Big pay, little district

The retirement system reports May’s “current creditable earnings” at $357,117, almost $23,000 more than any other educator in the system and one of 10 receiving more than $300,000 in the state.

May’s total compensation is 160 percent more than in 2002 when he started with the district. It’s also more than twice any other employee of the district, according to the retirement system’s data.

———————————————————————————-

“There are over 800 superintendents making $200,000 and $300,000, and all they do is try to convince parents their children are getting a good education and they aren’t,” said Jack Roeser, founder of the Family Taxpayers Foundation, a conservative organization often critical of the state’s public education system. “These people are supposed to be leaders of the district, and if you look at the rankings, they are presiding over a below-standard district.”

In 2013, 58.8 percent of the state’s tested students met or exceeded state education standards, compared to 51.9 percent of Marquardt students. The district’s students have tested below the state average since 2008, according to state records.

Read more at the Daily Herald

North Boone CUSD 200 Teachers File Intent to Strike

North Boone CUSD 200 union members and administrators meet at the bargaining table for a new contract. Teachers haven’t had one since June. If a deal isn’t reached, educators prepare to possibly stop working.

North Boone teachers filed an “intent to strike” document on Thursday. That doesn’t necessarily mean they will walkout, but it’s a notice they have to file in case they ever decide to strike in the future. However, educators say negotiations are moving along with a federal mediator.

“This will be our 5th mediation session that we’ve had. We do believe we’re making progress, in fact we made quite a bit of progress Tuesday night.” -says North Boone Education Association President & 8th grade science teacher Kelly Hanaman.

But, not enough progress to reach a deal. One main sticking point has both sides standing their ground.

“We’ve asked for a salary schedule and they refuse to give us a salary schedule. They want to take our schedule away; we do it the traditional steps and lanes and they want something totally different. The district has offered us some merit pay type schedules and that actually puts members against each other and we feel that’s unacceptable.” -Hanaman explains.

Click here to read the full article!

Teachers in Mount Olive will strike

MOUNT OLIVE — Thirty-nine teachers in the Mount Olive School District plan to strike Monday, the teachers union announced Thursday.

The union and district have been at odds over what to do about a retirement incentive for teachers that currently calls for a 6 percent annual pay increase for the final four years, as well as a proposed different salary schedule for new hires and health insurance coverage.
The decision to strike was voted on by teachers Wednesday.

In the event that they do walk off their jobs, Mount Olive Superintendent Patrick Murphy said Thursday the district will provide day care for kindergarten through sixth-grade students at no cost, including breakfast and lunch.

Click here to read the full article.

D-155 Union wants Taxpayers to pay 100% of Employee Contribution.

Unions want Taxpayers to pay 100% of employee retirement.

Please click the link above to read the full article by Jeff Engelhardt.

The District and the Union have posted their final contracts: ww2.d155.org/negotiations/default.aspx and d155teachers.org/negotiations .

Salary and retirement differences

SALARIES

Board proposal

Year 1: Pay increases based off accrued years of experience and/or education and a $1,350 lump sum to teachers on the final two steps of the experience ladder.

Year 2: Same as year 1.

Year 3: Same as year 1.

Union proposal

Year 1: Pay increases based off accrued years of experience and/or education.

Year 2: Same as year 1.

Year 3: Pay increases based off accrued years of experience and/or education and increase the base salary by the rate of inflation, up to 2.5 percent.

RETIREMENT

Board proposal

Year 1: Board pays 74 percent of employee contribution.

Year 2: Board pays 53 percent of employee contribution.

Year 3: Board pays 32 percent of employee contribution.

Union proposal

Maintain current language under which the district pays 100 percent of the employee contribution.

TEACHING LOAD

Board proposal

Maintain current contract language.

Union proposal

Teachers who are assigned a sixth class receive a $3,000-per-semester stipend. On full-day institute days, teachers have at least four hours for grading and another professional matters. Teachers earn up to 8 hours of flex time for working after-school and weekend functions.

