At the risk of sounding like a broken record, here’s the latest from the Chicago Tribune: “Pension boost tactic sidesteps laws to cost taxpayers millions.”
The latest [Tribune Watchdog] investigation centers on spiking in the municipal pension system, known by its initials, IMRF. It covers many local government employees in the suburbs and downstate. (Chicago and Cook County have their own pension systems for employees.)
And, like the earlier Tribune investigation, the latest one found that local agencies continue to pad pensions and often use exemptions in state law to get around any extra penalties for doing so. . . .
Here’s how it works: In many local governments, longtime public employees have been allowed to accrue balances of unused sick time or vacation time. They may also get retirement bonuses. Employees convert those to cash when they retire to produce what can be some fat final paychecks.
But to get the additional pension benefit, those big end-of-career payouts have to be timed just right. Pensions are based on the salary an employee has in his or her highest consecutive four years of employment, typically the last four years. But, since 1963, a law has limited how much of the final three months of someone’s compensation can count toward an IMRF pension. It’s meant to stop end-of-career payouts from spiking a pension.
So, to avoid the cap, employees time some of those end-of-career payouts earlier, at least four months before they retire, resulting in much higher pensions. . . .
Those extra costs are passed on to local taxpayers. IMRF formulas are set to collect enough money from employees and employers over time to cover future pension payments. But when compensation is spiked at the end of someone’s career, there’s not enough in the pot to cover the ballooned pensions. The bill for that padded pension is then forced on the local taxpayers where that employee worked. . . .
Some elected officials encouraged spiking.
In DuPage County over the past two decades, an era when public officials complained about losing good workers to the private sector, the county offered a significant bonus at retirement if employees stayed a long time. It also allowed employees to cash out unused sick time, and then let employees take those payouts up to six months earlier.
It was an easy political choice: The huge costs would come years later, when employees retired and pensions spiked. The Tribune found that other local governments around the region made similar policy changes. Some had vague policies that savvy employees could use to dictate payout dates. Others had policies with very specific dates, offering a clear road map for employees to use the perk. . . .
In 2010, the Tribune published an investigation showing just how widespread pension spiking had become in the municipal pension fund. Reacting to that, state lawmakers the next year debated a bill that, like the 1963 law, aimed to curb the practice.
The 2011 bill didn’t forbid spiking but instead sought to penalize public agencies that did it. It required extra pension payments to be paid immediately for people whose compensation spiked more than 6 percent. The penalty was formally termed an “accelerated payment” because normally agencies were given 30 years to pay off extra pension costs for someone’s retirement.
The bill became law in 2012. But local governments found ways around the penalties.
OK, I should probably stop quoting the article, but it’s hard to pick just a few compelling lines here. It’s so dispiriting to repeatedly read about ways in which Illinois state and local governments cannot manage to look out for the people, the taxpayers, instead of looking out for themselves.
Is it this bad everywhere? Or is Illinois singularly wasteful and corrupt?
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