Thursday, September 20, 2012

Chicago Teachers Pension Plan is Broke

Like almost every public pension plan in America, the Chicago teachers' public pension plan is not going to survive.  Mary Williams Walsh's article in today's New York Times lays out the numbers.  With just over $ 10 billion in assets the fund is paying out more than $ 1 billion more than they take in every year.  The end is clear.

Why is this the case?  Because it is very easy for politicians to make promises of things that they will do in the future, while providing benefits right now.  Social Security operates on this premise.  Give the benefits now, pay for them later.  But, of course, they never pay later.  That part is simply kicked down the road.

We have already witnessed pension funds cutting the benefit payments for folks that have already retired.  We are about to see a wave of such actions.  The Chicago teachers fund is in much better shape than the Illinois state employee fund.  So, guess where that one is headed.

The crime is that politicians pretend that nothing is wrong.  They castigate those, like Paul Ryan, who propose ways of providing funding for programs that everyone already knows will go broke if nothing is done.  So, the programs go broke. 

This means the future for the elderly of the future is bleak.  Medicare and social security will not be there for people who, today, are in their middle working years.  They will have almost nothing when they reach retirement age.  The situation is worse than that for public employees in many states where even folks in their fifties will have no retirement income in another decade.

Those who are currently retired are at risk as well, but their situation is not nearly so dire as those in the generation to follow.

Instead of pretending that these systems will be available in the future, the public should be made aware now that their retirement dreams are dreams that will not be fulfilled.  Then these folks can begin saving for their old age.  Pretending that what is clearly not going to be there is going to be there is a cruel policy that will produce untold misery for the future elderly when they realize, too late, that what was promised is not going to be delivered.