IMRF Retirees with ending salaries over $250,000

IMRF (Illinois Municipal Retirement System) provides pensions for virtually all local government employees except Police and Fire who typically have their own pension funds. The vast majority of employees contribute 4.5% of their wages to IMRF. Most IMRF employees also receive Social Security.

You have to ask yourself how a  middle class town like Mundelein with a population of about 30,000 ends up paying an Administrative Manager $464,000 for an annual salary. I mean the mayor of Chicago makes $180,000. The first table below lists all IMRF retirees who made more than $250,000 the year they retired.

And did you have any idea Park District employees made salaries of  over $400,000? Whose idea was that and who approved it? Apparently scheduling softball games and maintaining toboggan runs is a lot more complicated than I thought. The 2nd table below shows all IMRF park district retirees who made over $250,000 the year before they retired.

Last but certainly not least have you ever heard of “Township School Trustees” (TST)? No? Well neither did I even though one of them made over $310,000 right before he retired and another one has a pension of $179,000. While you and I may not of heard of TST’s believe it or not Abraham Lincoln did because the law setting up TST’s was passed by the Illinois Legislature when Abe was just 10 years old in 1819. And here it remains to this day handing out $310,000 salaries. The 3rd table below shows the highest paid TST retirees.

IMRF Retirees with ending salaries over $250,000
Name Employer Name Last Salary Pension
Marabella Kenneth W Village of Mundelein     464,006    142,064
Volpe Ralph J Park District of Highland Park     457,625    158,240
Vaughan Robert W Fox Valley Park District     454,850    179,973
Zeilenga Donald G DuPage County     442,348    137,141
Yeggy Gerry Niles SD 219     431,593      74,749
Wilcox Gregory W DuPage County     424,928      91,387
Andersen Edward A Cgh Medical-Sterling     403,417    284,088
Alderson Kenneth A Illinois Municipal League     379,348    190,882
Messerli Steven K Fox Valley Park District     376,493    179,853
Hergenroeder Gregory J Fox River Water Reclam Dist     371,497    176,908
Kutska Elizabeth R Park District Risk Mgmt Agency     364,641    232,762
McCampbell Roy F Village of Bellwood     358,561    243,516
Pagorski Albin D Fox River Water Reclam Dist     356,368    191,109
Franz Robert D Village of Deerfield     355,367    208,078
Badenhorst Casper H Cgh Medical-Sterling     349,956      93,504
Flickinger Theodore B ILL Assoc of Park Districts     347,098    233,012
Tokarski Charles F DuPage County     334,573    103,718
Skiba Richard H DuPage Water Commission     332,164      94,543
Knippen Joseph R City of Wheaton     331,100    106,092
Mezera John M City of Joliet     329,313    174,605
Kinsella John J DuPage County     327,974      67,131
Poole Allan L City of Naperville     325,768    151,926
Williams Douglas G Village of Winnetka     320,761    127,848
Shargo Nicholas P DuPage County     316,376    128,121
Hoffman Charles E DuPage County     313,782    110,085
Galassie Dale W Lake County     312,916    130,903
Dorgan David M City of Elgin     311,827      97,554
Janaes Thomas K City of West Chicago     310,896      90,278
Shroats Hal W TST T36 R12e     310,263      60,914
Kouba George K DuPage County     309,132      65,858
Seipel William G City of Springfield     300,078      97,900
Duhig Thomas P DuPage County     299,772    118,833
Smith Jr John C DuPage County     295,138    102,050
Lenczycki Donna M DuPage County     293,189      63,323
Morien Mark J Village of Northfield     290,551    118,519
Holloway Tim J Village of Streamwood     287,980    111,487
Cook David C Village of Hinsdale     286,695      95,995
Nawrocki Edward J DuPage Water Commission     283,558      64,465
Smith Philip R DuPage County     283,007    111,991
Cermak Danny A Downers Grove Park Dist     280,974    138,342
Hahn Thomas E Lake County Forest Pres Dist     280,641      66,177
Hupe Lawrence E TST T37 R13     280,593    179,335
Deets Norman O Cgh Medical-Sterling     280,032    132,079
Moser Ronald A Village of Hanover Park     279,362      96,141
Hamilton Thomas A City of Bloomington     278,141    122,997
Rylko Michael A Buffalo Grove Park Dist     276,697    160,671
Hummel Marc G Village of Hanover Park     271,952    116,567
Carter Steven C City of Champaign     270,441    114,582
Borchert Thomas P City of Elmhurst     270,174    167,145
Swan Kenneth R Park District of Highland Park     269,159    115,870
Kyarsgaard Dennis J Cgh Medical-Sterling     268,508    124,548
Burchard Peter T City of Naperville     267,928      86,678
Pappas Harry J Village of Rosemont     266,356    141,160
Balbarin Corazon J Will County     259,714      52,738
Perry John F Village of Woodridge     259,065    136,819
Richardson Thomas J Glenview Park Dist     258,026    156,386
Pierce Irene T Lake County     257,428      96,447
Marx Alex J Mundelein Pk/Recreation Dist     255,299    139,247
McKnight Michael D City of Peoria     255,250    124,796
Vitas Bogdan Village of Lake Zurich     255,088      27,115
Grossmann David M Lake County     254,420    153,637
Becker Paul A DuPage County     254,085    101,079
Morrissey Mary K Village of Niles     253,930    106,452
Pfeiffer Michael L City of Springfield     253,549      73,820
Murphy Randall Lake County     252,806    151,369
Melena Thomas M City of Rolling Meadows     252,673      79,023
King George S DuPage County     252,134    102,174
Boyle Hal W DuPage County     251,254      89,196
Oglietti Bernard A Village of Willowbrook     250,572      94,097

