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* Unreal…
Billionaire Ken Griffin revealed in these pages that he pitched Pritzker with a plan to move public employees into the federal Social Security system (they currently don’t participate).
Teachers and university employees don’t participate in Social Security, but most other public employees do, including state employees. We covered this a couple weeks ago.
We’ll have more on this goofy editorial later today.
…Adding… Frank Manzo III in comments…
Problems with the Editorial:
1. Only certain public employees in Illinois don’t receive Social Security, as Rich mentioned.
2. The Editorial Board says the state’s five pension funds “have just 42.4% of the needed funds” but, as the Illinois Commission on Government Forecasting and Accountability notes, “a more realistic valuation of the true financial position of the State retirement systems would be based upon the market value of the assets” and that was at 46.5%. Not a huge difference, but still a more accurate number which an Editorial Board may be better off using.
https://cgfa.ilga.gov/Upload/1121%20SPECIAL%20PENSION%20BRIEFING.pdf3. It’s a little shortsighted. The Editorial acknowledges that pensions produced a 7.8% annualized gain from 2011 through 2021. Do they think the market was positive every single year in there? Because the stock market declined in calendar year 2018. It also fell very far in 2020, as we may remember. Then something crazy happened both times: it rebounded. The Editorial’s doom-and-gloom almost acts as if this year’s dip is here to stay forever. But the market will rebound. (If it doesn’t, we have far bigger problems than just public pensions.) And there is no real reason to assume that the long-term annualized rate of return from 2022-2032 will be dramatically lower than the 2011-2021 rate of 7.8%.
4. The Editorial doesn’t mention the $500 million in supplemental contributions that the State is making to pensions. Why? Maybe mention it as a good example of paying down debt and encourage more of it every year after.
5. The point that a “federal bailout” would be “unfair to the rest of the country”… First, there’s no serious proposal to do this as far as I am aware, so it is a canard. Second, our neighbor Kentucky (as an example) has a similar pension problem too, so it’s not like Illinois would be the only state to gain if something like that ever did happen. Third, smaller states like Virginia, Maryland, and Arizona get billions more in Department of Defense spending annually than Illinois. Illinois is the 5th largest economy but gets the 19th most military spending. Does the Tribune think that is “unfair” to its home state? Obviously, that’s just one example, but the “unfair” claim can be made about a lot (but not all) federal policies from which Illinois benefits far less.
https://www.defense.gov/News/Releases/Release/Article/2819472/dod-releases-report-on-defense-spending-by-state-in-fiscal-year-2020/Look, the median age of an Illinois resident is about 38 years old. That means the typical person living in the state was 10 years old when the Pension Ramp was passed in 1994. The majority of people living in the state (and a huge chunk of voters) were either not alive or not old enough to vote back then. We didn’t create the Ramp or the underfunded pensions, but we are the ones who are going to make full pension payments and solve this problem so it doesn’t carry on to our children.
posted by Rich Miller
Friday, Aug 26, 22 @ 9:43 am
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Couple quick facts;
It’s their “opinion”, an editorial, it’s not driven by facts.
Further?
No payments either to retirees or for the bonds have been missed.
Explain, Tier 2, explain the Edgar Ramp
Utter phonies, as Illinois’ bond rating has only increased since Pritzker has been governor.
Rauner, bond ratings decreased, by nearly every measure Illinois was worse off with Bruce Rauner.
Did I miss anything, or…
Comment by Oswego Willy Friday, Aug 26, 22 @ 9:54 am
You’re joking. The Trib Editorialists has never been much interested in facts, when it comes to Illinois politics. I’ve often wished they’d simply asked one of their own reporters to check their work before publishing.
Comment by walker Friday, Aug 26, 22 @ 9:57 am
As a retired state employee I’m owed a lot of Fica contributions.
At what point can you no longer be considered a newspaper?
Comment by Flyin' Elvis'-Utah Chapter Friday, Aug 26, 22 @ 9:58 am
Articles like this are the reason I don’t even get the Sunday Tribune any more. Hack “journalism” outweighs my need to look at the old-school travel and real estate sections.
Comment by Travel Guy Friday, Aug 26, 22 @ 9:58 am
Fact-checking is for whiny liberals who care about reality. /s
Comment by Techie Friday, Aug 26, 22 @ 10:00 am
Dios mio. The clown car at the Trib only gets worse.
