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View Diary: Austerity in Chicago's public schools: A Greek tragedy of epic proportions (155 comments)

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  •  Correction (1+ / 0-)
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    happymisanthropy

    Illinois has a very well managed pension system. 30-year returns are very sustainable and assets are managed well.

    The issue with the pension system underfunding is both actuarial and due to Springfield legislators not following the very laws they put in place to replay the pension system. Instead they used the pension system as a credit card for decades in order to keep corporate give aways flowing and an outdated flat-tax system afloat with an artificially low tax rate.

    The actuarial issue relates to viewing the unfunded liability as all due tomorrow. This is absurd because the overwhelming majority of those in the pension system can not collect a dime in earned benefits for decades. Earned benefits will never come due all at once. It take decades to earn a pension. Anyone who owns a home understands large unfunded liabilities. It's called a mortgage. Don't confuse the mortgage payment with the full mortgage.

    Pension normal costs are sustainable. What is unsustainable is the "pension ramp" passed in the 90's that sees repayment of pension funding by the state increase every year. In the 1990's the increases were small. Now they are geometric and causing pain (by design by those who passed it in the 90s - they knew they wouldn't be around when the pain started). This law was largely ignored by Springfield legislators for years, and now they could easily pass a new law and amortize the repayment in a sustainable fashion over a 30 year period.

    But instead its easier to demonize teachers, nurses and first responders.

    Imagination is more important than knowledge. Albert Einstein

    by michael in chicago on Mon Jul 29, 2013 at 09:13:12 AM PDT

    [ Parent ]

    •  I am not (0+ / 0-)

      demonizing teachers, nurses and first responders.  Illinois had a problem with many decades of underfunding of its pensions.  GASB allows public pensions to discount future liabilities with an inappropriately high rate, thus understating the real scope of the problem by ignoringrisk.

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