State lawmakers' pension jackpot

This story below appeared in the Chicago Sun-Times. Hat tip to the folks at The Family Taxpayers Foundation.

Just an FYI. Teachers and administrators can collect their full pensions and work part-time. They can also work full time in other states and collect their pension from Illinois. Every time you vote yes for a referendum you condone this avaricious behavior on the part of your legislators, school employees and government employees.

State lawmakers' pension jackpot

April 6, 2003
BY TIM NOVAK STAFF REPORTER
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Art Berman hit the pension jackpot.

The retired state senator's pension is $164,612 a year, almost three times higher than his final salary with the state.

Berman finagled state laws to land a pension that is larger than the pension of any other retired elected official in Illinois, including the past three governors.

His pension is, in fact, $14,000 higher than Gov. Blagojevich's salary.

Berman, who retired in 2001, is among the latest former legislators to jack up their pensions by basing it on a much higher salary from another government job. It's a loophole available only to about 200 current and past legislators elected before 1995, including Blagojevich and Mayor Daley.

But that's just one of several pension sweeteners legislators have given themselves over the years, allowing them to live large in retirement while so many others must scrimp to get by. Most government workers don't get anything close to such generous pensions. Nor do most of the people who must pay for them--the taxpayers.

Berman's pension is based on his $140,416 salary with the Chicago Board of Education, a job he got the day after he left the Senate and held for just 20 months. But rather than collecting a pension based on just 85 percent of that school salary, as provided by state law, Berman got an extra 33 percent boost because he worked in the Legislature longer than necessary to get a top pension. That gave him a $164,612 pension--more than his actual salary.

On top of that, Berman's pension automatically rises 3 percent each year to keep up with inflation.
And, on top of that, he never really retired anyway. Immediately after quitting his schools job--so he could start collecting his big pension--he went right back to work for the schools under an outside consulting contract that pays him $80,000 a year.

"I think that the bottom line is that I worked very, very hard for 31 years in the Legislature,'' said Berman, 67, a Chicago Democrat. "What I receive in pension is what the law provides for me.''

Berman paid $109,292 into the state pension plan in his 31 years in the Senate, but even allowing for the interest earned on that money, he's already recouped it all. From here on out, the state's financially strapped retirement system and tax-payers will finance his retirement.

"These public pensions are much more generous than most people experience,'' said Lawrence Msall, president of the Civic Federation, which monitors government spending. "There needs to be discipline attached to the benefits, such as tying increases to the rate of inflation, rather than an arbitrary level, and setting a maximum level of benefits.''

Generous government pensions--all guaranteed by taxpayers--abound across Chicago, Cook County and Illinois, according to a Chicago Sun-Times analysis of 15 retirement plans with more than 200,000 retirees. If they live long enough, most beneficiaries will receive pensions that exceed their final salaries because of the automatic 3 percent raises every year.

All but two of the 15 retirement plans are set up in such a way that employees can merge their service from various government agencies, such as the city of Chicago, Cook County, the state of Illinois, and any school district. They can move their service into the most generous plan in which they worked so they can collect the highest pension possible. For example, teachers elected to the Legislature can transfer their teacher pension credits into the legislative plan, the most lucrative. All of these government retirement plans let employees begin collecting a pension as early as age 55, sometimes at age 50 with reduced benefits.

While Berman's pension is tops among elected officials, he trails many other government workers, particularly University of Illinois faculty, one of whom has a $305,007 pension, the state's largest. A retired U. of I. athletic coach gets more than $176,000. But, unlike Berman, these government workers don't get pensions that are larger than their final state salaries.

Such generous deals--unheard of in the private sector, where most workers save for retirement through 401(k)s--have left government pension officials wondering whether they can make ends meet. The huge payouts strain many retirement funds that are woefully undercapitalized. Their investments, particularly in stocks, have plunged in value and many governments--especially the state--have failed to contribute their share of pension costs.

Among the 15 funds, the legislators retirement fund is the worst funded, with just 29 percent of the money needed to pay these pensions. And, adding to the problem, it's difficult for pension fund managers to know how much money the fund should have because legislators constantly find ways to jack up their pensions, just before they retire, far above their salaries.

"Government is the last bastion of rich pensions,'' said Mike Johnston, a pension expert for Hewitt Associates, a human resource consultant in north suburban Lincolnshire. "Private companies have reviewed their pension plans. They've cut their pension plans. They've put in 401(k)s. But government has done nothing.''

Government workers justify their higher pensions by pointing out that, for the most part, they are barred from participating in the Social Security system.
Dozens of government workers have significantly boosted their incomes by collecting a pension from one agency while working for another. Among them are former Chicago Police Supt. LeRoy Martin, Cook County Judge Nancy Drew Sheehan, state Sen. Lou Viverito and Secretary of State Jesse White. The Sun-Times will report that part of the story in Monday's paper.

And hundreds of retirees get at least two government pensions. These include former Cook County Judge John Beatty, former Cook County Board President George Dunne, former state Sen. Beverly Fawell and former state Rep. William Laurino.
*****

Legislators aren't the only public officials taking advantage of lucrative pension loopholes. Like Berman, several DuPage and Will county elected officials are receiving pensions based on their last day's pay. That loophole is open to scores of elected county officials who held office between 1994 and 2001.

Berman said he was surprised to hear his pension is tops for all legislators. But he doesn't think his former constituents will object. "I think they'll be surprised," he said. "But would they turn the clock back 31 years and not have Art Berman serve at all? I don't think so.''

Almost half of the 249 retired lawmakers now collecting pensions receive checks that exceed their final salary as a legislator, state records show. Illinois legislators, who set all government pension laws in the state, have given themselves the best benefits.

Legislators with 20 years of government service can get a pension equal to 85 percent of their final day's pay, which can come from virtually any job in a city, county or state agency. After several used the loophole to strike it rich, the Legislature closed the loophole for those elected after 1995.

Under another loophole that one lawmaker wants to plug, legislators who serve more than 20 years--the total needed for a top pension--get a 3 percent boost in their pension for each extra year of service. The only catch is that they must be retired for a year to get that bump. Thanks to that rule, former Gov. George Ryan's pension will soar 39 percent next year.

Berman used both loopholes.

When Berman left the state Senate on Jan. 2, 2000, his salary was $59,657. That entitled him to a pension of $50,708, which would have jumped to $67,442 a year later because he had 11 extra years of service. But he rejected that option.

Instead, Berman went to work the very next day as the Chicago Board of Education's director of labor mediation services, hired by an old friend, Chicago Public Schools Supt. Paul Vallas. Berman retired from that post on Aug. 31, 2001, at which point his state pension could now be based on his $140,516 salary from the schools.

That gave Berman an initial pension of $119,440, which soared to $164,612 last year when his extra years of service in the Legislature were taken into account.

But all the while, Berman never stopped working as the school's director of labor mediation services. He went from a regular employee earning $140,516 to a contractual worker earning $80,000 annually.

"I have to keep 26 labor unions happy and the Board of Education happy,'' Berman said. "That's only part of my
responsibilities here. I sit in on legislative agenda meetings. I serve on three statewide commissions dealing with education policy and funding, and I'm constantly in touch with my fellow legislators and policymakers. "I fight for education and children,'' he said.

"I would have made a lot more money by not going to work for the Board of Education, going back to my law firm, and just drawing my pension based on my legislative salary.''