OpenGov Hack Night presentation by Ben Galewsky, David Melton, Nathan Pinger, Denis Roarty and Tim Sharko about modeling pension reform in Illinois.

1. Modeling Pension Reform in Illinois
We are a group of volunteers trying to educate public
employees, pensioners, tax payers and policy makers
about the math behind pension systems, the current debt,
and possible solutions.
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2. Open Gov Hack Night
● Our group was born out of the Open Gov Hack Night
which is dedicated to “working at the intersection of
open government, cities, and technology”.
● Our topic is one of a dozen civic engagement projects.
● We meet every Tuesday in the Merchandise Mart.
● Core team of 6 volunteers committed to seeing this
project through. Extended team incorporates volunteers
and stakeholders ad-hoc who provide diverse points of
view, project feedback and subject matter expertise.
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3. Pensions 101
Defined Contribution (401k)
Defined Benefit
Funded ratio
Compounding
Cost of Living Adjustments (COLA)
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4. Magnitude of the problem
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Source: Illinois Public Pension Reform, What’s Past is Prologue, Eric M. Madiar,
Volume 31 Issue 3 - Summer 2014: Illinois Public Employee Relations Report

5. Magnitude of the problem
● $111 billion of unfunded liabilities the state owes five
Illinois pension plans: GARS, JRS, SERS, SURS, TRS.
● A levy of at least $ 23,000 on every family in Illinois.
● Or a loss of at least $146,000 in retirement savings for
every employee and retiree in these five pension plans.
● And the $111 billion might be an underestimate of $100
to $150 billion depending on assumptions
● Most importantly, this problem is solvable. In addition to
awareness, we need to build understanding of this
complex problem. 5

6. How did we get here?
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7. How did we get here?
● State’s failure to make required payments
● Structural issues
o Fixed COLA of 3%, compounding is at or above inflation
o Constitutional guarantees inhibit structural modification
o TRS incentive problem where employers (school districts) can control
the amount of benefits accrued but are not responsible for paying the
benefits.
● A menagerie of problematic policies like state-wide
retirement incentives, union leadership benefits, no cap
on pensions.
● Lack of taxpayer and voter engagement in the process.
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8. Building understanding of the math
All solutions start with an understanding of the problem.
We plan to create two tools to help with this understanding:
● Pension Calculator - for pensioners and interested taxpayers to enter their
personal information and compare current contributions and benefits to
proposed scenarios.
● Liability Calculator - for taxpayers and policy makers to explore what the
state-wide liability looks like under various scenarios. This is a rough
model of the pension systems given our limited access to data and
actuarial resources.
Complex problems cannot be solved in a fair and understandable way without
sophisticated but transparent tools to help.
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9. Who should pay for the solution?
While building understanding of
this issue, we see a need to
highlight the cost to ALL
stakeholders.
● Taxpayers versus Employees and
Pensioners is only one dimension to
‘Who Should Pay’.
● Another dimension is our current
generation versus future generations.
● We advocate that all solutions be
framed this way.
Current
Generation
Future
Generations
Taxpayers
Employees
and
Pensioners
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10. Levers of change
● Our tools can help all parties understand the
levers available to change the outcome.
● We can use the model to assess the value of
each lever’s impact.
● We can understand the boundaries of the
problem by showing the most extreme
solutions.
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11. Reform Proposals
● Madigan Plan
● Cullerton Plan
● Rauner Budget Plan
● Interesting models to understand extremes
o Most Extreme Immediate Pain
o Most Extreme Deferred Pain
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12. 35 Year
Retiree at
various
lifespans:
1. 93 years
2. 88 years
3. 83 years
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13. 35 Year
Retiree
Funds about
half of
retirement
benefits
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14. 22 Year
Retiree with
a gap before
retirement
Funds
nearly
all of
retirement
benefits
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15. 22 Year
Retiree with
NO gap
Funds only
about 40%
of retirement
benefits
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16. Modeling Pension Reform Statewide
Demographic
Data
Capital Market
Data
Public Policy
Data
Calculation
Engine
Published Plan
Actuarial
Reports
Aggregate
Plan Liabilities
Aggregate
Plan Assets
Aggregate
Plan Costs &
Contributions
Stakeholder
“What-If”
Analysis
State Pension
Plans Data
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Impact
Analysis
Actuarial &
Financial
Models
Iterative research and development to build actuarial
and financial models with the required data

17. Modeling Pension Reform Statewide
17Source: GRS Illinois SERS Actuarial Report as of June 30, 2014, December 15, 2014, Page 22.

18. Proposed Visualization Templates
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Source: New Report Sheds Light on Illinois Pension
Problems, December 17, 2014. The Civic Federation,
Institute for Illinois’ Fiscal Sustainability Blog.
Source: GRS Illinois SERS Actuarial Report as of
June 30, 2014, December 15, 2014, Page 15.

19. References
http://www.civicfed.org/iifs/blog/new-report-sheds-light-illinois-pension-problems
- Civic Federation New Report Sheds Light on Illinois Pension Problems (graph)
https://www.srs.illinois.gov/PDFILES/Valuations/GARS/gars%202014.pdf - GRS
Illinois SERS Actuarial Report as of June 30, 2014, December 15, 2014
http://www.nasra.org/Files/State-Specific/Illinois/IL%20pension%20history.pdf
Illinois Public Pension Plans: What’s Past is Prologue
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20. We could use your help
● Data
o Access to detailed plan data provided to actuaries
● Expertise
o Access to state actuaries staff and models
o Javascript developers
o UX Designers
o Marketing
o Quants
● Becoming part of a coordinated effort
o Input on what is politically and pragmatically feasible
● Other approaches the team should consider
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