 

IMRF Park District Retirees with ending salaries over $250,000
Name Employer Name Last Salary Pension
Volpe Ralph J Park District of Highland Park       457,625    158,240
Vaughan Robert W Fox Valley Park District       454,850    179,973
Messerli Steven K Fox Valley Park District       376,493    179,853
Kutska Elizabeth R Park District Risk Mgmt Agency       364,641    232,762
Flickinger Theodore B ILL Assoc of Park Districts       347,098    233,012
Cermak Danny A Downers Grove Park Dist       280,974    138,342
Hahn Thomas E Lake County Forest Pres Dist       280,641      66,177
Rylko Michael A Buffalo Grove Park Dist       276,697    160,671
Swan Kenneth R Park District of Highland Park       269,159    115,870
Richardson Thomas J Glenview Park Dist       258,026    156,386
Marx Alex J Mundelein Pk/Recreation Dist       255,299    139,247
Retired Township School Trustees Salaries over $100,000
Name Township  Salary  Pension
Shroats Hal W TST T36 R12e    310,263             60,914
Hupe Lawrence E TST T37 R13    280,593           179,335
Harris Lee A TST T37 R12    174,624             60,295
Stefaniak Thomas P TST T36 R15    159,748           109,602
Barkley Patricia J TST T36 R14    117,140             47,546
Sebesta Gerald J TST T39 R13    115,833             87,720
Haddix Carol A TST T36 R14    103,944             32,575
Uhlig Arnold C TST T39 R12    102,744             25,120

TRS Retirees who received $1 million plus in salary over 4 years.

Million dollar K-12 administrators cost local taxpayers lots of money and cost state taxpayers, no matter where they reside, lots of money via state taxes to pay the outsize pensions. Top million dollar dog Harry Griffiths made an unconscionable $1.4 million his last 4 years in Lake Forest. And of course this did not include his home loan forgiveness or his leased car, extravagant health and life insurance included in his contract. To say Harry had a good deal paid for by the taxpayers (who else?) is putting it mildly.

