Time is Running Out for TRS

The executive director of the Illinois Teachers Retirement System (TRS) has determined that the TRS could be insolvent as early as 2029.  The Springfield State Journal-Register broke this story.  The TRS is the state pension fund for teachers outside the City of Chicago participate.  It is funded by teacher contributions (in most districts - some districts pay the teacher's share), additional payments from school districts, and the State.  According to the story, the State already owes $43 billion.  Ingram's memo stated that the unfunded liability is so large that reductions in benefits for current retirees - such as a reduction in their current guaranteed 3% annual cost of living increase (COLA) - must be on the table. 

This TRS shortfall is exacerbated by pension-spiking shenanigans like those I discussed in .  But ultimately, the problem is an unsustainable system that needs revolutionary change, not just reshuffling of the deck chairs.  We cannot sustain a system that permits those who started work before the 2011 reforms to retire with full benefits around age 57 (if someone entered after college and had 35 years service).  Would it be better for the participants to reduce COLA, or for the system to collapse altogether?

A common refrain against changes to the pension system is that "teachers, education support professionals and university staff have always paid their share for their retirement and never missed a payment."  Guess what?  I (and my employers) have always paid my share of Social Security taxes and never missed a payment.  I bet the same is true for most readers.  Yet Social Security is also running out of money, and according to its trustees, will be unable to pay the current level of benefits by 2036.  Moreover, those of us in the private sector have no contractual right whatsoever to any particular benefit level, as the US Supreme Court ruled in Flemming v. Nestor.  Our benefits can be changed at any time - for example, by raising the retirement age and taxes on benefits, as Congress did in the 1980s.  Protest all you want about how "unfair" this is; it won't change.

From the Social Security trustees:  "Projected long-range costs for both Medicare and Social Security are not sustainable under currently scheduled financing and will require legislative corrections if disruptive consequences for beneficiaries and taxpayers are to be avoided. If action is taken sooner rather than later, more options and time will be available to phase in changes, giving those affected adequate time to prepare. Earlier action will also afford policymakers greater opportunity to minimize adverse impacts on vulnerable populations, including lower-income workers and those who are substantially dependent on program benefits."

It's time for the defenders of the status quo on public pensions to stop burying their heads in the sand.  Change is coming.  The question is whether it will be sooner rather than later - to allow us to "minimize adverse impacts" - or whether the defenders will fight to the brink of insolvency, causing much more disruption.