How To Reduce Illinois’ Unfunded Pensions and Prevent Further Fiscal Gaps
The unfunded portion of Illinois pension funds now stands $70 billion. That total can and should be substantially reduced without raising the state income tax, according to Jim Tobin, President of National Taxpayers United of Illinois (NTUI). In addition to the $11.5 billion the state will receive over the next 20 months from the federal government’s ‘stimulus’ package, unfunded pension problems for new hires can be avoided.
“Approximately thirty-five per cent of state and local employee payroll is required to be contributed to retiree health care and pensions. Of that 35%, government employees contribute 8%, the employer (taxpayers) contributes 27% broken down as follow: 9% employer contribution, 15% for the unfunded pension liability, and 3% taxpayers cost for retiring the $10 billion in bonds issued for the pensions in 2004. So taxpayers are paying 330% more for state employees’ retirement than the employees themselves are paying.”
“To partially offset this unfair taxpayer burden, the government employee contribution for pension should be increased from 8% to 13%. This will reduce the $70 billion unfunded portion by $20 billion without raising the state income tax, bringing unfunded portion down to $50 billion.”
“Additionally, if all new state hires are required to enter Social Security and save for their retirement with their own contributions to 401(k) programs, these new hires will not become part of the unfunded pension or unfunded health care problem.”
“Any increase in the state income tax would result in taxpayer dollars going to the greedy, not the needy. It’s time to reform this corrupt system. Government employees should provide for their own retirement, just as workers in the private sector do.”