Comment by Glengarry Friday, Aug 26, 22 @ 10:01 am
Apparently they don’t read this blog. It would seem fundamental to me that they should at least attempt to understand the facts before pontificating . . . .
Comment by Facts Matter Friday, Aug 26, 22 @ 10:02 am
Perhaps the editorial board can understand this critique.
The reviews are in. This is not a good editorial.
Comment by Michelle Flaherty Friday, Aug 26, 22 @ 10:03 am
What the Tribune continues to fail to grasp is that Ken Griffin had/has absolutely no idea how government functions. Whether it’s public sector unions or term limits. Griffin and Rauner’s suggested “reforms” were untenable because in many instances they were detached from reality, devoid of facts, and often in direct contradiction with our financial and legal obligations. And worse yet they were willing to shut down government over these faulty premises. We owe no deference to Griffin’s “opinions” on how government should be run simply because of his wealth. Perhaps it would be a better use of space if the Tribue Editorial Board could opine on the damage inflicted by ill-informed billionaires.
Comment by Pundent Friday, Aug 26, 22 @ 10:04 am
Tribute editorial board cites Floridian that thinks Illinois governors are term limited while funding ways to make term limits possible.
They are all an embarrassing lot.
Comment by Oswego Willy Friday, Aug 26, 22 @ 10:11 am
Ken’s gone. Which according to the Tribune editorial board means that everyone should be asking themselves “Where’s Ken?!? What is Ken saying!?!”
Comical stuff. How is this still called a newspaper.
Comment by Larry Bowa Jr. Friday, Aug 26, 22 @ 10:15 am
The Trib editorial board room door is guarded by a MAGA wizard proclaiming, facts shall not pass.
Comment by Norseman Friday, Aug 26, 22 @ 10:21 am
The people who wrote this also pronounce the “s” in Illinois … and think they are doing it right.
Comment by Michelle Flaherty Friday, Aug 26, 22 @ 10:22 am
They are only 50 years behind on the news that State Employees participate in Social Security.
There *might* be 1 or 2 still working under the old State only retirement plan, but they would have to be somewhere around age 70 and still working.
Comment by RNUG Friday, Aug 26, 22 @ 10:32 am
From the editorial link
=and that dollar amount is less than other credible estimates of what is really owed=
Uh, so why then are you using the a less credible report to make your argument?
Comment by H-W Friday, Aug 26, 22 @ 10:38 am
Lies are a feature not a bug.
Comment by The 5th Deputy Governor Friday, Aug 26, 22 @ 10:41 am
===Teachers and university employees don’t participate in Social Security, but most other public employees do…===
State police, local police and fire, are usually not in social security (unless they changed it)?
Comment by DuPage Friday, Aug 26, 22 @ 10:55 am
Facts? We don’t need no stinking facts. They just muddy up the message.
Comment by Bruce( no not him) Friday, Aug 26, 22 @ 11:08 am
Problems with the Editorial:
1. Only certain public employees in Illinois don’t receive Social Security, as Rich mentioned.
2. The Editorial Board says the state’s five pension funds “have just 42.4% of the needed funds” but, as the Illinois Commission on Government Forecasting and Accountability notes, “a more realistic valuation of the true financial position of the State retirement systems would be based upon the market value of the assets” and that was at 46.5%. Not a huge difference, but still a more accurate number which an Editorial Board may be better off using.
https://cgfa.ilga.gov/Upload/1121%20SPECIAL%20PENSION%20BRIEFING.pdf
3. It’s a little shortsighted. The Editorial acknowledges that pensions produced a 7.8% annualized gain from 2011 through 2021. Do they think the market was positive every single year in there? Because the stock market declined in calendar year 2018. It also fell very far in 2020, as we may remember. Then something crazy happened both times: it rebounded. The Editorial’s doom-and-gloom almost acts as if this year’s dip is here to stay forever. But the market will rebound. (If it doesn’t, we have far bigger problems than just public pensions.) And there is no real reason to assume that the long-term annualized rate of return from 2022-2032 will be dramatically lower than the 2011-2021 rate of 7.8%.
4. The Editorial doesn’t mention the $500 million in supplemental contributions that the State is making to pensions. Why? Maybe mention it as a good example of paying down debt and encourage more of it every year after.
