When Barack Obama was first elected to the U.S. Senate in 2004 he made what a financial planner might have considered at the time a rash and costly decision.
Just two days after that November election, the then 43-year-old Obama quit his old job as an Illinois state senator even though his new federal gig didn’t officially start for weeks. Had he hung on just one more month, Obama would have qualified to start collecting his Illinois pension when he turned 55 last August and, coincidentally, was preparing to retire from his latest job as leader of the free world.
Lucky for Obama, however, that Illinois pension law includes a lucrative perk for former state legislators like him. If the former president is so inclined, he can still take his pension now by simply writing a $13,804.50 check to the state of Illinois. Otherwise, he would have to wait until his 62nd birthday.
Such an expenditure now by Obama could unlock a pension payout to him over the next six-and-a-half years nearly 13 times greater – $178,000.
To be sure, Obama hasn’t indicated what he intends to do about his Illinois pension. But his ability to leverage such a loophole for personal gain serves as a vivid illustration of how lawmakers, while leaving the state’s public employee pension systems starved of resources, have nonetheless carved out sweet options for themselves.
Over many years, legislators, who are considered part-time employees, have added wrinkles to state pension law that hold the potential to benefit them but not most other public workers in Illinois. For example, former legislators like Obama who leave office early can boost their retirements by buying pension credits for the unfinished portion of their terms.
Some high profile former state lawmakers have cashed in.
The special benefit for Illinois legislators who leave office before their term expires has been used by former Chicago Mayor Richard M. Daley and former U.S. Rep. Glenn Poshard, a Southern Illinois Democrat who once ran for governor.
State records show Poshard, who also served in the state senate as well as president of Southern Illinois University, took home $201,549 in Illinois pensions in 2016. Before becoming mayor, Daley, whose pensions hit $209,078 last year, served in the state senate and as Cook County state’s attorney.
Both were able to increase their legislative pensions by “buying” credit for time they were working somewhere else.
Several Illinois congress members who had previously served in the state legislature have, or can, take advantage of that feature.
Like Obama, now 50-year-old U.S. Rep. Randy Hultgren, a Republican from Plano, served in the Illinois legislature before heading to Washington and can buy credits for so-called “ghost-time” that he did not actually serve in the statehouse that would amplify the value of his state pension when he turns 55.
It’s a technique that Democratic U.S. Rep. Jan Schakowsky of Evanston took advantage of years ago, adding $43,000 to her pension take since turning 55 in 1999.
Pension law also includes perks for other public officials too, as Gerald Bustos, husband of Democratic U.S. Rep. Cheri Bustos of East Moline, found when he became Sheriff of Rock Island County and was allowed to collect both a pension and a salary from the same office.
Obama’s quick trigger in quitting the state Senate provides a classic illustration of how the pension system can be skewed to the benefit of lawmakers. He was 43-years-old at the time and needed to complete eight years of legislative tenure to qualify for a $18,000 pension at age 55.
He would have reached that goal had he just held onto his state office until December, 2004. The next crop of U.S. senators wasn’t due to be sworn in until January 2005.
Not logging a full eight years in the state Senate meant he couldn’t start taking his pension until age 62, under state rules. Unless….
In May 2009, shortly after Obama became President, his personal accountant Harvey Wineberg received a letter describing a workaround sent by the General Assembly Retirement System, the woefully underfunded pension fund for current and former state lawmakers.
The letter, obtained by the Better Government Association under the Freedom of Information Act, informed Obama that a $13,804.50 check could buy him enough pension service credits to cover the remaining 25 months of the state senate term he failed to finish.
In short, he would be considered a 10-year veteran of the legislature for pension purposes and thus eligible at the age of 55 to start collecting not an $18,000 pension in the first year but a $27,030 retirement benefit. Without buying the pension credits, he would have to wait until 62 to collect and the starting point would be $18,000 annually.
Reached by phone at his suburban Chicago home, the now-retired accountant Wineberg, said he had “no idea” whether the former president intends to exercise his pension options in Illinois.
