Keefe: Gov't Will Continue to Financially Struggle for Decades to Come

Thursday, July 6, 2017 | 0

Watching the mess that has gone on and continues in Springfield, one has to wonder if there is any chance it is ever going to calm down and fly along traditional lines of state government.

Eugene Keefe

In my view, the worst-run state government in the United States appears to be treading water in a hurricane, not going forward and not falling dramatically back. Remember, it remains at the precipice of total economic disaster.

In my view, the Illinois debt situation isn’t going to get significantly better without major changes in leadership and law. The problem with getting rid of the bad leaders is hundreds of thousands of current and retired state workers vote, vote and vote for them to ensure they keep getting their fake pensions. I truly doubt we have people in place with the brains to get things done that strongly need to be done.

The Better Government Association did a recent article that indicates our state has about 480,000 retirees currently being paid about $17.3 billion every year, with regular higher-than-COLA increases or about $500 million every year at taxpayer expense.

Both I and the BGA, in our own ways, promise you that most of those pensions are fake in the sense that the state and other Illinois government bodies have never set aside anything close to amount needed to ensure taxpayers aren’t called on to make up the widening shortfall. Whenever I see a T-shirt that says “A pension is a promise,” I always think “A fake pension is a fake promise.”

I look fondly to the north and Gov. Scott Walker of Wisconsin. He has worked hard to cut his state’s annual spending by $5 billion a year. The savings is being passed along to taxpayers. I am sure he should be able to lower state taxes and not keep increasing them to record levels as our goofy legislators are doing and will keep doing for decades.

Gov. Walker has done this by consolidating state agencies and streamlining their systems. We can only wonder if there is anyone in this nutty state who can come to power and do what Gov. Walker has done.

I assure my readers that we try to be as bipartisan as possible. I don’t care whether a Democrat or Republican leads us from the swamp of over-spending, over-borrowing and crushing debt. I just want someone from our state to do it.

Immutable engines guaranteeing financial destruction of this state until removed

Last week I wrote about the worst-funded fake government pension I am aware of, called GARS, or the General Assembly Retirement System. A participant in GARS has to work only four years to become fully vested and entitled to constitutionally protected benefits for life. As I advised, for an investment of about $32,000 in total, the former legislator may receive several million dollars if he lives long enough.

His retirement money will quickly come from you and me when the participant’s contribution, state match and investment income is rapidly exhausted. This financially destructive fake pension program could be ended in only four years by enacting legislation barring it for everyone but current participants.

A similar financially destructive engine is JRS, or Judicial Retirement System. Participants pay a little more than GARS but the payout is wildly higher. If you aren’t aware, in my view, the Illinois judiciary is the best paid judiciary in the United States, and your local traffic court judge gets paid more money than Gov. Rauner, the secretary of state, treasurer any statewide official. Right now, judicial pay starts at over $200,000 a year, and they retire at 85% of their highest salary with guaranteed annual compounded increases at 3%. Here is the math:

• Judicial contribution to become fully vested equals approximate annual pay, or about $200,000.
• Return on the investment of $200,000 is paid at 85%, or about $175,000 in the first year.
• The second year of retirement, retirees have used up their entire 20-year pension contribution plus the state match and any investment income.
• Third year, the judicial retiree is back on the taxpayer’s dime.
• In the 23rd year of retirement, the first year payout of $175,000 will have doubled to $350,000 a year.
• The pension will continue to triple and quadruple if they live long enough.

I feel an Illinois judge could put in $200,000 and get $3 million to $7 million back from you and me in fake pension payments.

If you want to be mad at me about reporting this, you are going to have to be mad because I don’t want to pay former judges who are no longer working, as judges. And I promise my math is accurate — if you want to be mad about me about the math, you are clearly blaming the wrong party.

Like the GARS program above, this destructive financial engine could be ended right now but would have to continue to allow the current participants to get billions of our tax dollars over the coming years.

What does this have to do with workers’ comp in state government?

As I have told my readers for years, I have many sources that indicate there are hundreds of former state workers who are getting lifetime “odd-lot” total and permanent disability awards. The cost to taxpayers is well over $100 million.

Our WC rates for such claims are very high and there is also a cost of living adjustment component paid for by you and me. This concept could all end very rapidly with a law mandating our state retrain and rehire such workers at sedentary and light-duty state jobs when such jobs open up. There are hundreds of such jobs that are filled every day. While we are at it, why not mandate all police and firefighters getting line-of duty disability pensions also be put back to such work?

In short, we are almost certainly going to be raising taxes and adding new taxes to allow our leaders to tread water and pay some bills for now. If we don’t find and block/end these sorts of destructive financial engines, we are going to need to continue to raise taxes and add more taxes, to then raise taxes again and add more taxes. The outflow of jobs and businesses to our sister states will continue and may accelerate.

Eugene Keefe is a founding partner of Keefe, Campbell, Biery and Associates, a Chicago-based workers' compensation defense firm. This column was reprinted with his permission from the firm's client newsletter.