December 9, 2012
By: Chicago Tribune Editorial Board
In January 2011, Dick Ingram left the relative calm of the New Hampshire Retirement System for the Wild West of public pension challenges. He became executive director of Teachers’ Retirement System, Illinois’ biggest pension fund. Every day he wakes up concerned about 370,000 people: some 104,000 retirees or their beneficiaries, 166,000 educators now working, and 100,000 retirees not yet old enough to claim pension benefits.
Then there are all the others — the aspiring teachers still in college or younger, who someday will be what they cannot appreciate today: retirees expecting lifetime pensions from TRS.
Ingram traverses Illinois — he speaks Wednesday in Palatine, Thursday in Oak Lawn — explaining to educators the inconvenient truth of their retirement system: TRS risks insolvency, the inability to pay full benefits. The fund has the same fiduciary responsibility to a 25-year-old teacher that it has to an 85-year-old retiree. Yet Ingram cannot assure the young teacher of his or her pension payments. And the retiree? Early this year he stirred a terrible fury with his warning that pension benefits promised to teachers, starting with those already retired, may need to be cut … by the Legislature.
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$35In an oped in today’s Tribune, Ingram confronts Illinoisans with the urgent need to reform pensions. He’s a voluble man who, in this essay, writes with restraint about the stakes, and the potential victims. He also writes to those among us who are more obsessed with laying blame than with finding solutions: “All of these difficult conversations about pensions are far more about securing the future than balancing the present or understanding the past.”
Ingram doesn’t advocate specific fixes. Successive General Assemblies and governors have had that responsibility. Until now, all have been derelict. Lawmakers last week completed their fall veto session without passing pension reforms. Twenty-one House members did, though, offer a framework that still awaits a costs and benefits analysis. We hope the 21 ultimately will deliver what their caucus leaders and the current governor have not: reforms that become law. Maybe in January. Maybe not.
Ingram does, though, advocate acceptance of reality: At the moment, TRS is only 40.6 percent funded. Its unfunded obligations total $52 billion, more than half of Illinois’ nation-leading shortfall of $96 billion for all five state funds.
Educators, think on that. And on this:
Opinions differ on what will happen if and when state pension funds go insolvent. Does the legal obligation to pay benefits transfer from the funds to state government itself? Or does Illinois law explicitly limit payout responsibility to the funds — and thus protect taxpayers from that burden?
Ingram argues that it may not matter: Taxpayers will put $2.7 billion into TRS this fiscal year, and the fund will pay $4.5 billion to retirees. If state government tried to respond with pay-as-you-go pension benefits, where would lawmakers find the additional $1.8 billion?
He also tells teachers how TRS’ problems worsen because lawmakers don’t write pension statutes using standard actuarial math. Instead they’ve used “Illinois political science math”: Actuarial math calls for systems to be 100 percent funded; Illinois math aspires only to 90 percent funding. Actuarial math says lawmakers need to put $3.8 billion into TRS this year, not the $2.7 billion that Illinois math allows. Actuarial math demands recovery of unfunded amounts over a 30-year span; in 1995 lawmakers gave themselves the luxury of a 50-year recovery — then took pension holidays.
And this: Actuarial math doesn’t let funds claim savings that don’t yet exist; as recently as the 2010 law that lowered benefits for workers hired in 2011 and after, lawmakers boasted of future fund savings from the pensions of workers who haven’t even been hired.
“They pre-loaded the savings and backloaded the costs,” Ingram says. “When politicians say they’ve made full payments to the funds, I tell them, ‘You’ve done what the law requires. You haven’t done what the math requires.’”
We don’t see enough of this in Illinois: an employee speaking inconvenient truth to power. The General Assembly still includes many of the lawmakers who engineered this debacle with their votes to expand benefits they didn’t pay for, and to leave taxpayers even more indebted by borrowing money to put into the funds.
Union leaders don’t like Ingram’s candor, either. Many were complicit, by neglect or design, in decisions to short-change their members’ pension fund. The Illinois Federation of Teachers has insisted that Ingram, the messenger, resign over the message: TRS is in trouble. (Ingram didn’t take IFT’s advice.)
We keep waiting for rank-and-file union members to realize what rank-and-file legislators realize: Waiting for leaders to reform pensions may be a fool’s errand. Union leaders, like political leaders, haven’t delivered. That’s our frustration; if Ingram shares it, he keeps it to himself.
Instead he’s trying to focus all of us on a future that, unless we act, will be bleak. Turn to his oped and read his thoughts, headlined “Why wouldn’t we do that?”
Copyright © 2012 Chicago Tribune Company, LLC.
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