Whatever retirement benefit Obama receives from the state of Illinois would supplement his presidential pension of $205,700. He also has the option of declining the state pension and getting a refund of the $55,000 in contributions withheld from his paycheck while he served in Springfield.
Obama has not informed the state retirement board about what he plans to do, and his spokesman did not respond to detailed questions sent to his post-presidency office.
Publicly at least, Obama has not shown much concern about his pension. The subject came up during a 2012 presidential debate with then-rival Mitt Romney as Obama was chiding the Republican for having extensive overseas investments. When Romney suggested that investments tied to Obama’s Illinois state pension might also be in the same boat, the president shot back that he knew little about the details.
“I don’t look at my pension,” Obama told Romney, the wealthy former equity investor. “It’s not as big as yours so it doesn’t take as long. I don’t check it that often.”
Hultgren’s Illinois pension situation is a variation of that experienced by Obama. Before his election to Congress, Hultgren served a combined 12 years in the state house and senate. As such, he is entitled to collect a $35,205-a-year pension when he turns 55 in 2021.
However, under the rules, Hultgren could boost that starting annual pension to $43,029 by buying pension credits to cover the two years that were remaining on his last state senate term when left for Washington. The cost would be $15,602, an amount he would recoup in little more than two years of higher pension payments.
Hultgren did not respond to written questions or requests for an interview. To date, records show, he has not exercised his option to buy pension credits and it is not known whether he ever intends to do so.
U.S. Rep. Jan Schakowsky, a Democrat from Evanston, has since 1999 been collecting a pension for her past service in the Illinois House, and has managed to boost her take since that time by $43,000 thanks to another special maneuver.
Schakowsky, 72, spent eight years and one month in Springfield, enough to qualify to start taking her pension when she turned 55.
The extra month of service was the result of an unusual situation in which the retiring state lawmaker that Schakowsky was initially elected to succeed opted to resign a few weeks before his term was up.
Schakowsky won election in November 1990 and under normal circumstances wouldn’t have taken office until the following January. Instead, she was appointed to fill the vacancy left by her predecessor and started her state legislative career in December.
Fast forward to March 1998 when Schakowsky was running for her first term in Congress. State records show she inquired at that time about the status of her pension benefits. The response from pension officials, obtained under the Freedom of Information Act, advised her that for $3,759.25 she could buy enough pension credits so that her retirement benefit would be calculated as if she began her service at the beginning of 1990 rather than the end.
Records show Schakowsky wrote the check within days of getting that news, boosting her pension by $2,300-a-year.
Schakowsky, who declined to respond to questions from the BGA, currently gets a $27,888 state pension and has received a total of $390,000 in retirement benefits since 1999, the year she turned 55.
Not all special Illinois pension breaks go to former state legislators. One beneficiary is Gerald Bustos, the sheriff of Rock Island County and husband of Democratic U.S. Rep Cheri Bustos of East Moline.
A quirk in Illinois law enables Gerald Bustos to double dip–collecting both his $109,650 annual salary as sheriff as well as a $67,097-a-year pension for the years he worked as a deputy in the same department.
Gerald Bustos who had been the chief deputy sheriff of Rock Island County, was elected in 2014 to fill a vacancy in the sheriff’s post after his predecessor resigned in a scandal.
As a local elected official, the law gave Bustos the option of continuing to pay into the sheriff’s retirement system, or exit the system and claim his pension benefit. That option legally enabled Bustos to take his pension while still taking a salary from his new job. As chief deputy he made $85,571-a-year. Now, between his pension and sheriff’s pay, Bustos takes home $176,747 annually.
Bustos served 30 years as a deputy, but his pension is calculated as if he served 31. The bonus, worth $2,022-a-year, came courtesy of a provision in state law that rewards retirees for unused sick leave.
“I earned this pension after my many years of public service doing the sometimes dangerous and life-threatening, but always necessary, work of a public safety officer,” Bustos wrote in an email in response to questions. He said he had worked in every aspect of the Sheriff’s office.
Bustos, 56, said he pays a tax penalty for taking a pension and salary simultaneously from the same employer. Federal law applies an extra 10 percent tax on pensions in situations such his.