5. The point that a “federal bailout” would be “unfair to the rest of the country”… First, there’s no serious proposal to do this as far as I am aware, so it is a canard. Second, our neighbor Kentucky (as an example) has a similar pension problem too, so it’s not like Illinois would be the only state to gain if something like that ever did happen. Third, smaller states like Virginia, Maryland, and Arizona get billions more in Department of Defense spending annually than Illinois. Illinois is the 5th largest economy but gets the 19th most military spending. Does the Tribune think that is “unfair” to its home state? Obviously, that’s just one example, but the “unfair” claim can be made about a lot (but not all) federal policies from which Illinois benefits far less.
https://www.defense.gov/News/Releases/Release/Article/2819472/dod-releases-report-on-defense-spending-by-state-in-fiscal-year-2020/
Look, the median age of an Illinois resident is about 38 years old. That means the typical person living in the state was 10 years old when the Pension Ramp was passed in 1994. The majority of people living in the state (and a huge chunk of voters) were either not alive or not old enough to vote back then. We didn’t create the Ramp or the underfunded pensions, but we are the ones who are going to make full pension payments and solve this problem so it doesn’t carry on to our children.
Comment by Frank Manzo IV Friday, Aug 26, 22 @ 11:13 am
I would be terribly remiss if I don’t acknowledge some of the delicious snark dished by - Michelle Flaherty -
The bar is always raised in snark with - Michelle Flaherty -
To the post,
The fictional character deals of the Floridian Ken Griffin is such an odd framing to a picture of factless words.
The audience, again, is two fold;
Old, angry, white readers whom have issues with unions.
The handful of uber-wealthy so and sos as they look for outlets to grieve, and it’s the access by both, needing each other, to a shrinking group of readers… the old, angry, white readers… toggling between Kass and this Board.
Once you realize who the audience is, and the goals…
Comment by Oswego Willy Friday, Aug 26, 22 @ 11:15 am
==he pitched Pritzker with a plan to move public employees into the federal Social Security system.==
The tribune appears to have forgotten how their pensions were fleeced by Sam Zell.
Comment by Jocko Friday, Aug 26, 22 @ 11:42 am
=The latest audit of the state’s five biggest pensions, conducted before this year’s market volatility, showed they have just 42.4% of the needed funds.=
I’m a novice at pension funding and funds.
But isn’t this 42% business about as relevant as me having all the money right now to pay off my mortgage? I owe it, but the bank isn’t taking it all right now because I don’t need all the money to start when I buy my house. Isn’t this what’s always being talked about with the liability? It the number “we” owe if everyone retired all at once and no one died or came off the rolls?
Comment by Cool Papa Bell Friday, Aug 26, 22 @ 11:58 am
Presumably more pensioners/future pensioners than usual passed away during the pandemic so for sad reasons the liability was likely reduced for that reason as well.
Comment by Big Dipper Friday, Aug 26, 22 @ 12:01 pm
Agree that the Trib needs to do it’s homework. I was a paperboy for the Trib and remained a supporter and will stay a subscriber, but their work on pensions is simply not very useful.
Crains carried a story on 8/ 25/02 that was entitled “Illinois Public Pension Fund Returns are Worse than they Look” that went into detail on how poorly fiduciaries like Treasurer Frerichs have done on managing the investments of these funds. The bottom line on the failed management of these funds is that taxpayers have to pay more and pensioners have less stable Pension Funds. I think it is a fair conclusion that politics over pensioners drives the investment decisions for Treasurer Frehlich and the other Trustees.
The Trib refers to the Pritzker consolidation idea that the Trib supported. A quick glance at the Police funds web site (see IPOPIF website under Transition Update at page 7) shows the Board cannot figure out performance with three vendors coming up with 3 different sets of numbers. Also the Board still has not figured out an actuarial target to set tax rates after 2 years of talking about it.
Local Police Boards were (a group)the 2nd best funded system in the state, but once the ball was passed to Team Pritzker they now cannot do simple tasks like figuring how they are doing to come up an actuarial number - - something local boards have been doing for at least 30 years.
The Trib needs to so some research before they start writing poorly researched editorials. Simple following a philosophical idea based on political spin by Mr.Griffin, Mr. Pritzker or Mr. Frerichs does not cut it. They owe their readers a more honest and professional researched approach to the pension fund problems in Illinois.
Comment by Back to the Future Friday, Aug 26, 22 @ 12:10 pm
=The latest audit of the state’s five biggest pensions, conducted before this year’s market volatility, showed they have just 42.4% of the needed funds.=
Care to guess the level of funds (as a percent) to obligations the pensions were at when the Illinois Constitution was passed? 41%. So over more than 50 years, the system has been fairly stable. Not outstanding, but stable.
