Graying Illinois

Jan 1, 2015

Credit Illinois Issues

Listen to Jamey Dunn talk about her piece with Rachel Otwell:

Three years ago, the first members of the Baby Boom generation turned 65. This generation, born between the mid-1940s and mid- 1960s, has had a large influence on American politics and policy, in part by virtue of its sheer size. As the Boomers reach retirement age, they may once again drastically reshape the country.

By 2030 an estimated 2.4 million people in the state will be 65 or older.

Even before Baby Boomers began joining the age group, the share of America’s population older than 65 had increased substantially. According to a report released by the U.S. Census Bureau this year, the percentage of the population age 65 and older increased from 4.1 percent in 1900 to 14 percent in 2013. The Census Bureau projects that by 2030, nearly one in five residents will be 65 or older. The demographic trends in Illinois are similar. Census estimates for 2013 peg Illinois’ over-65 population at almost 14 percent. By 2030, that number is expected to go up to 18 percent, meaning that an estimated 2.4 million people in the state will be 65 or older.

The challenges Illinois faces as its population ages seem to come from all directions. As the state looks to fund programs to care for more and more seniors, tries to cover the costs of the benefits it promised its own workforce and hopes to be competitive with the private sector in recruiting new talent to replace retiring Boomers, its revenues will also take a hit because of the graying of its residents. “It’s an interesting challenge, because when you look at the numbers and the assets, it doesn’t add up The demand for services over the next decade, given the full arrival of Baby Boomers into retirement or into 60-plus status and the resources that are being put in place today — if it stays at that level, we’re going to really be behind.”

Growing Costs

Just as costs for federal programs like Medicare and Social Security will increase, the demand for some state services will grow as Illinois’ population ages. Medicaid, a state and federally funded program that provides health care to low-income residents, also covers the costs of long-term care for thousands of elderly Illinoisans. Seniors and disabled adults made up about 16 percent of the state’s Medicaid population, prior to the recent expansion under Obamacare. But because of their complex needs, which sometimes include care in residential facilities, this population accounted for more than half of Medicaid spending. If policymakers cannot find a way to bring down the cost of caring for these two groups, Medicaid liabilities will continue to balloon.

Another key source of funding for programs targeting older residents is federal money doled out to states through the Older Americans Act. This money supports programs such as meal delivery, transportation and activities to encourage social engagement for seniors. The act expired in 2011 and gridlock has prevented a full reauthorization. Instead, Congress has opted to extend it on an annual basis, creating a level of uncertainty for programs that depend on the funding. Under the act, almost $2 billion goes to states annually, roughly the same amount that has been distributed annually since 2004. Funding did spike slightly in 2009 and 2010, bolstered by temporary funds from the federal stimulus. Advocates for the senior population argue that stagnant funding for such programs will never be able to cover costs as demand grows. There is also concern that as lawmakers on the federal level face steep Social Security and Medicare costs, they may pull back on funding state programs.

One of the fastest growing portions of the older adult population happens to be individuals who are 85 years and older. Living longer means that you push the envelope physically, mentally, cognitively, emotionally all the time.

The state does have a few strategies to cut costs and streamline care. Illinois and several other states are experimenting with Medicaid managed-care programs. The hope is that through coordinating patients’ care, they can be better served and for less money. Holton says that it is too early to tell if Illinois’ managed- care program, which serves elderly and disabled patients, is achieving its goals. “Because of its newness, we still have to get evidence that that is being successful in Illinois. It’s certainly being done by the majority of states across the country now.” But he says results from such programs across the nation have been a mixed bag, and no clear model for success has emerged at this point. “It’s too much of a checkered landscape to really draw some definitive solutions.”

Illinois is also focusing on providing services, like meal delivery and support staff, to help seniors stay in their homes whenever possible instead of moving into nursing homes, where the total cost of care can be far more expensive. “We are a state that for a long time had spent the majority of its dollars in nursing home care. And we are moving away from that to emphasize aging in place, meaning that you age in your own home; you age in your own community,” Holton says.

Many a dire trend piece has been penned about the potential consequences of the costs associated with aging Baby Boomers. But at this point, Holton says that Boomers are more concerned with caring for their parents, who are living longer than previous generations, than their own plans for old age. Some Boomers who are caring for their parents are also still helping to financially support children. This group, which also includes members of Generation X (born between the mid-1960s and early 1980s), is sometimes called the Sandwich Generation because those in it are “sandwiched” between the needs of their children and their elderly parents.

“One of the fastest growing portions of the older adult population happens to be individuals who are 85 years and older, "Holton says. “Living longer means that you push the envelope physically, mentally, cognitively, emotionally all the time.” 

He says that one lower-cost way agencies like his can assist is by helping families with tough conversations — like when is it time for grandpa to stop driving and who will be the executor for mom’s will? Holton says that while the cost of care as the population gets older is a huge concern, it would be a mistake to only focus on the bottom line. “This topic really cuts into some emotional stuff that we need to appreciate and understand” along with the nuts and bolts, such as “how to make sure that meals get delivered, and that there are enough in-home workers.”

While care for seniors is trending toward strategies to keep them in their homes and communities, there is a group of older Illinoisans who are required to live in an institutional setting. In 2011, 13 percent of inmates in the Illinois Department of Corrections are 50 years old or older, according to statistics compiled by the Chicago Reader. If current trends bear out, the number of inmates 50 or older will double within six years. According to the Reader, incarceration costs for older inmates can be twice as expensive as those for younger ones, and the cost of housing inmates over the age of 50 eats up almost a third of the department’s budget. The IDOC disputes that statistic, saying that there is no way to calculate the specific cost of housing older prisoners. Under the most recent numbers provided by the department, inmates older than 50 made up 16 percent of the prison population in 2014.  Multiply the number of older inmates times the average cost for housing prisoners, and the number is $170 million, which is closer to one seventh or one eight of the department's budget. IDOC  does acknowledge that there are higher medical care costs associated with older prisoners. 

