DeKALB – Jim Tobin says the state’s pension system will collapse unless it switches from a defined-benefit system to a defined-contribution, 401(k)-type system, similar to what many private-sector workers have.
The president of Taxpayers United of America, who spoke Wednesday in DeKalb, said the current pension system was helping to make a number of DeKalb County retirees into multimillionaires.
A 2011 investigation by the Daily Chronicle showed 101 people who had retired since 2000 and worked at a public agency in DeKalb County collected six-figure pensions annually.
“Illinois’ government bureaucrats have been feeding off taxpayers in DeKalb and all across the state for the last 30 years, receiving gold-plated pension benefits in return for the votes they give politicians,” Tobin said.
Several proposals have been made to address the shortfall in the state pension system, but state legislators have yet to make sweeping changes.
Ideas have included shifting the burden of teachers’ pensions from the state to local school districts, as is the case for Chicago Public Schools. Reducing the amount of pension payouts to which an annual cost-of-living adjustment applies has been proposed, along with increasing the retirement age for workers and increasing the amount employees must contribute to the pension system.
However, any changes that effect those already receiving benefits likely will be challenged in court.
Not everyone agrees with Tobin’s portrayal of retirees. Cathy Hill, president of the DeKalb County Retired Teachers Association, said it’s a disservice to assume every teacher receives a lucrative pension payout.
“We just don’t make that much,” Hill said. “All we want is what we were promised.”
Tobin and Taxpayers United want to change the promises in the state’s pension system. They want to raise the retirement age to 67, increase employee contributions by 10 percent, increase health care contributions by 50 percent, eliminate all cost-of-living adjustments and switch to a defined contribution system.
“They can still get their million-dollar pension payouts,” Tobin said. “We’re not cutting their pension payouts. They are just paying a little bit more. Instead of paying 3 percent or 6 percent, they’d be paying 10 percent or 12 percent.”
The group also wants to eliminate pensions for new hires and replace them with a 401(k)-style account.
Despite repeated calls for action on pensions, the 97th General Assembly adjourned without addressing the problem. This led to Fitch Ratings downgrading the state’s financial outlook from stable to negative earlier this month.
Using a Freedom of Information Act request, Tobin compiled a list of the top 100 pension earners at Northern Illinois University and local school districts, respectively. He also compiled a list of the top 20 pension earners at the city of DeKalb and the top 25 in the DeKalb County government. The lists can be found online at www.TaxpayersUnitedOfAmerica.org.
The lists include a retiree’s employer, their annual pension, how much they contributed to it and their age at retirement. Tobin and his staff created the list making the assumption of a cost-of-living adjustment of 3 percent compounded annually, and that a retiree lives to be 85 years old.
By Tobin’s count, some of the teachers and other government retirees will have collected millions of dollars. Kevin Hickey, who retired as deputy sheriff of DeKalb County in 2010, tops the county list, collecting a lifetime pension payout of more than $5 million by the time he’s 85.
“I don’t think any of these people are deserving of what they are receiving,” said Tobin, who later described the payouts as immoral. “These people are receiving million-dollar pension payouts. It’s ridiculous. It’s absurd.”
Dave Urbanek, the public information officer for the state’s Teachers’ Retirement System, said teachers outside of Chicago must contribute 9.4 percent of their salary to their pension, although some school districts pay a portion of that requirement under union contracts.
Increasing the contribution requirement would mean less take-home pay, he added.
“You have to weigh the current needs of the teacher versus their retirement needs,” Urbanek said.
Urbanek said the average teacher pension is $48,000, and that if it were extended over time, it would be $960,000. But it’s not that simple.
“The money is not put in somebody’s mattress. It’s spent ... all over,” Urbanek said. “To say people are getting rich on pensions is simply not correct.”
Top local pension earners
Name last job annual pension contribution age at retirement amount collected Joel Milner NIU research professor $261,396 $429,142 63 $1,341,262
Robert Hammon School District 427 superintendent $145,925 $149,037 58 $954,285
Kevin Hickey DeKalb County deputy sheriff $109,864 $129,874 56 $258,493
Kim Williams City of DeKalb information and technology director $94,671 $85,137 56 $238,526
Source: Taxpayers United of America