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Buyouts in the Balance

The elusive savings of retirement incentives

BY: | December 2007



Like a lot of other governments struggling to make their budget numbers add up, Cook County, Illinois, recently offered a buyout package to many of its employees. It is saving the county an estimated $30 million.

More than 540 employees took advantage of the deal, which offered them a 50 percent bonus on whatever they had paid into their pension plan, which would lessen the county's long-term pension burdens. The county will no longer be liable for any further pension payments to those workers, according to Derek Blaida, a special assistant to the Cook County board president. "The 50 percent payment," he says, "is much less than the long term liability if they retired 10, 20 or 30 years down the road." If rehired, the employees would have to start their pension plans afresh.

But not all jurisdictions in the Upper Midwest are enthusiastic about the buyout option. In Kent County, Michigan, the county's fiscal services department determined that, although such programs help temporarily with cash flow, they don't ultimately fix budget problems.

That was the conclusion reached at the state level, where the legislature rejected the idea. "We would either have to replace the employees who are leaving, potentially eliminating all of the cost savings," says Leslee Fritz, a spokeswoman for the state budget office, "or cut services."


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Alan Greenblatt

Alan Greenblatt is a GOVERNING correspondent.

E-mail: mailbox@governing.com
Twitter: @governing

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