This Article is About
state pension fund
bailout plan
assets and liabilities
retirement plans
pat quinn
debt crisis
pension system
Blame The Accounting Practices When Your Illinois State Pension Fund Crashes
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Blame the Accounting Practices When Your Illinois State Pension Fund Crashes

The Illinois State Pension fund is in horrible shape and some people blame the politicians for mismanaging the pension funds. The State of Illinois passed Legislation that provided many years of pension holidays leading to Illinois not making the required contributions. However, this is not the only reason for the Illinois State Pension fund to be in serious trouble. The accounting practices of Illinois State government is also a contributing factor. The state’s expenses are not always recorded in the budget year for which expenses are incurred. There is a better accounting method for Illinois to use if the state is serious about fixing this problem going forward but I haven’t heard Governor Pat Quinn suggesting to change the current accounting practice in order to fix the pension system or the state’s overall debt crisis.

Illinois and most other states use industry accepted actuarial accounting practices which gives the appearance of a liability or debt to be spread out over future years and thus making the current year’s budget situation appear better than it actually is. Is it fair that Illinois uses misleading accounting practices? F.A.C.T. based accounting would keep a running tally of the pension benefits in the current year and there would be a true value known for all assets and liabilities.

The reason the current archaic accounting practice is an industry accepted practice is that this helps the current administration look better in the current year but continues to push more debt and liability to future years. Unfortunately, all of this debt eventually caught up with the Illinois Pension system and the Illinois's overall budget situation which is among the worst of all fifty states. Illinois has $64 Billion in net reported liabilities and $66 Billion in hidden retirement liabilities according to the Illinois’ June 30, 2009 audited Comprehensive Annual Financial Report and retirement plans’ actuarial reports. Is it time for a pension bailout plan?

There may be some hope but I wouldn’t count on Governor Pat Quinn stepping up and making the necessary changes to the State of Illinois accounting practices. No governor or politician will want to make the budget numbers appear suddenly worse than previously reported even if it’s the truth. F.A.C.T. based accounting practices provide easy to read transparent balance sheets which make it much easier to calculate retirement benefits to retirees each and every year instead of deferring the debt to future generations.

Other nations currently use similar budgeting and accounting practices as F.A.C.T. This might give some hope to Illinois state government employees. However, if you are really counting on your Illinois State Pension to provide you financial security and passive income for life in your retirement years you need a pension bailout plan. I don’t think the pension will be there for you in just a few short years and it would be very wise to start a Plan B. I really hope I am wrong but do you really want to sit idle hoping that the Illinois governor will take the proper precautions to save your pension? I recommend educating yourself on the status of your Illinois State Pension and then make a decision to protect your financial future today.


Street Talk

Sounds like they have a mess here

Reply
  about 1 decade ago

Yes they do have a mess Shawn. Unfortunately most people counting on their pension don't realize just how much of a mess it is and how it will affect them.

Reply
  about 1 decade ago

Your article of blame the accounting practices when your Illinois state pension fund crashes is relevant in many ways beyond Illinois. Pensions may have been intended to provide you financial security but that concept seems to have washed away. I really hope I am wrong too but I don't think planning to retire is something most people of retirement age today will be ably to rely upon. Planning to work a little bit ... and passive income for life... make more and more sense as our global economy stomps on people's savings including pension plans.

Reply
  about 1 decade ago

You are so correct Cynthia. Pensions in theory are fantastic but unfortunately soon many government employees and retirees will be facing a harsh reality. I really want to make as many people aware of the true status of their pensions and how they can begin a new ways to earn passive income. And yes, all of this goes beyond Illinois. Stay tuned for some more articles on other states and their troubled pensions. Thanks so much for insightful comments Cynthia!

Reply
  about 1 decade ago
AJ  

Rodney has a point. Politicians pass pension laws that are in their own favor simply to get reelected or to avoid bad press. They may be in office for 3 years or 30 years, but their pensions are never once at risk. Why? Because they write the rules on their own pensions. Where does it make sense that they can work for a handful of years and receive a very high pension for the rest of their lives, but state employees, working for much less money and for much longer periods of time, get their pensions taken away. Plan B is a necessity for everyone as there is no job security or retirement security anymore.

Reply
  about 1 decade ago

Your right AJ. The system is set up so nice for many of the politicians and even judges. If you take a close look at Judge's benefits and pensions they are protected so much better than the average government employee. The new economy will be based on things other than pensions. Illinois can audit it's citizens but the Illinois pension system needed its accounting system audited a LONG time ago

Reply
  about 1 decade ago

Great article, coming from the other side of the world where mis-use of all funds happen on a daily basis, I was actually surprised to see this happens over there as well.

Reply
  about 1 decade ago

As they say, the world is indeed round!

Reply
  about 1 decade ago

Don't be surprised Rob. I can't speak to any misuse in S. Africa with certainty but I can tell you there is a lot to be desired in Illinois and the US in general. Thanks for commenting

Reply
  about 1 decade ago

This has been going on for years with many pension plans all across the nation. Politicians and governments at all levels have misused and abused the peoples money and there needs to be action taken at all levels. It just seems you cannot fight these swindling politicians that are looking out for themselves. You can bet they will get their retirement funds as they write the laws. We all need to look for other means of retirement as you mentioned. You definitely need a plan B or the life you had planned for many years could be null and void. Work on that plan B. Great article Jay. You get a big tweet on this one.

Reply
  about 1 decade ago

Thanks Rodney. It really is amazing that politicians continue to get away with abusing the pensions of so many government employees. Soon people will realize that their pension is a promise on paper but reality will show something entirely different. Working on plan B is a very smart move.

Reply
  about 1 decade ago
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