IMRF and Local Governments

[OakParkSpartan]

http://www.illinipundit.com/2009/02/02/imrf-panic



Mark Shelden wrote about this on here back in November, but the NG has a bit more:

    The IMRF saw its pension assets fall 24.8 percent during 2008, from $24.2 billion to $18.1 billion.

    The pension fund provides defined-benefit pensions for 178,000 city, county, park district and other local governmental employees, as well as 78,000 retirees.

    Using its normal rate- setting procedures, the retirement fund would increase the amount of money that local governments must pay out next year by 79 percent, according to Louis Kosiba, IMRF executive director.

More:

    Urbana Comptroller Ron Eldridge said the city expects to pay $858,000 to the retirement fund this fiscal year. A 79 percent increase would mean an additional $677,000; a 10 percent increase would mean paying $85,000 more.

    Eldridge said he opposes a cap on rate increases.

    "If they're saying that normally we'd be up 79 percent and they're holding it at 5 or 10 percent, my goodness, how are they going to make up the difference?" he asked.

    Eldridge predicted that public pensions "are going to be a major gorilla" for local governments in coming years.

    "It's going to eat governments alive," he said. "I think there's going to be a big discussion about how pensions are set up in the public sector."

    Champaign paid $1.58 million to the IMRF in 2008. A 79 percent increase would mean paying an extra $1.24 million; a 10 percent increase would be an extra $158,000.

    City Finance Director Richard Schnuer, who attended the workshop last week, said he was aware of the IMRF's difficulties generally, but "seeing the numbers up on a chart still takes your breath away."

    "The thing about a defined benefit plan and why so many organizations are going away from them is because the employer takes all the investment risk," Schnuer said. "The employee does not. Whether that's good or bad is a real policy issue."

   
I've not looked at Berwyn's numbers, but a 79% increase would be tough to swallow.

[OakParkSpartan]

Oh, and every pay increase adds to the obligation.  Think about that when you are advocating a 4% salary increase in this economy, because it means your taxes will be going up faster.

As does the declining or stagnant stock market.

[delbowz]

Anyone care to start a list of all the companies that have frozen salaries in this economy?

I'll start:

AT&T
Motorola
CDW

I know there are others....  I respect the job our local employees - both union and non-union do - but the reality is, in this economy - should ANYONE be expecting a raise? 

[buzz]

Add MacNeal Hospital to that list.  They've frozen salaries in many departments, even before the current economic problems.  They've also increased medical   putting a larger burden on employees.
I'm assuming the freeze is still on, but I no longer know anyone working there.  They left!

[Shelley]

The Archdiocese of Chicago froze teacher salaries for next year. 

[delbowz]

It wasn't just teachers - it was all employees - including staff, priests, and pastors as well. 

[treeguy]

Loyola University Medical Center has frozen salaries and hiring, as well as forced employees to take an unpaid day off.

[delbowz]

Can't leave off the top White House staff - Obama just froze everyone's salary for those making $100K or more.

Also, Wynn Casinos cut hours, salaries and bonuses.

It's going to be a VERY intersting contract negotiation here locally...

[Ted]

  This is why I think pension funds, including government pensions, are going to be phased out over the next decade and be replaced by contributions to 401K or 457 accounts.  Pensions guarantee an outcome where as 401K just guarantee a contribution.

  It is easier to guarantee a contribution year by year than it is to guarantee an outcome based on the market and investments.

  Ted

[n01_important]

Maybe we should do the same with Social Security.

[rbain]

Really? After the last 3 months are you REALLY suggesting that Social Security should be put in the MARKET?

[n01_important]

At least I would have the money and only myself to blame if it's lost.  Also the pay-as-you-go system doesn't work.

[OakParkSpartan]

Really? After the last 3 months are you REALLY suggesting that Social Security should be put in the MARKET?

I would say the same about 401k's as well.  The risk was ALL on the employee, with little or no training to manage that risk.

[Ana]

I've stopped checking my 401(k) and I'm hoping for the best when I retire.  I've moved future investments into the safer zones to ride out the current economy.

[Ted]

I've stopped checking my 401(k) and I'm hoping for the best when I retire.  I've moved future investments into the safer zones to ride out the current economy.

  When the market took a downturn in 2001, I looked at the 10 and 20 year analysis of the various funds and the "safe" funds like PIMCO did a;most as well as the market funds.  The market funds had more highs but they also had more lows.  From a long term perspective, the safe funds were yeilding 5% to 6% every year where as over the last 20 years, the market funds were yielding 7% to 8% on avergage with more highs and more lows.

  Since I was getting closer to retirement, I decided in 2001 to put all my 401K money in the safe funds and I am glad I did that.  I would rather get a steady return of 5% per year than a situation where I was getting over 10% some years and then see my account go to 50% of what it was in just a few months (which is what happened in 2001).

  Ted