a portfolio mix of 25/75 stocks to fixed income. However use math and now look at 50% of your holdings doing 1% not 6%. You need to adjust and maybe take more risk or figure out how to do with less. I ask State workers to do the same.


Posted: June 26th, 2013 1:21 PM

If you were advising 45 year olds to get their money out of the stock market and into t-bills and 1% CDs as a "wise move", you are probably the one with a comprehension problem. I don't think you're in a good position to be advising others on retirement planning.

Mr. Middle  

Posted: June 26th, 2013 12:55 PM

@Question...You are having a little comprehension problem. In that same point I made reference that the Stock Market will do well over time. We are talking about people who are retired now or soon who have much less money and need to adjust. That should be the same for everyone. What the author is saying is don't touch mine because I am a State worker and I help the economy. The brunt of this is felt by everyone but mostly people who are retired or about to be.


Posted: June 26th, 2013 12:06 PM

"After 2008 anyone over 45 moved most of their $ to t-bills at 1% as the wise move. " -- Mr. Middle, June 26, 2013 9:43 PM.

Mr. Middle  

Posted: June 26th, 2013 11:58 AM

@Question...the reference is not to someone 45-58 the reference is to the retired or hopefully retired person like the author. If you are now 62-75 you have been forced into some difficult decisions. Its time for State workers to do the same. The World has changed and we ALL must adjust.


Posted: June 26th, 2013 11:46 AM

And I am saying that not all avenues have investment have suffered. Home values in Oak Park (with the notable exception of 2006-2011, and Oak Park was not unique) have increased, 401Ks have increased, IRAs have increased, investments in tech stocks have definitely increased. We are well over 45 and we don't have all our investments in t-bills and CDs. We all make decisions and some of them are better than others. Don't extrapolate your own perceived suffering to the "whole economy".

Mr. Middle  

Posted: June 26th, 2013 11:36 AM

@Question...then you would concede that counting on a plan that never worked according to actuarial science and hoping for pension returns to average 13% (that's what Blago said) is exactly the same as a pensioner having to adjust. I am not suggesting that my home was a large part of my plan. What I am saying is that all avenues of investment have suffered creating a perfect storm.


Posted: June 26th, 2013 11:27 AM

No, a loss has not occurred until the loss has occurred. Mentally, the boom money you were perhaps counting on was not there, and mentally, you may need to adjust. But counting on a housing boom to be your "responsible investing plan" was not a responsible investing plan, as you stated in your original (otherwise valid) point about pensioners.


Posted: June 26th, 2013 11:23 AM

Also, there is not a single house in Oak Park that is worse less now than it was in 2000, per your example. Unless it burned down or has been infested with mold.


Posted: June 26th, 2013 11:23 AM

@Question-No one blames the pensioners directly. But they have yet to solve the problem of a system where withdrawals exceed contributions. No such system can survive. In fact, the current system is propped up only by current contributors, most of whom will most likely not see the returns afforded to current retirees. Guess what they call a system where original investors (retirees) are paid out from new investors (current employees). A Ponzi scheme!

Mr. Middle  

Posted: June 26th, 2013 11:22 AM

@Question...You missed the entire point. A loss has occurred and the home owner must adjust. The same set of circumstances has besieged the pensioner and they do not want to take similar losses. Its a question of simple fairness. Should the ave citizen pay more, lose more and deal with it so the pensioner can keep theirs? The Cullerton plan says yes because you vote for me. The Madigan plan says no we all must share so the State can get back to paying for the services we all need.


Posted: June 26th, 2013 11:18 AM

$540K - $145K equals $395K equity. That's not "wiped out". I get it, people buy houses here, send their kids to school, get sentimentally attached to their house and think the price will just keep going up and up, but then the bubble burst and they got stuck and they resent paying taxes for younger families with kids. good news is that houses are selling again, so you can take your 400K equity and move to florida or something now.

Mr. Middle  

Posted: June 26th, 2013 11:02 AM

@Question...So someone who buys a house in 1988 at say $145K and in 2000 it was worth $675K and in now its worth $540K does not have the $135K. Nothing can be done but deal with it. Its the pensioner who is asking to be "whole" given the same metrics. However there is one more cruelty to the home-owner. in 25 yrs taxes have gone from $2150 to $16,521. I am only asking that pensioners realize that they DO have it better than most and accept realities. Madigan's plan is fair.


