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Originally Posted by 10023
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And they're going to need to stiff public pension holders. A massive haircut is the only way. Pass a constitutional amendment, give everyone 50 cents on the dollar (perhaps above a low minimum threshold like $50k in total pension value). And then do away with public employee pensions entirely, and have state employees participate in Social Security instead. You can only get one or the other, and so the existence of pensions is just voluntarily shifting the obligation from the federal government to the state, which is insanity.
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I agree that Illinois will have to allow for the adjustment of pensions visa a constitutional amendment, however I disagree with the idea of "stiffing" pensioners. A very large portion of the pension "debt" isn't debt in the normal meaning of the word, but rather a calculation of monies needed to meet pension obligations as projected. Given that, a big chunk of that debt would just go away by limiting the COLA increases baked into pension payments. Part of the reason the pension numbers increased is that we had over a decade of time where inflation was historically low, yet COLA increases for pensions were guaranteed to be 3% or more. There is no world where COLA increases on pensions being higher than the rate of inflation can be considered fair to taxpayers. I don't have the numbers needed to calculate this for certain, but I think a constitutional amendment with three changes would dramatically reduce the problem:
1) Going back to the year 2000, all pensions should have COLA retroactively capped at the higher of inflation or 3%. For pensioners whose current payments are higher than they would be with those retroactive calculations, their increases would be stopped until their payments were in line with what the retroactive calculations would have made them.
2) All State and local pensions should be combined and limited at, say, $100,000. Perhaps this could exclude certain job titles like doctors, but they, too, should have some max limit. So no one could receive $75,000 from a local pension and $75,000 from a state pension. Instead they would receive, at most, $50,000 from each.
3) All future pensions would be required to be fully funded in the year they are given credit for. In other words, any contract promising a pension would need to have monies for that pension budgeted and paid in each year that counts toward pension awards - if they are not, the law would be that that year would not count toward pension entitlements. So, unions would strike immediately if their pension wasn't funded that year because they would know immediately that the state or local government was ripping them off, and the problem would be addressed immediately instead of being kicked down the road indefinitely.
Just those three things would dramatically reduce the current and future needs of the pension system, without huge hits to current or near pensioners.