I have a friend that works as an employee for the State of Illinois. The other day i asked him what he thought about this ordeal in Wisconsin. He stated that they must not have learned how to do a slight of hand there like Illinois has. So here is the rest of the conversation.
YCV: What do you mean slight of hand in Illinois?
SE: The union refused to help George Ryan address the fiscal issues Illinois was having. But when Blagojevich came along they were open to pension reform. But it was more of a slight-of-hand, a Ponzi scheme in fact.
YCV: How was it a slight-of-hand?
SE: Well they agreed to the State employees paying around 6% of their retirement. Mine runs right around $500 a month. But when they old us that they also said that ‘they’ agreed to give us a raise to off set this cost to us.
YCV: So in the long run you broke even?
SE: No, not at all. Since they raised my base pay to cover this new cost I incurred they also raised my retirement amount. My retirement pay is based on my base pay, or best 4 years out of last 10 including overtime. So I broke even, but it raised my retirement pay as much.
YCV: So that is a slight-of-hand, looks like you are paying but you actually get a raise. Wow.
SE: It gets better that that. The legislators see that the employees are now paying their share they take what they would have paid to the pension and figured they could spend it elsewhere rather than paying down the pension debt. But in addition they see the employee contribution as additional income they can borrow from the pension system.
YCV: Wow!
SE: Let me put it this way. Just for argument lets say that the employee contribution for the entire State is $! million. The legislators see that $1 million they don’t have to pay the pension system as $1 million they can spend elsewhere (forget the fact that the $1 million is now going to payroll). Then they see the $1 million as new revenue, another $1 million they can spend. They also see the $1 million that the employees contribute to pension as another $1 million they can borrow and spend. So the $1 million they did not save now becomes $3 million they can spend.
YCV: I see why you said it could be called a Ponzi scheme.
SE: I was told this was nothing new. When we got the notice that we would contribute and then they would pay and older employee told me years ago they paid for pension and the State wanted to save money (or appear to) told them they were not getting raises (well that is what he public know - no rises) but the State was going to pay the employees share of pension to offset. That was before my time so I don’t know that for sure but does sound like the slight-of-hand that they do.
So you can see how ‘Legislative Economics’ has got the States as well as the United States in the economic condition it is. Nancy Pelosi understand how you can get $3 million to spend with no new revenue. The legislators have a very hard time understanding how we can not see how this works, after all it makes perfect logic to them.
God help us all!!!!
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