Here’s the list of all 49 TRS retirees who received more than $1 million in salaries over their last 4 years of public employment.
SOURCE: TRS

TRS Retirees who received $1 million plus in salary over 4 years.
Name District 4-yr Salary total
Griffith, Harry D Lake Forest SD 67           1,400,659.99
Fleming, Larry K Lincolnshire-Prairie View 103           1,376,867.00
Lamberson, Jonathan E Riverside SD 96           1,372,303.12
Kelly, Dennis G Lyons TWP HSD 204           1,323,899.00
Catalani, Gary T Community Unit SD 200           1,304,041.12
Dada, M Mohsin Schaumburg CCSD 54           1,294,543.06
Van Der Bogert, Mary R Winnetka SD 36           1,284,701.34
Murray, Laura L Homewood-Flossmoor CHSD 233           1,274,034.96
Giannetti, Glen M Bloom TWP HSD 206           1,253,048.31
Gmitro, Henry A Community CSD 93           1,252,281.66
Curley, Mary M Hinsdale CCSD 181           1,238,585.12
Hager, Maureen L North Shore SD 112           1,235,747.57
Bangser, Henry S New Trier TWP HSD 203           1,230,100.00
Rafferty, Edward F Schaumburg CCSD 54           1,179,110.91
Barshinger, Jack K Batavia USD 101           1,173,317.08
Codell, Neil C Niles TWP CHSD 219           1,169,589.42
Robbins, Kathryn J Leyden CHSD 212           1,162,441.79
Weaver, Reginald L National Education Association           1,155,061.33
Mical, Gary E Wheeling CCSD 21           1,154,256.32
Vieth, Linda J Sunset Ridge SD 29           1,136,927.60
Renner, Sandra Butler SD 53           1,122,561.49
Burns, Kevin G Community HSD 218           1,113,576.73
Hintz, James S Adlai Stevenson HSD 125           1,113,340.11
Humphrey, Steve K DuPage HSD 88           1,111,131.34
Friedman, Mark R Libertyville SD 70           1,090,311.01
Doebert, Sandra L Lemont TWP HSD 210           1,089,620.51
Schoffstall, Phillip W Valley View CUSD 365           1,086,502.38
Riebock, Ann D Glen Ellyn SD 41           1,085,538.13
Engler, Thomas D Yorkville CUSD 115           1,078,515.88
Lane, Bruce A Mannheim SD 83           1,078,292.57
Buckner, J Kamala Thornton TWP HSD 205           1,075,990.60
Many, Thomas W Kildeer Countryside CCSD 96           1,074,162.00
Goers, Donald R New Trier TWP HSD 203           1,069,144.00
Raymond, Garry W Lockport TWP HSD 205           1,065,765.29
Bultinck, Howard J Sunset Ridge SD 29           1,062,947.00
King, Eric A Elementary SD 159           1,058,044.91
Swanstrom, Paul Joliet TWP HSD 204           1,048,656.76
Marks, Linda R Golf ESD 67           1,048,251.98
Wyllie, Lawrence A Lincoln-Way CHSD 210           1,046,827.00
Gallagher, James J Evergreen Park CHSD 231           1,042,041.08
Joy, Donna M Flossmoor SD 161           1,039,638.30
Johnson, Michael D IL Assoc of School Boards           1,030,791.03
Kanold, Timothy D Adlai Stevenson HSD 125           1,022,514.84
McKanna, Robert A Palatine CCSD 15           1,022,467.56
Porto, Joseph Avoca SD 37           1,021,333.40
Lindsay, Thomas S Mannheim SD 83           1,016,666.26
Boyd, Alex Jr. West Harvey Dixmoor SD 147           1,009,710.99
Palermo, Joseph A Berkeley SD 87           1,009,484.23
Yomtoob, Youssef Hawthorn CCSD 73           1,008,616.15

Retired TRS members who had Salaries over $300,000/yr. while working.

It is easy to see why IL has the worst credit rating and pension funding in the country when you look at current retirees and how much they made when they worked. One man, Neil Codell made $411,000 one year and that went into his pension calculation. In all $300,000 plus salaries were paid out 65 times to current retirees and not counting current K-12 employees yet to retire.

