Much debate has been given over whether the state’s new pension reform legislation will end up hurting retired public employees, and by how much.
Now, some new numbers offer an answer: it could be a lot.
As reported by the Springfield State Journal-Register, the Center for Tax and Budget Accountability developed a formula to calculate estimated changes in retirement income over the years for a number of different scenarios. The Center calculated the effects on retirement income over the years of changes in annual cost-of-living adjustments, and found some startling numbers:
- In the first scenario, a retired teacher with 30 years of service and an initial annual benefit of $67,000 could, over the course of 20 years, see a cumulative decrease of $284,030.
- A retired Department of Children and Family Services caseworker with 25 years of service with an initial annual benefit of $30,000 over 20 years could see a cumulative decrease of $76,765.
- In the third scenario, a retired teacher, age 75, with 30 years of service and an initial annual benefit of $25,000 could see a cumulative decrease over 20 years of $137.
The bill changes how cost of living adjustments are paid out, creating pauses up to five years when those COLAs are funded and raising the retirement age for those aged 45 and under. The bill, backed by Quinn and the state's four legislative leaders, is expected to save the state $160 billion over 30 years.
Meanwhile, Crain’s Chicago Business is reporting Wall Street rating agencies, long sour on Illinois’ finances, are generally responding positively to the pension deal.
Fitch Ratings, Moody’s Investors Services and Standard and Poors have all said they believe the legislation is a step in the right direction, but will wait to see if the law survives expected court challenges before changing the state’s credit ratings.
Earlier this year, Illinois experienced a spate of credit rating downgrades due to its pension situation. The state’s pension system is currently underfunded by as much as $100 billion.