Monday, September 20, 2010

Illinois Slashing Future Pensions To Save Money

Well this seems like a good idea since a lot of these pensions and unions are draining the blood out of states' budgets. But it also doesn't come without criticism since the SEC is already investigating New Jersey for duping their numbers to get aid and looking like a credit risk while selling a bunch of cash in bonds. We'll see how this plays out.

NY Times: Earlier this year, Illinois said it had found a way to save billions of dollars. It would slash the pensions of workers it had not yet hired. The real-world savings would not materialize for decades, of course, but thanks to an actuarial trick, the state could start counting the savings this year and use it to help balance its budget.

AND

...The maneuver, and techniques that have similar effects, are already in use in Rhode Island, Texas, Ohio, Arkansas and a number of other places, allowing those states to harvest savings today by imposing cuts on workers in the future.

Texas saved millions of dollars this year after raising its retirement age for future hires and barring them from counting unused sick leave in their pensions. More savings will appear in coming years. Rhode Island also raised its retirement age for future retirees last year, after being told it could save $90 million in the first year alone.

Actuaries have been using the method for years, it turns out, but nobody noticed, in part because official documents usually describe it in language few can understand.


AND

Illinois’s pension funds are more fragile than most, but their survival is essential to thousands of people. The state’s teachers and certain other workers do not participate in Social Security, so for them, the pension fund is their only source of retirement income.

Read it all at NY Times

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