Kentucky’s Pension Crisis Cannot Be Ignored
Moody’s downgraded all Chicago debt to “junk” status on May 13, including City, school district and park district paper. The move follows the opinion issued by the Illinois Supreme Court that certain pension benefits could not be altered under the state constitution.
The Chicago Teachers Union has also sued the Chicago School District, accusing the District of failing to bargain in good faith to reach a new contract. The District requests that teachers begin to pay more towards their own retirement. In 1981, the school district bargained, in lieu of salary raises, to pay 7% of the 9% that each teacher pays towards his own retirement: so the “employer” paid its own portion PLUS approximately 80% of the employee portion, since 1981. Teachers have had 2% of their paychecks withheld for retirement since 1981. According to reports, the City “owes” a teacher who retired in 2011 approximately $2.4 million during retirement.
The public sector and the private sector continue in a complete disconnect, and Kentucky is just masking its issues for now until our fiscal turmoil becomes a true fiscal crisis. Private sector workers pay 6.2% social security tax, plus whatever additional percentage they withhold for their own 401(k) benefits. When they retire, that is all they have … no long-term “pension” benefits that someone else supposedly pays them for life. The public sector retirement crisis is here. The only question is what the politicians are going to do about it.
For Chicago, Chapter 9 is not currently an option under Illinois law. For Kentucky, the crisis is most likely going to end up in federal bankruptcy courts, unless Frankfort acts and acts quickly. Bankruptcy is all about facing harsh unrealistic situations in an organized fashion, and that is unfortunately what is upon all citizens in the Commonwealth.