As Time and Cash Run Out, Pols Must Launch Pension Rescue

By Robert Reed
This Think Tank post was also published as an OpEd on Friday, Feb. 3, 2012 in the Chicago Sun-Times. Robert is the BGA’s director of programming and investigations. Contact him at rreed@bettergov.org. Follow him on Twitter @RReedBGA.

Long after the state’s public pension alarm began to blare, Illinois’ leadership is finally roused and ready to answer the call.

Maybe.

This year, we’ll see how determined our leaders are as they launch various efforts to comprehensively fix a benefit system that’s teetering on financial ruin and may ultimately plummet the state government into insolvency.

The Better Government Association welcomes the reform effort and is also encouraged by recent crackdowns on individual pension abuses that have been uncovered in exposes by the BGA and media outlets. But this problem goes beyond such isolated repairs and it’s high time our leaders toughen up and hammer out systemic remedies.

Democratic and Republican powerhouses are ramping up for this legislative session:

  • Having avoided aggressive pension reform for most of his tenure, Democratic Gov. Pat Quinn says he’s raring to go. Recently, Quinn forged a bi-partisan working group of lawmakers and others to embark on a comprehensive examination of the state pension crisis. Quinn’s goal: Prescribe remedies that the governor says can be accomplished in a “fair and constitutional manner.”’
  • Meanwhile, the powerful Democratic House Speaker Michael J. Madigan is interested in the way state pensions invest retirees’ money. He’s convened a special House committee to examine the major funds’ financial strategies. Madigan’s goal: Determine how decisions are being made and how much risk these portfolios carry, especially in today’s choppy economic seas.
  • Across the aisle, Republican House Minority Leader Tom Cross (who is chairing the special House panel on investments) is also again gearing up proposed legislation that would alter benefit structure for current state workers. Cross’ goal: Pass a law that protects worker benefits already accrued but reduce them going forward either by having employees pay more into a defined plan like a pension or opt for a defined contribution plan, such as a 401 (k).

It’s encouraging to see state chieftains address the larger pension issues and take a wider view.

That direction is a welcome departure from the recent past when the crisis has been ignored or when lawmakers settle for passing important but incremental reforms, usually after the BGA and media reports uncover embarrassing abuses of the current system that make taxpayers’ blood boil.

For example, lawmakers last session outlawed the egregious practice that allowed two education lobbyists, who were each substitute teachers for merely one day, to become eligible for hefty public pension payouts.

While such repairs provide momentary relief, they are not the real answer to this systemic quandary. We need solutions that match the size and scope of this enormous crisis.

Obviously, it’s a huge challenge and the BGA doesn’t profess to have all the answers.

But here are some issues the BGA would like to see addressed in the upcoming session: Suspending or limiting cost of living adjustments; capping the amount of money a retiree receives (as is done in the private sector) no matter how many public pension plans they have been in; prohibiting “back-loading” or “spiking” by ending the suspicious practice of state employees getting last-minute promotions or salary increases which translate into heftier pension payouts; and consider phasing out defined pensions for defined contribution plans, like a 401 (k).

The BGA knows there are stormy debates ahead especially whether any changes to the state pension rules for current workers is legal under the Illinois Constitution.

Moreover, organized labor can rightly argue that the state caused this massive shortfall by not keeping its word and properly funding its pension plans.

Yet despite the fiscal complexity and political reality that dogs this controversial issue, we are on the verge of disaster.

It’s time to stop stalling. The alarm bell is clanging and our state leaders must confront this emergency before it’s too late.

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6 Comments

Filed under Commentary, Pension Reform

6 responses to “As Time and Cash Run Out, Pols Must Launch Pension Rescue

  1. Honestly

    It seems logical that any pension reform should start out with the borrowed money and forgone interest being repaid to the pension fund. If benefits are then unsustainable after repayment, then some type of reductions would make sense. Otherwise any so-called reform is a guise for ripping -off its own employees.

    • Except that the employees were already ripped off!
      This state is bankrupt! The sooner we face that,the sooner we can negotiate a settlement of debts.

      Incidentally, it could be argued that the taxpayers were also “ripped off”

  2. So why aren’t the citizens of Illinois fired up over this train wreck that threatens to destroy this state?
    MEGO
    My eyes glaze over…
    Though the complex analysis is necessary, it hasn’t lit the fire of outrage that is necessary in any public reform. That’s because 98% of the public don’t get it.

    Try this instead…
    Calculate the individual pension liability for each employee/official. Also, show the change from the previous year. Print this next to the employee’s earnings for the year.
    Start with all elected officials!

    I think even the BGA will be shocked!

    • Mike, we retirees sacrificed eight and a half percent of our pay every pay day into the pension system for years,and where is the money.When BLAGO first took office he (BORROWED OUR PENSION MONEY?????),to the C.T.A.,Where is that money??? If this was a company they would all be in jail,why isn’t there an investigation???

  3. How come no one recalls Mr. Quinns Statement in April or May when he Stated quoted “Current RETIREES WILL-NOT BE AFFECTED BY PENSION REFORM”, Why does’nt the media go back and ask him,how he has gone back on his word!!, Retired I.D.O.T. Highway Maintainers paid eight and a half percent into THEIR PENSIONS every pay day throughout their career.Pension Reform is for CURRENT workers and Future Retirees.WE retireed and signed a Legal document describing our monthly BENIFETS NO-LESS!!!! These ridiculous PROPOSALS are just that,They DO-NOT INCLUDE THE JUDICIAL SYSTEM WHICH THEY SHOULD!!!!!Politicians do not need perks such as 20,0000 a year for a vehicle to travel to Springfield???

  4. Lillian Scharpou

    SURS pensions at Chicago City Colleges are ridiculous. Why do staff members retire at 50? This is not sustainable. Also, some professors make over 100,000 plus pensions–NOT sustainable. CCC is a waste of taxpayer money. Graduation rate is a joke. CCC College presidents have won the lottery while Illinois taxpayers are plundered and raped. Check out the SURS pensions of CCC college presidents. Crooked and corrupt.

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