Taxpayers United of America was quoted about the IMRF pensions by Wirepoints.
“Gall: Brazen boldness coupled with impudent assurance and insolence.”
– Merriam-Webster Dictionary
By: Mark Glennon*
IMRF, the Illinois Municipal Retirement Fund, went on a “statewide informational tour” last week. It was basically a brag fest. Illinois taxpayers should be appalled.
IMRF is the second largest pension fund in the state. It covers 100,000 employees and retirees of 3,000 Illinois municipalities who are not policemen, firefighters and those covered by state pensions. Among its boasts is that it will be reducing contributions made by municipal employers from 11.73% of payroll to 11.34%. Also, it’s “well funded,” in its words — about 87 % funded — far higher than most state and municipal pensions in Illinois.
Here’s why taxpayers should find IMRF’s grandstanding galling:
- If you’ve been wondering why Illinois has the highest property taxes in the nation, often exceeding a suicidal four percent, count IMRF as one reason. IMRF is unique among Illinois state and municipal pensions because it’s empowered to force municipalities to raise property taxes to keep its funding up. That crowds out money for libraries, roads, schools, you name it. Taxpayers pay $2.50 for every $1.00 that IMRF member pay into their pensions, far higher than is typical in the private sector. Most IMRF retirees get Social Security, too, into which both they and municipalities contribute. For IMRF, municipalities around the state don’t face the impossible choice of either underfunding or raising taxes to cover contributions — as they do with police and fire pensions. IMRF just sends a bill for whatever it takes, which goes into property taxes.
- Even with its comparatively high funding level, IMRF is still short about $5 billion, which taxpayers will be on the hook for. Dropping employer contribution rates means little with taxpayers in hock for that $5 billion plus whatever else accrues.
- IMRF offers its members, in addition to their pension, a “guarantied” 7.5% annual return savings account, effectively at taxpayer expense. As any saver today knows, guarantied long term rates are far lower than that (under 2.7%). Guess who guaranties the difference? Property tax payers. As with the pension obligations, IMRF can force automatic property tax increases as necessary to cover that savings account. We wrote in detail about those 7.5% accounts earlier.
- IMRF members also get a “13th payment,” notorious in the pension world. That’s a sort of bonus check once a year in addition to their monthly pension payments, paid entirely by taxpayers, according to IMRF’s site. It cost $42 million last year. A coalition of public unions gloated two years ago about killing a bill that might have ended it.• IMRF’s accrued pension benefits have been growing at the pace of 7.2 percent a year since 2000, according to the Illinois Policy Institute, far faster than the 2.3 percent rate of inflation and beyond what city taxpayers can afford.
- IMRF attributes its supposed success largely to the Tier 2 pension reforms, which it praises. They should be embarrassed if that’s what’s helping them look good. The Tier 2 pension reforms of 2010 are a disaster. They were “bulldozed through” the legislature by House Speaker Michael Madigan with no understanding of the consequences. Tier 2 employees — those hired after 2010 — pay in the same portion of their paychecks even though the cost of their benefits is 40% less than Tier 1 employees because Tier 2 benefits are far less than Tier 1’s. We’ve written in detail about the myriad problems in the Tier 2 “reforms,” linked here, here and here. The General Assembly has a legislative task force trying to figure out how to fix Tier 2 problems. We haven’t heard a peep on that, probably because they are stumped.
- IMRF continues to peddle numbers about its positive economic benefit, but it looks at only one side of the equation. Eighty-five percent of its retirees remain in Illinois after they retire, supporting the the creation of nearly 16,000 jobs and $600 million in additional salaries, it gloats. Yeah, well, 100% of that money would have been spent in Illinois had municipalities been able to spend it on other services and there’s no reason to think that any fewer jobs would have been supported had the money been left with taxpayers to spend as they choose. IMRF measures only one side of the issue.
- Why did IMRF, alone, get the right to force funding to keep it relatively healthy while cops and firefighters in many towns an cities face the certainty of having their pensions go broke? Who knows, but maybe it had something to do with mayors, county board members and other top brass politicos being in IMRF.
- “Spiking” — jacking up end-of-career pay in order to artificially jack up the pension — is a recurring problem with IMRF members. The General Assembly is now considering special legislation to try to control it.
- Members are supposed to work a minimum number of hours per year to get a pension, but questions persist about how well that’s enforced. As reported last week, some members of one county board weren’t even aware of that requirement.
The press is routinely suckered by IMRF’s propaganda. WTTW’s Chicago Tonight show has featured, at least twice, IMRF representatives showboating as a model as a successful pension, and they go unchallenged. The Rockford Register Star last week praised IMRF, saying it puts other pensions to shame. (They also repeated the absurd myth that 80% funding is healthy for a pension.)
IMRF is no model pension. It is, as Taxpayers United of America put it, “the gold standard in taxpayer abuse.”
*Mark Glennon is founder of WirePoints. Opinions expressed are his own.