patrick.net

socal2 says

80% of the US workers who rely on their 401K's and Social Security for retirement.

You could have committed decades of your life to a government job if you thought it was such a sweet deal.

WookieMan says

And yes, the total is 9% of their pay.

I looked this up, that's the total teacher contribution, but the district "picks up" seven percent of that. But the district then must contribute at least another 10% and the state probably contributes something as well. So the total amount that's supposed to be put aside for the employer is something along the lines of 20 to 25%

With social security, employees pay 6.2 % of their salary and employers match 6.2%, and then of course the government picks up the rest thorough bond issues or whatever is necessary when it comes time to pay all that dissability and retirement income.

So if the total contributed (or should be contributed is say 20 to 25%) for a teacher pension, verses 12.4 % for social security, then the actual luxurious cost of teacher pensions is in the neighborhood of 8 to 12%. But probably less, becasue if they didn't get pensions and did get social security, surely they would probably do some level of "matching" contributions even if small for 401ks. So 10% of salary is a reasonable assessment of the cost. (compared to the social security route)

Seems way worse, becasue government is behind on funding it. AS for that pick up of the 7%. I don't know what's up with that. That's bizarre.

IT is a mess though. https://www.huffingtonpost.com/entry/chicago-teachers-pension-fund-nearly-200-in-payouts_us_593b13f5e4b0b65670e56a4f

Interesting explanation of how they go where they are. Teachers are going to have to up their contributions a lot, and the state and the district too. Maybe you're right that it wont be enough.

marcus says

But the district then must contribute at least another 10% and the state probably contributes something as well. So the total amount that's supposed to be put aside for the employer is something along the lines of 20 to 25%

I'm going to come across as a dick, but I have zero idea what you're talking about here. I believe you're in CA, so forgive me if I'm acting like an ass.

For a CPS teacher, 9% goes towards the pension fund, total. Of that 9%, 2% is paid from the teachers salary and then the remaining 7% is paid by the tax payer. So 9% total of their salary when added up. Either way, a teacher making $100k, is only putting in $9k into the pension regardless of who is actually paying whatever portion. Is that sustainable? My answer is no.

Let's then account for the fact that CPS teachers are only putting in 2% of their income into the pension. I keep throwing out $100k, but the reality is, over a 25-30 year career the average is probably, what, $70k? We're talking $1,400/yr contributions or $35k over their teaching careers "invested" in the pension. A CPS teacher, even with the earliest retirement, is going to get $50k/yr pension. Over their career, most CPS teacher barely pay in enough to cover one year of their own annual pension at retirement. I get the money is invested and grows, but you have to think about this. CPS teachers literally have not invested in their retirement and get inflated wages to do a shit job in Chicago. There's not much of a dispute on this on the ground here.

Going back to the SS point of view. Do you realize what SS is? Do you realize what most people will get from it? If you don't own your home outright AND live in a high property tax state, SS isn't a living wage. Yet we HAVE to pay into it. SS is shit compared the what a CPS teacher here in IL will get when retired. They didn't even have to put in half of what people collecting SS did yet they'll collect triple the benefits of a SS person.

This is why IL and many other states are in (or will be in) shit shape.

marcus says

Interesting explanation of how they go where they are. Teachers are going to have to up their contributions a lot, and the state and the district too. Maybe you're right that it wont be enough.

I was posting my comment below while you posted this.

This isn't a I told you so, but admittedly it kind of is. I have no problem with teachers (my mom being one), cops and the like. IL and specifically Chicago is uniquely fucked up. You found the link you posted. Check out the recent ruling on the Chicago Park District. (FUCK the Chicaog Tribune - Easiest link to get) http://www.chicagotribune.com/news/local/politics/ct-met-park-district-pension-court-ruling-20180402-story.html

IL is a dumpster fire. Not sure the fire department can put it out, either way their pension debt is doomed. We're the definition of waste and corruption. This is why I have an enormous amount of cynicism for ANY type of government. IL has scarred me for life.

WookieMan says

Let's then account for the fact that CPS teachers are only putting in 2% of their income into the pension

Well if you're trying to see the cost of what they get on the other end. It's 9% of the teachers Salary. Plus I have to assume some other contribution by the district and an additional contribution from the State. There things together make up what is supposed to be put into the fund per year. Not just the 2% (yes, the teachers essentially get a bonus equal to 7% of their salary that goes toards their contribution. That "give back." You've got to know that there are actuaries, that put together the planned contributions (NOT JUST THE TEACHER's) that will fund the plans - but yes with overly optimistic assumptions, and probably errors about the percentage of people that are retired versus contributing.