Posted: June 26th, 2013 10:53 AM

Unless you bought your house at the height of the housing boom-- which I am assuming you did not since you are retirement age-- your home value should have withstood the recent 20% drop in value. Unless you cashed out some of your equity during the boom, which many people did, but which no one would call "investing responsibly". I'm not saying there isn't a pension problem, there is, but please don't blame public employees because you maybe made choices that didn't work out for you.


Posted: June 26th, 2013 10:10 AM

Open question to public employee union members - When it's YOUR money, how do you choose to spend it? Do you drive anything besides a Ford/GM car? If so, it was probably built by non-union labor. Do you shop at Walmart? Not alot of union-made products there. I could go on, but the point is that when it's YOUR money, what choice do you make? But when avg taxpayer asks for the same choice in their public services, everyone says DO NOT TOUCH. I merely want the same choices that you are afforded.

Mr. Middle  

Posted: June 26th, 2013 9:53 AM

@Question....just to put more meat on the bone for you. Someone who retired in the last 10 years or the next 5 have born the brunt. Once you reach 58 you need to start moving your $ into safer investments with less return. Someone 65 did not have their $ in the stock market over the last 4 years. Also with extremely low CD rates have no way of regrouping. Also, a typical OPRF home saw a 20% drop in value. Sell today to avoid property taxes and you lose. So you keep working more.


Posted: June 26th, 2013 9:49 AM

The math never lies. Pension contributions (individual + state match) + investment gains < withdrawals. This is true for EVERY avg pension. Pensioners retort, in not so many words, that they are entitled to withdraw more than what was put in on their personal behalf because that was promised to them decades ago. Unfortunately, that math equation has not changed. The fact that it was ignored is not the taxpayers' fault. Early retirement, free health, pension...too good to be true? Looks that way.

Mr. Middle  

Posted: June 26th, 2013 9:43 AM

@Question. Your point is way too simple. If you are in your 70s then most of your equity was wiped out in 2002 and 2008 just as you would transfer money to safer t-bills that have no return. That's the best comparison to the author. If you are in your 50s to early 60s you lost huge in your home's equity. The stock market comparison only really works over a 30-40 year time period. After 2008 anyone over 45 moved most of their $ to t-bills at 1% as the wise move.


Posted: June 26th, 2013 9:29 AM

What exactly does it mean to "put away money responsibly"? If to you that meant, putting it in an IRA or 401(k), then "this economy" shouldn't be preventing your retirement. The stock market is at a historic high, as are most people's retirement investments. Yes, people lost money on their 401ks if they tried to retire during the waning Bush years, but most people have made that back and more.

Timothy Ryan from Oak Park  

Posted: June 26th, 2013 8:22 AM

Mr Middle is correct on all counts. The pension issue lays at the feet of Mike Madigan. He & his ilk lied for decades to state workers in exchange for power. The result is, unfortunately, that the pensioners like Mr Dooley will have to bear the brunt of their own choices. Actions have consequences, Mr Dooley, & your actions & those of your union bosses have put you in this spot. You'll not be able to shift blame to those who correctly point our the cause. Sorry...

Mr. Middle  

Posted: June 26th, 2013 6:57 AM

No Patrick your problem is the people you have probably supported for election. The lied to you for what...VOTES! You think its a funding issue? Then explain Toni Preckwinkle. Reduced taxes, reduce expenditures and balanced a budget. How? Great management and a focus on helping citizens instead of Unions. Read the stories about Cook's Health system and the rampant waste. Next week for the 2nd year in a row you will get your tax bill on time. Good Gov is possible with current Revenue

Mr. Middle  

Posted: June 26th, 2013 6:50 AM

It is so small minded to think that millionaires and the Cayman Island are the problems with Illinois. How about the local neighborhood day-care center that the State has not paid in 190 days? Your neighbor the Dentist who repairs dentures that waits 200 days to be paid? How about Blago and Madigan who promised an endless honey-pot of pensions and benefits that ever actuary said would not work. They fired those people and disregarded the obvious. The Pension crisis is 40 years old.

Mr. Middle  

Posted: June 26th, 2013 6:42 AM

@Patrick...are we all in this together? There are many of us who put away money for retirement in a responsible manner and now have to put off retirement and hope for the best. This horrible economy over the last 10 years have wiped many out. Our property taxes have doubled. Our income taxes have doubled and our jobs have stopped paying us more. Also our portion of benefits have gone up too. And it is self-defeating? To whom? You? This is not about millionaires its about your neighbors.

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