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Illinois Turns Its Time for the Future

An Illinois judge has?ruled?unconstitutional the state’s 2013 law that decreased cost-of-living adjustments, capped pension amounts, the retirement age for workers whorrrre currently under age 45. For background, read?my interview?with Illinois state Daniel Biss, among the many co-sponsors with the 2013 legislation.

The state appeal the ruling towards the Illinois Top court as well as what happens there exists better left for legal minds. But what’s clear is the ruling is potentially very problematic for first time teachers and people who aren’t yet teaching.?Because states like Illinois have constitutional protections that lock in benefits for existing workers, the only way for state and local governments to handle funding problems could be to target new workers. Nearly every state has produced?less generous plans for brand spanking new workers, plans that will require new teachers to pay more money up front, live in their jobs longer before they “vest” within the system and are eligble for a good minimum benefit, and work longer before they retire with full-benefits. This situation can’t last forever.

Illinois can’t really cut considerably more. This season, involved in extreme under-funding of their pension system, and bound by the constitutional constraints, the state created a new plan for new workers. Robert Costrell and Mike Podgursky?calculated?what those benefits actually looks like thorough, 25-year-old female teachers. The figure below compares the pension benefit wanted to existing workers at the time of December 2010 (the dotted line) into the type of pension wanted to new workers hired after January 1, 2011 (the solid line).

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As Costrell and Podgursky write, “a 25-year-old entrant probably would not accrue positive net pension?wealth until age 51; if she left teaching before, she’d need to be cashing out her contributions than leaving her?profit on her pension.” In a profession like teaching with relatively high turnover, just a fraction of teachers will be this long. In reality then, Illinois is ?using a no-cost loan from your most of its new teachers. When the state should reduce costs at some point, it provides to produce?even less generous plans for future teachers. No one, such as courts, wants out for them.

This post originally appeared on TeacherPensions.org