No need for the constant chicken little stuff from the tribbies.
=that went into detail on how poorly fiduciaries like Treasurer Frerichs have done on managing the investments of these funds.=
And yet, TRS regularly outperforms the markets and other pension systems with their investment returns.
Comment by JS Mill Friday, Aug 26, 22 @ 12:42 pm
=Billionaire Ken Griffin revealed in these pages that he pitched Pritzker with a plan to move public employees into the federal Social Security system (they currently don’t participate).=
Of course this could only be done with new legislation and for new employees. But doubt if Griffin has even thought about this.
If this were done the state would actually have to pony up the 6.2% contribution. No IOU’s to the Feds.
Comment by notafraid Friday, Aug 26, 22 @ 1:35 pm
==But isn’t this 42% business about as relevant as me having all the money right now to pay off my mortgage?==
No, because comparing pensions to transferrable and depreciable assets isn’t an apt comparison.
==Care to guess the level of funds (as a percent) to obligations the pensions were at when the Illinois Constitution was passed? 41%.==
And what percentage of the state’s budget 50 years ago went to the pensions systems? How about the ratio of active to inactive participants? Were 1970’s Tier 1 benefits the same or less than today? Was the state growing or stagnating?
Thinking 40% in 1972 is the same as 42% in 2022 is an extremely naïve way to look at the debt.
Comment by City Zen Friday, Aug 26, 22 @ 1:41 pm
==== There *might* be 1 or 2 still working under the old State only retirement plan, but they would have to be somewhere around age 70 and still working====
Madigan retired so I would go with the 1 still working.
Comment by Been There Friday, Aug 26, 22 @ 2:12 pm
And yet, TRS regularly outperforms..”
According to the article in Crain’s yesterday, TRS was the fourth-worst performing pension funds of the funds Richard Ennis looked at. It reported - - “ an annualized return (8.3%) that was 3.2 percentage points lower than an indexed return”.
Of course if you set up easy to beat benchmarks you might look pretty good and be able to sell the idea that your fund is just doing great.
Another item from the study done by Richard Ennis is that TRS is the worst over the 10 year period covered by the study which included 50 large funds.
Taxpayers pay for the approach the TRS Trustees and staff take so I am not sure that that Board has an incentive to be better fiduciary folks.
You can take the Board’s and Pritzker’s spin or the comments of one of the leading professionals in investment consulting.
Perhaps reading the article might be a good place to start before reflecting on TRS performance results.
Comment by Back to the Future Friday, Aug 26, 22 @ 2:39 pm
=== Of course if you set up easy to beat benchmarks you might look pretty good and be able to sell the idea that your fund is just doing great.===
Are you complaining or arguing about… “goal posts”?
That’s very Tribune Editorial Board-ish
Comment by Oswego Willy Friday, Aug 26, 22 @ 3:13 pm
I am talking about “gaming”the system.
We will never solve our collective pension issues by doing such a poor job in investing. Investment returns are a big part of funding our pension systems. For example a shortfall on market returns of 3.23% on a hundred million dollars as reported in Crains yesterday translates into a shortfall of 3.23 million dollars. The TRS system is about 66 Billion Dollars. This shortfall that trustees and staff tolerate is huge.
Failing to hold Trustees like State Treasurer Frerichs responsible is only adding to the funding problem. Having news outlets like the Trib write an article on the effects of political ideology on the pension problems without examining the complete issue was not useful.
Comment by Back to the Future Friday, Aug 26, 22 @ 3:42 pm
=== I am talking about “gaming”the system.===
Goal posts.
I can read. Thanks.
=== === Of course if you set up easy to beat benchmarks you might look pretty good and be able to sell the idea that your fund is just doing great.===
Are you complaining or arguing about… “goal posts”?
That’s very Tribune Editorial Board-ish===
Your complaining at your crux about goal posts.
You say so…
===I am talking about “gaming”the system.===
Vote accordingly if you feel it’s Frerichs’ fault as to where goal posts sit.
Comment by Oswego Willy Friday, Aug 26, 22 @ 3:49 pm
Also,
Thank YOU, Frank Manzo III
Restaurant quality.
Comment by Oswego Willy Friday, Aug 26, 22 @ 3:50 pm