Yes, some teachers and Union leaders really are stupid. I'm not going to argue with you on that. THe crazy thing is that they fuck themselves over by negotiating deals that won't be sufficiently funded. It's almost as if the union is run by some 70 year old guy that's only worried about the next 10 to 15 years.

What I was doing was comparing the cost of pensions in general to what the situation would be without the pension, where employee pays 6.2%, employer pays 6.2% in to SS and then presumably some level of matching 401K or IRA type investments.

It's the difference in cost between the govt pensions versus a social security plus matching 401k which is the cost to the public of govt worker pensions. But it gets exacerbated by under funding, for example when Illinois took a holiday from contributing it's obligations to the pension funds, I'm quite sure under republican governance. They're probably laughing their asses off about it now. "haha ha, fuck those teachers !"

marcus says

But it gets exacerbated by under funding, for example when Illinois took a holiday from contributing it's obligations to the pension funds, I'm quite sure under republican governance.

This is true. But what was a Republican governor supposed to do at the time? What Rauner just did with the budget for 3 years digging our hole even deeper? I did vote for Rauner and he's been a disaster. Problem is it would be a disaster either way I voted last time or the next time around this year. IL is a dumpster fire that can't be put out.

The problem is EVERYONE in this state has to take some sort of a bath in this mess. You can't just legislate a graduated income tax and magically the problem goes away. We have income tax reciprocity with Wisconsin for Chicago area residents (or anyone in IL, but obviously Chicago due to location). So income earned in IL, if you moved to that state, is taxed at that states rates (and goes to them), not IL (This include KY, MI & IA as well). The exodus "dam" so to say will break if a graduated tax is implemented. Downtown workers can move to Wisconsin in a heartbeat and have a commute similar to Aurora, IL to downtown Chicago that thousands already make. So it's not a big deal. Any YES, WI income taxes are higher now. But that won't be the case for long. Plus property taxes are marginally to significantly cheaper in WI. Plus housing would initially be cheaper for the first wave.

For the sake of the rest of the nation, every sector in IL is going to HAVE to make sacrifices. Otherwise we end up in some form of state bankruptcy. I know a state technically can't do this, but once taxes are raised to what they should be to cover the current liabilities, along with the necessary cuts, people won't want to live here anymore and people will flood out of the state (as is already happening). My opinion, this is going to happen no matter what, as leadership here is too soft to take their lumps on the necessary measures to correct this. They're rich anyway, so can just cut and run.

And like I said, I'm okay paying some more in taxes if it rights the ship. What government entity has ever cut though? I'm not talking about cuts when revenues are down, because they have to cut. I know it's happened, so I'm being a bit hyperbolic, but REAL cuts are the exception, not the norm. And in IL, the necessary cuts require an impossible constitutional amendment because retirees (all of them including private 401K's) don't pay state income taxes on those retirement distributions and get automatic COL increases (not the 401k's on the COL). Why would those voters voluntarily shoot themselves in the foot? Future retirees won't vote for it either since it's such a good deal for them. Again shooting themselves in the foot to vote for change. Hence, the solution in IL is impossible without oppressive income tax increases and massive service and pay cuts.

marcus says

It's 9% of the teachers Salary. Plus I have to assume some other contribution by the district and an additional contribution from the State. There things together make up what is supposed to be put into the fund per year.

It's IL. Don't assume anything about this place. For CPS, the state doesn't do a damn thing (although they did get a bit of a bailout in the last budget). The district (taxpayers) are that 7%. Teachers are 2% (taxpayers still). That's it. Nothing else besides borrowed money to dump into the black hole (taxpayers as well). That's far less then SS and the additional 5-10% that anyone with a brain HAS to fund into a 401k to ACTUALLY retire like an IL pensioner at 59-1/2 (they can do it earlier). 9% vs. say 17-20% (SS and 401k contributes) for a private sector job of gross pay to retire. There's not a chance in hell public sector workers (at least CPS) will change a thing. And they threaten to (and have) strike on an annual basis because it's not good enough. Give me a break.