Retired TRS members who had Salaries over $300,000/yr.
Name School District  Salary  Pension
Codell, Neil C Niles TWP CHSD 219      411,510.88       163,344.12
Murray, Laura L Homewood-Flossmoor CHSD 233      402,331.22       271,912.56
Curley, Mary M Hinsdale CCSD 181      385,378.73       264,089.16
Catalani, Gary T Community Unit SD 200      380,227.46       276,382.32
Catalani, Gary T Community Unit SD 200      380,227.46       276,382.32
Van Der Bogert, Mary R Winnetka SD 36      376,150.19       179,345.16
Fleming, Larry K Lincolnshire-Prairie View 103      374,302.00       258,162.60
Van Der Bogert, Mary R Winnetka SD 36      373,107.15       179,345.16
Gmitro, Henry A Community CSD 93      368,589.94       234,802.80
Lamberson, Jonathan E Riverside SD 96      366,103.28       262,516.44
Bangser, Henry S New Trier TWP HSD 203      364,500.00       277,617.00
Griffith, Harry D Lake Forest SD 67      362,339.59       231,108.96
Griffith, Harry D Lake Forest SD 67      362,339.59       231,108.96
Hintz, James S Adlai Stevenson HSD 125      361,146.50       249,109.44
Kelly, Dennis G Lyons TWP HSD 204      356,620.61       236,935.44
Fleming, Larry K Lincolnshire-Prairie View 103      353,390.00       258,162.60
Conyers, John G Palatine CCSD 15      353,351.13       244,777.68
Dada, M Mohsin Schaumburg CCSD 54      352,473.12       236,904.12
Engler, Thomas D Yorkville CUSD 115      350,154.38       176,411.28
Gmitro, Henry A Community CSD 93      348,113.05       234,802.80
King, Eric A Elementary SD 159      347,110.49       176,753.88
Lamberson, Jonathan E Riverside SD 96      346,138.54       262,516.44
Griffith, Harry D Lake Forest SD 67      344,396.63       231,108.96
Codell, Neil C Niles TWP CHSD 219      343,345.28       163,344.12
Bangser, Henry S New Trier TWP HSD 203      342,500.00       277,617.00
Bultinck, Howard J Sunset Ridge SD 29      342,184.00       233,033.52
Giannetti, Glen M Bloom TWP HSD 206      341,511.51       173,293.44
Kelly, Dennis G Lyons TWP HSD 204      339,962.36       236,935.44
Lamberson, Jonathan E Riverside SD 96      339,811.33       262,516.44
Dada, M Mohsin Schaumburg CCSD 54      338,772.63       236,904.12
Burns, Kevin G Community HSD 218      336,366.08       206,494.56
Hager, Maureen L North Shore SD 112      336,304.54       256,059.12
Murray, Laura L Homewood-Flossmoor CHSD 233      335,276.02       271,912.56
Fleming, Larry K Lincolnshire-Prairie View 103      333,912.00       258,162.60
Griffith, Harry D Lake Forest SD 67      331,584.18       231,108.96
Dada, M Mohsin Schaumburg CCSD 54      331,352.51       236,904.12
Willis, Robert H Rockford School District 205      324,882.45       143,309.04
Giannetti, Glen M Bloom TWP HSD 206      321,945.75       173,293.44
Hyland, Timothy F Glenbard TWP HSD 87      321,158.03       177,421.44
Curley, Mary M Hinsdale CCSD 181      321,149.11       264,089.16
Johnson, Michael D IL Assoc of School Boards      320,656.00       193,273.32
McKanna, Robert A Palatine CCSD 15      320,590.31       191,381.88
Lamberson, Jonathan E Riverside SD 96      320,249.97       262,516.44
Schoffstall, Phillip W Valley View CUSD 365      317,970.38         62,453.88
Kelly, Dennis G Lyons TWP HSD 204      317,396.47       236,935.44
Hager, Maureen L North Shore SD 112      317,268.36       256,059.12
Marks, Linda R Golf ESD 67      316,873.86       160,798.44
Rafferty, Edward F Schaumburg CCSD 54      316,502.04       221,083.32
Robbins, Kathryn J Leyden CHSD 212      316,481.31       217,957.80
Fleming, Larry K Lincolnshire-Prairie View 103      315,263.00       258,162.60
Weaver, Reginald L National Education Association      314,381.77       257,434.80
Barshinger, Jack K Batavia USD 101      312,022.14       219,996.96
Catalani, Gary T Community Unit SD 200      311,075.69       276,382.32
Kelly, Dennis G Lyons TWP HSD 204      309,919.56       236,935.44
Yaple, Linda L Lake County Area Vocational      309,746.39       206,731.92
Vieth, Linda J Sunset Ridge SD 29      309,535.00       213,173.88
Gallagher, James J Evergreen Park CHSD 231      307,075.51       217,954.80
Renner, Sandra Butler SD 53      305,656.00       210,480.24
Giannetti, Glen M Bloom TWP HSD 206      303,497.51       173,293.44
Palermo, Joseph A Berkeley SD 87      303,101.29       209,865.72
Weaver, Reginald L National Education Association      302,704.81       257,434.80
Hager, Maureen L North Shore SD 112      302,407.44       256,059.12
Yomtoob, Youssef Hawthorn CCSD 73      301,268.99       101,766.24
Friedman, Mark R Libertyville SD 70      300,856.34       173,002.32
Conyers, John G Palatine CCSD 15      300,303.01       244,777.68

