The need to reverse outrageous public pensions

Rauner budget hits the nail on the head when it comes to cracking down on public taxpayer funded pension abuse but it doesn’t go far enough. No one should be paid more than $100,000 for a public pension that is paid for by the taxpayers. It’s just wrong.

By Ray Hanania

RayHananiaColumnBoxGovernor Bruce Rauner unveiled a budget that seems to anger everyone, which means he’s doing the right thing because there is no way to cut $2 billion from the state’s bloated spending without making drastic cuts and forcing agencies to find ways to live within reasonable budgets the public can afford to pay.

The most egregious area of wasteful public spending is the outrageous and totally unjustified pensions that governments have bestowed to employees in in public education, healthcare and government.

I don’t care that the highest paid public pensioner is Tapas Das Gupta is a brilliant doctor. He doesn’t deserve a $450,000 a year pension paid for by taxpayers.

Gupta is just the tip of an iceberg of fiscal irresponsibility driven by greed, favoritism and clout. How else do you explain these outrageous public taxpayer paid totals?

More than 10,000 people today earn more than $100,000 a year in public pensions. Most are employed by our schools but many worked for public hospitals and governments.

Defenders argue pension recipients paid into their pensions during the sometimes brief time they worked at their jobs. But that is a distortion. Gupta will receive more than $10 million during the life of his pension. Did he even contribute even half of that? No, not according to public records, Gupta paid 9 percent of what he is expected to receive in payouts. In fact, most recipients will have “contributed” (from government wages) an average of under 8 percent of what they will reap!

Anyone who earns more than $300,000 doesn’t deserve a public pension. They should invest their own money in their own 401 K. But that’s exactly the reason why these folks didn’t do that because that can be risky. Under the state system, the taxpayers are required to keep paying at the outrageously high rate no matter what happens in the economy.

Governor Rauner suggests the pension system be changed moving forward, meaning people like Gupta and the hundreds of others who are being paid pensions greater than $100,000 a year don’t have to worry.

But that’s wrong. Pension reform should be retroactive. There is no way anyone should be paid more than $100,000 a year in a pension from a government job, regardless of what you did and what you were paid, or more than double what they paid into the system.

Anyone who receives a public pension greater than $100,000 should be banned from working in another public job. If they work in private business, they shouldn’t be allowed to collect their pension.

Public service pensions should not be a get-rich scheme to guarantee a luxury after-life.

Rauner should crack down. He already knows people will be angry with him, but who cares? Does her worry about the 10,000 pensioners or the 13 million residents of Illinois? Do what’s right!

Public pensions should be capped at $100,000. And, no one should collect a pension until they reach the age of 70.

That should apply to those who now collect outrageous and unjustified pensions. If they don’t like it, let government give them a “buy out” and return the sums they invested.

Finally, we need real time data published and available to the public on ALL pensions so the public can see the truth about how some of our public officials have profited off of the taxpayers’ backs. That’s not the case.

(Ray Hanania is an award winning former Chicago City Hall reporter. Reach him at [email protected])

NOTE: Here’s the 2013 pension list:

Ray Hanania

Ray Hanania

Blogger, Columnist at Illinois News Network Online
Ray Hanania is senior blogger for the Illinois News Network news site. He is an award winning former Chicago City Hall political reporter and columnist who covered the beat from 1976 through 1992 (From Mayor Daley to Mayor Daley). And, Hanania is a stubborn and loud critic of the biased mainstream American news media.

Hanania Chicago political beats and Chicago City Hall at the Daily Southtown Newspapers (1976-1985) and the Chicago Sun-Times (1985-1992). He published the The Villager Community Newspapers covering 12 Southwest suburban regions (1993-1997). Hanania also hosted live political news radio talkshows on WLS AM (1980 - 1991), and also on WBBM FM, WLUP FM, WSBC AM in Chicago, and WNZK AM in Detroit.

Hanania is the recipient of four (4) Chicago Headline Club “Peter Lisagor Awards” for Column writing. In November 2006, he was named “Best Ethnic American Columnist” by the New American Media;In 2009, he received the prestigious Sigma Delta Chi Award for Writing from the Society of Professional Journalists. Hanania has also received two (2) Chicago Stick-o-Type awards from the Chicago Newspaper Guild, and in 1990 was nominated by the Chicago Sun-Times for a Pulitzer Prize for his four-part series on the Palestinian Intifada.

Hanania’s writings have been published in newspapers around the world. He currently is syndicated through Creators Syndicate. He has written for the Jerusalem Post, YNetNews.com, Newsday in New York, the Orlando Sentinel, the Houston Chronicle, The Daily Star of Lebanon, the News of the World in London, the Daily Yomimuri in Tokyo, Chicago Magazine, the Arlington Heights Daily Herald, The Saudi Gazette, the Arab News in Jeddah, and Aramco Magazine.

Hanania's Chicagoland columns are published in the Southwest News-Herald, the Des Plaines Valley News, the Regional News and the Palos Reporter newspapers.

He is President/CEO of Urban Strategies Group media and public affairs consulting which has clients in Illinois, Florida, Michigan and Washington D.C.

His personal website is www.TheMediaOasis.com. Email him at: [email protected]
Ray Hanania

Latest posts by Ray Hanania (see all)

  • http://www.TheArabDailyNews.com/ Ray Hanania

    A Reader Writes:

    Thank you for for your common sense article “Lets retire the outrageous pension plan”.

    Perhaps you could also educate the Editor.