And yes, it's a zero sum game, the 7% is getting paid no matter what whether it's directed to the teachers first and then a pension fund or directly to the fund. Problem is both sides of the aisle (including the unions as you mention) wanted votes so they could get their own pensions and voted on pension "holidays" so we're in the situation we are now. It literally is probably not reversible. I've made my contingency plan for what I'm pretty sure will happen and have told anyone else I know to do the same.

Fuck, I really hate this state after reading this.

marcus says

You could have committed decades of your life to a government job if you thought it was such a sweet deal.

The lavish pensions in California didn't really start until 2000 when Gray Davis retroactively went an increased the formulas for State workers.

I was already working for the private sector and still remember the day back in 2000 when one of my clients that works for San Diego Water Utilities was crowing in a meeting about how he was going to now be able to retire in his 50's.

Government unions never consider that cost of their pensions is astronomical.

WookieMan says

This is why I have an enormous amount of cynicism for ANY type of government. IL has scarred me for life.

I was born in Chicago and have lived in Kommie Kalifornia for about 25 years working in the water business watching our infrastructure crumble as much needed taxpayer funds diverted to pensions and stupid shit like high speed rail.

Needless to say, I have gotten more Libertarian and Conservative and skeptical of government the longer I have been exposed to it.

WookieMan says

The problem is EVERYONE in this state has to take some sort of a bath in this mess.

Yep. Just amazes me how some can argue that the vast government bureaucracy shouldn't have any skin in the game and only the tax payers should suffer to keep these gold plated pensions in place. People are really suffering and going to such extremes of moving out of the State because they can't afford the taxes and dysfunctional government services.

WookieMan says

And like I said, I'm okay paying some more in taxes if it rights the ship. What government entity has ever cut though? I'm not talking about cuts when revenues are down, because they have to cut. I know it's happened, so I'm being a bit hyperbolic, but REAL cuts are the exception, not the norm.

This always amazes me too. How come technology can make about every industry in the private sector more efficient where we are producing much more for much less - but we rarely see the same efficiencies flow through in the public sector?

Can we never ask our government for better services with our tax money? Why is the Democrat argument only about raising taxes higher and making government even bigger?

socal2 says

Yep. Just amazes me how some can argue that the vast government bureaucracy shouldn't have any skin in the game and only the tax payers should suffer to keep these gold plated pensions in place. People are really suffering and going to such extremes of moving out of the State because they can't afford the taxes and dysfunctional government services.

Government workers are taxpayers too. It's seems like the above is arguing that they should have MORE skin in the game.

The problem is how do you legally change the terms of their contract without going through bankruptcy?

HappyGilmore says

The problem is how do you legally change the terms of their contract without going through bankruptcy?

With the current rules in places like California and Illinois, even when a City goes bankrupt - they still can't renegotiate the pension "contract". Everyone else suffers with higher taxes, reduced services and bond holders getting shafted - but not the government workers.

How is that fair? Where is the "contract" for tax payers to not let their cities implode with junk bond status while the politicians and the government bureaucracy to pad their nests using our tax dollars?

All we are asking is for the government workers and their unions to compromise a bit too.

socal2 says

HappyGilmore says

The problem is how do you legally change the terms of their contract without going through bankruptcy?

With the current rules in places like California and Illinois, even when a City goes bankrupt - they still can't renegotiate the pension "contract". Everyone else suffers with higher taxes, reduced services and bond holders getting shafted - but not the government workers.

How is that fair? Where is the "contract" for tax payers to not let their cities implode with junk bond status while the politicians and the government bureaucracy to pad their nests using our tax dollars?

All we are asking is for the government workers and their unions to compromise a bit too.

Correct. Well put. Guaranteed pension appreciation should be illegal.

mell says

Correct. Well put. Guaranteed pension appreciation should be illegal

Yup and also salaries. I posted this before-but these village/city managers in IL make more than every GOvernor in this nation-how did they give themeslves these salaries and I am pretty sure the salaries of those downstream will also be above amrket.
https://www.forbes.com/sites/adamandrzejewski/2016/03/28/the-big-dogs-of-illinois-municipal-government-2016/#34c754775c5b

These are pensionable salaries too-I mean you want to raise income taxes on top of the highest property tax rates-cut their salaries in half and problem solved-but hey you can't -public unions.