 

Illinois State Pension Systems Numbers Matrix

Illinois – Pension  “NUMBERS MATRIX”  2012
TRS SURS SERS JRS GARS Total
Active members 2012 165,872 81,341 62,729 968 176 311,086
Full Time 133,752 75,142 unknown
Part Time 32,120 6,014 unknown
Inactive Members 2012 121,781 81,341 22,549 15 79 225,765
Retirees& Beneficiaries 2012 105,499 54,532 62,788 1,056 414 224,289
393,152 217,214 148,066 2,039 669 761,140
Total Active, Inactive and Retired>>>>> 761,140
TRS SURS SERS JRS GARS Total
Payroll Billions 2012 9.5 3.4 4.3 0.17 0.014 17.4
Annuities Paid Out Billions 2012 4.7 1.8 1.7 0.11 0.019 8.3
Yearly Increase Number of  Retirees 4,147 3,162 1,391 9 4 8,713
TRS SURS SERS JRS GARS Total
MV Assets Billions 2012 36.5 13.7 10.9 0.6 0.052 61.7
PBO Billions 2012 90.0 33.1 33.0 2.0 0.303 158.4
Unfunded Billions 2012 53.5 19.4 22.1 1.4 0.251 96.7
Per Cent Funded 40.56% 41.39% 33.03% 28.90% 17.16% 38.97%
TRS SURS SERS JRS GARS Total
Employer Contrib. Rate 2012 % 36% 53% 38% 73% 95%
Employer NC Billions 0.84 0.70 0.55 0.04 0.003 2.14
Interest on UAAL Billions 4.28 1.50 1.71 0.11 0.02 7.63
Total Employer Cost 5.12 2.20 2.27 0.15 0.02 9.77
Employer Normal Cost Rate 2012 % 8.84% 19.52% 12.88% 25.58% 21.43%
Employee Contribution 2012 Billions 0.918 0.258 0.259 0.016 0.0016 1.45
Employer minus Employee Cost 4.202 1.946 2.008 0.138 0.021 8.31
Employer Cost % of Employee Contrib. 558% 854% 875% 964% 1403%
Employee Rate 2012 % 9.40 8.00 4.00 11.00 11.50
Assumed Interest Rate/ROI % 8.00 7.75 7.75 7.00 7.00
Assumed Salary Annual Increase % 6.50 5.00 5.50 4.00 4.00
Post-retirement Annual Increase % 3.00 3.00 3.00 3.00 3.00
NOTE 1: Assets, PBO and Unfunded as of 06/30/2012
NOTE 2: Employee Rate Annuity Only no beneficiary
NOTE 3: SURS Police/Fire Employee Rate 8.5%
NOTE 4: SURS Employee Contribution Rate Average all contributors
TRS = Teachers Retirement System
SURS = State University retirement System
SERS= State Employees Retirement System
JRS = Judges Retirement System – Contribution rate 8.5% or 11%
GARS = General Assembly Retirement System – Contribution rate 11.5%

IMRF – the stealth pension tax no one talks about.

