IML’s latest Fleece

By:  Diane Benjamin

I’ve written many stories about the Illinois Municipal League.  This organization works for cities, not the people paying their bills.  This is their latest plan:

iml consolidation

It all sounds wonderful until you look at the facts.

All of these funding numbers come from the Comptroller’s website, the latest numbers for Bloomington and Normal are not yet posted.  These are the percent of future liability funded: http://warehouse.illinoiscomptroller.com/

pensions funding

(Carbondale net Fire pension liability jumped form $14,607,569 to $26,918,919 in one year)

I’m sure there are other cities with serious funding problems, I just picked these at random.

Below is the article IML referenced.  They must have thought nobody would click on it – the article states changing to a defined benefit plan is the only solution to pensions soaking up so many tax dollars that essential services suffer:  https://www.thecentersquare.com/illinois/illinois-municipal-league-pushes-pension-consolidation-talks-as-budget-pressures/article_25f94f3c-c829-11e9-9052-2fe8ef17c1a6.html

Quote from the article:

dab

Of course this isn’t going to happen because doing the right thing in Illinois isn’t possible.

Representatives from both police and fire departments should be very afraid of the IML.  There are cities who would love to see all the funds put into one pot.  That would hurt the cities with better funded pensions.  Of course your funds would eventually be used to pay pensions for workers in cities that didn’t fund their pensions.  Why wouldn’t every city cut funding since real numbers would be hidden?

Are you going to trust government?

This is yet more proof the IML isn’t working for you.

8 thoughts on “IML’s latest Fleece

  1. Moving from a defined contribution plan to a defined benefit 401K style plan is a definite first step in the pension reform process in Illinois. I’ve been advocating for that for years. These plans are very poorly underperforming and given the nature of a defined contribution plan those in the plan have little concern about the underperformance. Their money is guaranteed in an underperforming plan because the taxpayers are paying the difference. Those in the plan need to understand they’d be better off in a defined benefit 401K style plan where they’d have more personal control over their money.

    Yet the rest of the IML’s recommendations go south in a hurry. We have to peal back the mask and see that this is nothing more than a bailout plan for municipalities that have not adequately funded their pensions. That’s what the newly elected mayor of Chicago is pushing for and it ought to scare us to death. The very thought of it would be motivation for municipalities to continue to inadequately fund them. There must be some protection written in where each municipality shoulders and is credited for current levels of funding as they are transferred to a defined benefit plan.

    This article reveals the problem of pension reform in Illinois. We cannot trust the people who would be responsible for initiating reforms and the ulterior motives they bring to the table. But, we’ve got to start somewhere. We’re currently on the path of unsustainability. This will have to be a step by step process and I’m fearful of where it might lead. But, that said, transferring to a defined benefit plan would, I think, be a good first step.

    Our local leaders have got to stop blaming Springfield and get more involved in lobbying for the needed reforms. To what extent does the IML lobby speak for them? Our local leaders also better get serious about current levels of funding. They have to be funded 90% by year 2040 and if the town of Normal’s only funding mechanism is a property tax levy, people in Normal will be taxed right out of their homes before we get there.

    Liked by 2 people

    1. Overall great comments, but you have your terms switched.
      Defined Benefit Plan – This is something resembling a traditional pension. The Benefit to be received is very well Defined: Person X will get $5K/month, for an expected 20 yrs. How much money needs to be contributed is less clear, as it depends on investment returns.
      Defined Contribution Plan – This is something resembling a traditional 401(k). The Contribution to be mode is very well Defined: Company and person will put aside $1K/mo, split 90/10 for 40 yrs. how much money will be received in benefits is less clear, as it depends on investment returns.

      Most government employees currently operate with the Defined Benefit Plan, which has three problems. 1) Politicians will often assume high investment returns so they don’t have to put as much money into the retirement funds and then use the difference on something that will buy them more votes, and the benefits end up underfunded. 2) Politicians will often simply not put in even those estimated payments, instead spending that money on something that will buy them more votes, and the benefits end up more underfunded. 3) Taxpayers, their kids, and their grandkids end up stuck paying the bill years or decades later, long after the irresponsible or crooked politicians who caused the problem are probably long gone. And extra credit: 4) ‘Later’ is coming up sooner than we think.

      Side note: I’m not a fan of hardly Any current elected officials, but to the best of my knowledge this is a problem that has been decades in the making – current elected officials may have contributed, but it is far from ‘all their fault’.

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  2. Thanks for the point of correction, Karl. You’re correct I have the plans switched. My bad!

    As for whose to blame there’s plenty of blame to go around and it’s years in the making. Current elected officials have got to get serious about tackling this or they’re to blame too. I’m less than optimistic.
    Investors would be far better off in a 401K style plan and so would the taxpayers.

    Liked by 1 person

  3. You would not necessarily have to combine plans into a single plan in order to combine plan administration and management. For instance, if everyone’s pension check is processed by the same processor that would probably reduce the cost for each plan.

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    1. You are correct that there are probably lesser efficiencies of scale available, but for something that minor, would it really be worth it?
      I can easily see them pushing for a ‘segregated combination’ as you describe, then seeking some minor concession like applying fees more to more solvent cities, then saying the savings would be So much greater if they just did a straight mix. Or some other version of boiling the pension frog.
      This could come before or after some city falls so low that they don’t have the fund balance to cover all their payouts, then some court declaring it ‘unfair to the retirees’ for the remaining cities to try to throw the bad apple out of the fund, thus forcing more responsible cities to cover the less so.
      Much too likely to end poorly if you’re part of one of the more solvent pensions, which still includes Bloomington & Normal for now…

      Liked by 1 person

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