May 19, 2015
Mr. Arithmetic was wondering after seeing an article in the Chicago Sun Times that analyzed the distribution of pensions among former employees of the City of Chicago and the State of Illinois. The article began by telling readers:
“One of every four retired workers from the state of Illinois, the city of Chicago and the Chicago Public Schools is getting a pension of more than $60,000 a year.
“That’s 80,365 people in all.”
It then went on to say that 13,240 of these workers had pensions of more than $100,000 a year and 20,004 had pensions between $80,000 and $100,000.
So this group of retirees seems to be doing reasonably well, but what prompted Mr. Arithmetic’s interest was the statement:
“In all, the state’s five pension funds, Chicago’s four pension funds and the Chicago teachers pension fund are paying a total of $12.7 billion a year to more than 310,000 people.”
Here’s the problem. We apparently have total payments of $12,700 million. If this was just divided evenly among all 310,000 beneficiaries it would come to a bit less than $41,000 a head, but we know that many retirees get much more than this figure, so the rest must get much less. We can try to figure out how much less by doing some arithmetic and making some assumptions.
We’ll assume conservatively that the average pension for people who get more than $100k a year is $105k, the average pension for people who get between $80k and $100k is $85k, and the average pension for people who get more than $60k and less than $80k is $65k. That gets us:
13,240 * $105k = $1,390 million
20,004 * $85k = $1,700 million
47,121 * $65k = $3,063 million
Taken together this gives us $6,153 million going to these retirees. If we subtract that from $12,700 million being paid out in total, that leaves $6,547 million going to the remaining 229,635 retirees. That comes to an average pension for this group of $28,500 a year. This doesn’t seem too high, especially since most of these workers are not covered by Social Security so this will be the bulk of their retirement income.
As far as who pulls in these higher pensions, many of them are police and firefighters. The city reports that the average pension for 2,900 retired firefighters is $67,000. The average pension for 9,200 police officers is $59,000. Obviously there are others who fall into the Sun Times high pension group, but that’s a significant part of the story.
Note: My mother is one of these pension beneficiaries, although she is not among the Sun Times’ high income group.
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