The Illinois Municipal Retirement Fund is the pension fund that provides pensions for virtually all city, township, non-certified school employees and county workers in IL outside of Cook County. With 394,000 members it has more members and more retirees than TRS (Teachers Retirement System) and is thus the largest pension fund, in terms of membership, in Illinois. That’s why I call it a stealth tax – no one talks about it.

Most muni employees pay 4% into IMRF as well as being members of Social Security. The employer pays into Social Security and another amount into IMRF. Generally speaking muni employees make less than teachers, university employees or state employees. Employer (taxpayer) contributions for both SS and IMRF are well over $1 billion/yr. so this is not chump change we are talking about.

The taxes for IMRF and SS come mostly out of property taxes. Check your tax bill – on my tax bill (Lake County) there are 7 IMRF pension taxes:

  1. County of Lake
  2. Village of Mundelein
  3. Mundelein Park District
  4. Mundelein School District 75
  5. Mundelein School District 120
  6. Forest preserve
  7. Fremont Public Library

 

So you pay for the five state pensions with sales tax and income tax but you also pay for local IMRF pensions via property taxes. There are about 3,000 employers in the IMRF system.

Local police and fire pensions are also paid at the local level but are not broken out on your tax bill because they are paid out of general fund budget. There are over 600 P&F pensions statewide.

Under IMRF rules each muni government is its own little pension fund i.e. contribution rates vary depending upon the number of employees, salaries and retirees each muni government has. It is not a standard rate for all units.
IMRF officials brag about their relatively good funding position – the unfunded level is only about 15% using a 7.5% interest rate assumption. But using Moodys interest rate assumption of 4% IMRF has an unfunded liability of 54% or $33 billion.

 

See my article “Pension math: why the Interest Rate assumption is soooooo important.”

One of the reasons IMRF is looking better on paper is the “stealth tax” keeps going up. What I mean by that is the employer contribution rate in many cases has doubled over the last 10 years. Check out some numbers from Lake County governments:

 

Illinois Municipal Retirement Fund                  
Municipal Employer Contribution Rate 2003 to 2013            
Employer Name

 Rate

 Rate

 Rate

Rate

Rate

Rate

 Rate

 Rate

 Rate

 Rate

 Rate

 
 

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Increase 2003 2013
GRAYSLAKE

5.26

7.96

8.45

9.14

8.96

8.47

7.94

9.53

10.45

10.72

11.74

123%

WAUKEGAN

6.04

6.60

8.39

9.03

8.56

7.89

7.66

8.52

10.76

13.75

13.42

122%

HIGHLAND PARK

5.86

6.83

8.36

8.47

8.46

7.62

7.54

8.50

9.35

10.29

12.34

111%

 DEERFIELD

7.63

9.28

9.59

11.49

11.03

11.55

11.66

14.00

14.22

13.85

14.09

85%

ROUND LAKE

7.31

9.20

8.95

9.41

9.44

9.59

9.78

10.76

11.83

11.81

11.94

63%

LAKE COUNTY

9.40

9.49

9.54

10.30

9.53

9.02

8.59

10.96

11.44

11.47

11.79

25%

 

So if you thought your only concern was state pensions think again. There are billions and billions due at the local level for IMRF and Police and Fire Pensions that no one is talking about. That is one of the reasons why your property tax bills keep going up.

Happy taxpaying!

Pension math: why the Interest Rate assumption is soooooo important.

As the debate on phony pension reform continues unabated in Springfield pundits on all sides of the issue continue talk about the IR or Interest Rate. This can be very confusing if you do not understand the basic impact changing the Interest Rate assumption has on the viability of any and all pension systems.

In pension math the IR is used for more than one thing but today we are just going to concentrate of how the IR is used in calculating pension liabilities especially the dreaded UL (Unfunded Liabilities).

