With the first of the Baby Boom generation having reached the traditional retirement age of sixty-five in 2011, the number of retirement age individuals is expected to grow by 10,000 each day for the next fifteen years.
By 2030, when the last of the Baby Boomers will have turned sixty-five, an estimated 18% of the US population, or sixty-five million Americans, will have reached retirement age.
Up In Smoke provides a startling examination of the status of each of our nation’s retirement systems and explores how a pending retirement crisis could threaten the US economy. Those nearing retirement, as well as generations to follow will increasingly be seeking an understanding of how we arrived at this difficult place and what hope lies ahead. Up In Smoke provides those insights.
Richard DeProspo is an investment professional with over 30 years’ experience advising state and local governments throughout the country. An expert on public employee pension management, he has lectured widely on the topic and advised numerous municipalities and public pension funds on the proper management of employee retirement liabilities.
Mr. DeProspo holds B. A. and M.B.A. degrees from the State University of New York. Up In Smoke in his first non-fiction work.
Illinois' Underfunded Pensions Imply Further Tax I
Many cities and states in the US now face staggering levels of unfunded public employee retirement liabilities. Some may be inclined to dismiss the news, thinking it's simply not their problem. But for residents in these communities, it very much is. Whether taxes on personal income, property or retail sales, nationally, 91% of state and local government revenues come from taxes on individuals. Here's what it means to the State of Illinois.
Up in Smoke
This may leave the reader wondering where the money will come from for Illinois to actually fund what it is so committed to pay. It turns out the state’s options for raising revenue are actually quite limited. Yes, there are a variety of sources of tax revenue, including taxes on gaming, utilities, motor vehicle fuel, beverages, etc., but the big enchilada is the personal income tax, accounting for over one-third of the state’s budget, with sales taxes - also largely a tax on individuals - accounting for an additional 20%. In fiscal 2012, the state legislature in fact turned to its taxpayers, substantially raising the personal income tax rate (following a 30% rise in corporate income tax rates the year prior). With greater tax revenue, 2012 turned out to be a record year for the state’s income, with revenue increasing by $5.8 billion. Despite the tax windfall, though, Illinois still recorded a budget deficit, as it has by the way in every year since 1999. It is from this platform of rising taxes and budget deficits, not unlike that of many other states, that Illinois faces the greatest challenge to its solvency yet - an unfunded pension liability that is 260% of its annual revenue.