    Thanks, PA

  • Andrew Szakmary

    I am a Finance professor, and I have just one question to ask you: do you have any understanding of basic time value of money concepts, and how compounding works over long periods of time? If you did you would not post this drivel. Any Walmart employee who diligently contributed 6% of salary each year to a 401k plan over a 35 year career, with a 6% company match (which is what Walmart actually offers), and invested in a diversified 70% stock 30% bond portfolio (like the Illinois retirement systems do) would similarly have a ratio of total employee contributions to ending 401k balance that is around 8%, or perhaps even less. I would be happy to send you a spreadsheet that demonstrates this. Such is the magic of compounding, not adjusting for inflation and living in a time when stock and bond returns have been quite favorable to investors.

    • http://www.IllinoisNewsNetwork.com/ Ray Hanania

      Thanks for making my point Andrew. I agree. Pensioners should be forced to take their money and invest it themselves, especially given how easy you made it sound to profit. Their 5-8 percent of their investments is more more than enough for them to assume the risks of investing and creating their own pensions instead of requiring taxpayers to pay for these outrageous, excessive and unconscionable pension amounts which are disgraceful and unwarranted and unjustified. And, by the way, I doubt you are a Finance professor, mr anonymous : )

  • Flip Side

    Changes should be made to the system - that much I think all can agree upon. We have a constitution in Illinois Mr. Hanania and speakers at the constitutional convention were very clear about the intent behind the pension protection clause. If you sign on for a job and you are promised deferred compensation (pension) when you sign up, as long as you put your years of service and pay your statutory contributions, that it what you will get. Labor groups sued in the mid 90’s because they could see that the State was going on pension holidays and not contributing to a system which would become vastly underfunded even though they were aware or kicking the can down the road knowing that the day of reckoning would come. They tried to do the responsible thing and force payments to be made to save the system in the future. They lost and the legislators did nothing about it.

    The members of the public, are always the first ones to scream at the police when they they take a life in the line of duty or use force to make an arrest, particularly of people of color. They are the first to scream about the constitutional rights of the criminal who wasn’t listening to the officer or wouldn’t put down his firearm or show his hands. Now we surely want our police officers to comply and enforce the constitution of the US and Illinois, but your argument says that the irresponsible leaders of Illinois who didn’t contribute what they should to the pensions of these noble public servants aren’t entitled to the same constitutional protections as the dirtbag criminals for economic promises made when they started their career. Why should they protect us if we won’t protect them?

    In 1995, the Chicago Teacher Pension fund was nearly 100% funded. The City of Chicago subsequently failed to contribute to that fund for ten years (2005) while collecting over 2 Billion in pension tax monies. Why didn’t that 2 billion go into the fund where it was collected? Logically the fund dropped to only 58% funded in a short time. In 2010, the City asked for deferred payments to underfund by $400 million a year until 2013. It doesn’t take a rocket scientist or an actuary to realize those reckless actions will decimate a fund because most income in a pension fund is realized from investment gains rather than contributions. Why should the teachers be asked to take less than they were promised? They made their required contributions and kept their promise.

    The system is broken and the only way to ethically, legally and constitutionally fix it, is to pay every member what they are owed. Then we need to form a new system - whether it is a 100% defined contribution system or some hybrid variant. New workers going forward will know what their system will be and they can choose to accept it or go to work in the private sector. There are already two tiers of pension systems in Illinois, we now need a third. This will stabilize the system going forward so we can focus on the existing unfunded liabilities.

    The State is intending on making a “Police Powers” argument before the Illinois Supreme Court next week. It is going to fail for the simple reason that there is no true emergency. If the State was really that short on revenue, the General Assembly shouldn’t have let the State income tax rate drop from 5% to 3.75% on January 1st. They absolutely had the ability and the support of Governor Quinn to make the tax hike permanent in the veto session after the last election. They didn’t and now they can’t make the argument because they again irresponsibly kicked the can down the road again and put it squarely in the lap of Governor Rauner.

    The legislative changes in the 90s said that the pension systems needed to be 90% funded by 2045. That is 30 years away and we still have time but no one likes the only true solution. A 1% income tax increase generated nearly $4 billion in revenue for the State. By earmarking a special 1% income tax solely to fund the pensions systems $110-120 billion in unfunded liabilities, this tax could generate in excess of the $120 billion needed to fund the systems over the 30 years remaining on the amortization period and bring all pensions systems to 100% funding levels well before 2045. In doing so, the new workers would likely not be receiving pensions so there would be no further funding required and we would be keeping our word to existing pensioners, current workers and the workers who have yet to enter the system. The 1% tax would still leave our income tax level at a level lower than it was on December 31, 2014 and the problem would be solved.

    So why does no one discuss this simple solution to what everyone says is such a complex problem? The simple answer is that none of the legislators want to admit the sins of the past and no one has the political courage to admit the only way to uphold our constitution is to keep our word and pay what we are obligated. The truth is, the State is not going bankrupt, a state can’t go bankrupt. What we are is mismanaging to the point where the debts are going to cloud the ability of our great State to handle the business of the day without significant pain to everyone here.

    • http://www.IllinoisNewsNetwork.com/ Ray Hanania

      No taxpayer funded pension, public pension, should be greater than $100,000, triple the average income of an average taxpayer. Of course we scream because the system takes advantage of the system and grants excessive pension increases and payments to public servants. This shouldn’t be a Lottery System with big payoffs. The pension should be enough to live on based on the work you produced not the clout or cronyism that drove these pension amounts to such outrageous and obscene levels. That you think a $450,000 pension is a good thing is troubling to your argument.

  • http://www.IllinoisNewsNetwork.com/ Ray Hanania

    A Reader Writes:

    Thank you for for your common sense article “Lets retire the outrageous pension plan”.Perhaps you could also educate the Editor.Thanks, PA