 

In rough numbers Springfield is claiming the following for the 5 state pensions:

Total Pension Liabilities:         $160 B

Minus Assets on hand             $  65 B

Equals Unfunded Liab.          $  95 B

The only one of the three key numbers that is grounded in reality is “Assets on hand”. That is because those assets are a fact locked up in cash, bonds, stocks and some private equity all of which have tangible value and can be easily verified.

The UL (Unfunded Liability) is a simple arithmetic calculation: Total liabilities minus Assets equals UL.

So the really important number is Total Pension Liabilities. Total Pension Liabilities or AL (Actuarial Liability) is a made up or “modeled” number. That is it is calculated from a complicated algorithm that uses the IR (Interest rate) assumption to determine how much money we should have in assets today if we are to pay all the pensions, current and future, in full. Since the AL calculation is really just a modeled number it has theoretically an infinite number of possible outcomes. Unfunded Liability (UL) as we discussed above is calculated from AL minus Assets meaning how big and bad UL is, is totally dependent on the modeled Interest Rate being used to calculate AL. Since it is totally dependent on the model and IR, UL also has an infinite number of possibilities.

The key point to remember is this: you (or politicians) can make the Unfunded Liabilities be whatever you want it to be, to serve whatever purpose you may have to serve at the moment such as getting re-elected. I claim that is exactly what they are doing: playing with a low-ball modeled value of UL ($95 B) to make funding appear much better than it really is.

Currently the assumed IR is about 8% although they are beginning to lower it slightly to 7.75%. For the example I show below we will use 8% since that is close to the chosen value and will be easy to demonstrate the power of the IR assumption.

A VERY simple illustration of the power of the Interest Assumption in determining how much taxpayers owe for pensions.

This is simple because we are not going to calculate exact amounts but instead just use illustrative amounts like $4. Deal with it.

OK you are the administrator of the following pension fund.

  1. The fund only has one member, John Smith.
  2. His pension is $8 per year.
  3. You have $100 in assets.
  4. Your Interest Rate assumption is 8%.

So as pension fund administrator you take your $100 in assets and go to the local bank. The banker tells you he just happens to have a CD paying 8% (I told you this wasn’t real). So you give him your $100 and over the course of the next year he dutifully pays your fund $8 and you in turn pay John Smith’s $8 pension. With $100 in assets and an 8% IR you are 100% funded. Everything is cool.  Life is good.

The year ends and you go back to your banker thinking you will just roll over the $100 into another 8% CD. Unfortunately the banker says “Things are tougher this year I can’t do 8% I can only do 4%”. Oops. Everything is not cool. Life sucks.

Because if you only get 4% then you will have to dig into your $100 assets for $4 to fund the rest of the $8 you owe John Smith. Then your assets will be down to $96 from $100.

So at the end of year 2, your assets are $96 and your assumed interest rate is still 8% therefore you still need $100 in assets to get the $8 pension. Since you only have $96 your unfunded is now $4 and you funded ratio is down to 96% from 100%.

Since by law you need to project costs and benefits going forward 30 years you seek reassurance for your 8% IR assumption by going to the banker and see what he thinks he can do on interest rates going forward 30 years. That way you could tell your Board of Trustees not to worry, over the long term everything will work out. You will get 8% on average.

The banker, wanting to keep you as a customer hems and haws but says yes he thinks you can/maybe/probably get 8% per year average over the next 30 years. Problem solved, you can go to your board of trustees and say everything is OK.

But suddenly another banker shows up and his name is Moodys. Moodys says no you probably will not get 8% going forward more likely you will get 4%. If you IR assumption is 4% then your Actuarial Liability is $200 because it takes 4% of $200 to get the $8 you have promised your retiree.

Your banker says you are 96% Funded

Moodys says you are 48% Funded.

Your banker says you have $4 Unfunded Liability.

Moodys says you have $104 Unfunded Liability.

The answer is nobody knows who is right but certainly Moodys has at least as much if not more credibility than your banker does in determining the funded ratio.

Since two credible parties have very divergent opinions of the future funding requirements of your pension system doesn’t it make sense to also plan for the option put forward by the party with no political motives?

Pension math and common sense say “yes”.