There has been a recent push for the state to consider releasing some of these  older prisoners who are unlikely to re-offend. But those who stay in prison until old age are often there for serious and sometimes violent crimes, so the issue is contentious.

Beyond caring for low-income seniors and prisoners, Illinois also has obligations to its own workforce as it ages. The current fiscal year pension payment of more than $6 billion will require almost 20 percent of all general revenue coming from state — but not federal — sources. Lawmakers had hoped to reduce some of the cost of providing health care to retirees by charging premiums. But the Illinois Supreme Court ruled the plan unconstitutional. The ruling also calls into question a law that would reduce retirement benefits to eventually eliminate the state’s $100 billion unfunded pension liability.

Retiring Workers

As public employees from the Baby Boom generation begin to leave the workforce, Illinois must find a way to replace them while trying to preserve as much as it can of the institutional knowledge they possess.
About 16 percent of the state workforce is currently eligible to retire. According to projections from the Illinois State Retirement System of Illinois, it will bump up to 20 percent by the end of 2015. 

“We have an aging workforce at all levels of government, including state government,” says Elizabeth Kellar, president and chief executive officer of the Center for State & Local Government Excellence. The center is a national nonprofit that advises governments on workforce planning issues. Kellar says there was widespread concern about how the public sector was going to handle mass numbers of retirements. But the financial collapse in 2008 put many state budgets in the red and shoved the issue to the back burner. “I think the issue was lost for a little while in the aftermath of the economic downturn.” She says that when those who manage human resources raised concerns about possible staffing shortfalls, they were often met with statements like, “That can’t be a problem; people are unemployed.”

We have this invisible network of people working every day to ensure that we are safe and healthy.

Kellar says that while some job openings can prompt a deluge of applications, work in the public sector can be technical, with very specific education and experience requirements. “The applicant pool can be small to nonexistent.” Layoffs and hiring freezes at entry-level positions reduced the number of younger workers on staff who could be groomed for leadership roles in the future. Belt- tightening cuts to benefits and pay also present a challenge when trying to recruit and keep good workers. “If you’re a young person, and you don’t get a salary increase for three years, that’s a problem.”

Kellar says that one spot of good news is that Millennials often view community service as a core value, but she says that political messages vilifying public workers are not helping matters. “There still are people out there who feel a calling to serve the public and care about it, but it gets harder for them when a lot of the public dialogue is negative.” (The Census Bureau doesn’t recognize a time frame for the Millennial generation, but the general consensus seems to be that it begins with people born in the mid-to-late 1980s.)

Like so many things in government, she says that people do not often notice and appreciate public employees until there is a crisis. “We have this invisible network of people working every day to ensure that we are safe and healthy.”

Even if states can find the right people to fill the positions left by Boomers, they will still take years of experience and understanding of their jobs out the door when they retire. Governments big and small are focusing on something called succession planning to try and ensure that some of that knowledge gets passed on. Kellar said common strategies include allowing employees to phase into retirement over several months or even a few years. Another option is bringing retirees back on a part-time basis to help out with training or special projects.

When asked for this story, the Illinois Department of Central Management Services was unable to produce projections of the number of retirements the state workforce can expect in the near future. A spokeswoman for the department also said that she does not know of any formal succession plan being used by state agencies. However, some agencies have recognized the issue and seem to be planning for it on their own. The Illinois Department of Transportation, for example, has a Human Capital Strategic Plan.

In it, the department notes that 2,000 of its employees will be eligible to retire by 2015. The plan includes recruitment strategies as well as training to pass on knowledge.

Shrinking Revenues 

If all of that doesn’t seem like a big enough challenge to Illinois, the state will also see its revenues shrink as more of its population leaves the workforce. Illinois relies heavily on income taxes but does not tax retirement income. Senior citizens also get a break on their property taxes, which fund local services and schools. So, while seniors demand more from the state, they will be paying fewer of the tax dollars needed to keep the whole operation afloat. The Census Bureau estimates that by 2030, when all the Boomers will be over the age of 65, there will be fewer than three working age people to each person of retirement age in the country. “On the revenue side, I think the issue doesn’t get enough attention,” says Kurt Thurmaier, chair of the Department of Public Administration at Northern Illinois University. “You have a smaller and smaller group of younger people who are earning income, and the equation just doesn’t balance.” 

If you want this service, you have to pay. ... There's no magic. You have to pay.

Thurmaier points out that the federal government will face revenue losses, too. One proposed solution is for the country, and possibly the states, to tax consumption instead of income — with rebates offered to low-income residents to prevent the tax from being regressive. Under such a plan, federal income tax would be eliminated, but states would still have the option of taxing income.

Such a drastic shift in taxing policy seems impossible in the current political climate. In the short term, Thurmaier says that states could help slow the budget bleeding by extending sales taxes to some services, taxing retirement income (if they do not already) and means testing and charging fees for some programs for seniors that are currently free to everyone.

But eventually the problem will boil down to whether Americans are willing to pay for programs for seniors. “The politics of the Boomer generation are a real problem,” says Thurmaier, who is a member of the generation himself. He says that so far, Boomers have accepted pushing much of the cost onto future generations through borrowing, budget deficits and ignoring programs that will face fiscal calamity in the future if nothing is done. And politicians who are not upfront about budget realities have enabled the country’s denial. To get back on track, Thurmaier says the public needs politicians who are willing to say: “If you want this service, you have to pay. ... There’s no magic. You have to pay.” It’s a statement he admits would make a sorry campaign slogan for candidates looking to actually win elections, given that older people consistently turn out to the polls.