Ahhh, Labor Day. It’s the unofficial end of the summer and the beginning of the school year. It’s the time for working stiffs–especially those of us doing the slow crawl toward age 65–to reflect on how far we’ve come and how far we’ve got to go. And, for thousands of workers with the State of Illinois, it’s time to think about . . . early retirement!
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Early retirement?
Yes, my fellow private-sector stiffs. This is a gubernatorial election year. Soon the air will be full of campaign promises about “fiscal accountability” and “no new taxes.” This will be followed, on Nov. 3, by an election in which someone named Glenn Poshard or George Ryan will be chosen as our next governor. On Jan. 11, one of these men will accept the reins of power from outgoing Gov. Jim Edgar, who decided not to run for a third term. Whereupon the air over Illinois will be filled once again, not with promises, but with tax-funded parachutes. There will be golden ones for many of Jim Edgar’s inner circle. (In recent months the governor has appointed several of his senior staffers to salaried seats on various state boards and commissions.) And, if everything goes as planned, there will be little silk parachutes–called early retirement incentives, or ERIs–for thousands of the rank and file.
For weeks now the excitement has been building up and down the corridors of state government. The grapevine says it’s time for civil servants to get out their pocket calculators and crunch the possibilities: age, length of service, ERI bonus points, expected monthly pension benefit.
Oh, the joy! Instead of waiting uneasily for a Poshard or Ryan administration to take over, instead of enduring a new boss or department head (who would just as soon you’d quit so he or she could bring in more of their own “team,”) you could be, as they say, outta here. And you’d be going with state-subsidized health insurance, with a souped-up state pension and with the ability to go find another job in a booming private-sector labor market.
So far the powers-that-be have been keeping all this close to the vest, but at 10 a.m. Tuesday in Room 16-504 of Chicago’s James R. Thompson Center, something called the Illinois Pension Laws Commission is scheduled to unfurl the silk.
It’s high-quality material: Starting Jan. 1 and during a “window” of several months, state employees (except state police) who are 50 years old and have five years of pension-covered state service would be eligible for early retirement. As a special incentive, takers could buy up to five years of additional pension credits (worth about $80,600 over the duration of an average retirement) by pre-paying about $5,307 in pension payroll contributions. That’s a return of $15 for every dollar contributed, or a bit better than my 401(k) has been doing lately on Wall Street. And if early retirees can’t afford the $5,307 up front (which is unlikely since most also would be getting lump-sum payments for untaken vacation and sick leave) then no problem. The State Employees’ Retirement System will collect the money in installments deducted from a retiree’s first 24 monthly checks.
In evaluating an earlier version of this plan, state-pension consultants Watson Wyatt & Co. estimated that 17,854 employees would be eligible, and that some 35 percent of them, or 6,256 of the state’s most seasoned employees, will take it. Others familiar with the situation–political as well as economic–say the percent of takers could easily exceed 40 percent of eligibles.
What’s all this going to cost taxpayers?
Even the conservative Watson Wyatt forecast shows a net liability increase to the state’s already underfunded pension system of more than half a billion dollars. And there are other, not-so-obvious costs: like adding another 6,256 recipients to the state’s subsidized health-insurance program for retirees; like those lump sums owed for accrued vacation and sick time; like the overtime that will have to be paid to non-retiring state workers as they scramble to keep the state running while new workers are hired and trained.
Add it all up and it’s highly unlikely there will be any net savings just because the new hires, as a group, will be paid less than the retirees. Keep in mind there is no overall downsizing or merger going on here (the usual reason corporations offer early retirement) just a massive, person-for-person substitution. Nor does this cost/benefit calculus take into account the chaos that is apt to occur next year as thousands of the state’s most experienced employees leave just as a new set of managers (be they Poshardites or Ryanites) take over.
There is no guarantee, of course, that the bipartisan Pension Laws Commission will go along with all this. And even if it does, the state legislature would have to pass it during the upcoming fall veto session and Gov. Edgar would have to sign it into law.
Then again, the real business of the veto session will be conducted after the November election, when Springfield will be a veritable pond of lame ducks, with Jim Edgar paddling as hard as anybody. It could be an easy sell, this plan to take care of the Edgarites while making room for the next generation of state workers, be they Republican or Democrat. All for just a half billion, plus incidentals.
So much for Labor Day reflections. It’s enough to make a guy skip work Tuesday and picket the Thompson Center.