An ongoing lack of leadership from top state officials means that the pension reform proposals currently on the table will not provide the kind of comprehensive reform we need to make sure these systems will be viable and have sufficient funds to pay the benefits promised to workers under the Illinois constitution.
The House of Representatives and the Governor chose to ignore a plan that had already been passed by the Senate. That plan would have resulted in savings of $20 billion to $30 billion. Instead, the House chose to take a preliminary vote on a different plan that would only affect the General Assembly Retirement System and reduce the savings to $110 million. Passing the General Assembly-only plan would have been foolhardy – like throwing a nickel in the bucket and calling it reform.
A major concern of mine for many years, pension reform should be about safeguarding the viability our public retirement systems for current and future retirees, while also protecting our state’s fiscal health and our taxpayers’ wallets.
I am a member of the bipartisan, bicameral Pension Work Group that has been working for many months to develop a comprehensive solution. We have found common ground on major reform issues, but became divided on the Governor’s proposed liability shift.
The Governor called us back to the Capital City, but never told us exactly what he hoped to achieve during the special session. He appears to favor a plan that would shift major pension liabilities from the income tax to local property taxes, but he must know it will be difficult to find enough votes to support the “cost-shift provision” that he and many other Democrat state officials favor.
When lawmakers left Springfield at the end of May, there was general agreement among the Governor and legislative leaders of the broad outlines of pension changes. However, no final agreement could be reached when pension reforms became linked to shifting the cost for teacher pensions to local property taxpayers, rather than state income taxes.
I do not support the shift to property taxes to cover past pension liabilities because it would not save taxpayers’ money.
The Governor’s plans to shift the liabilities for teacher pensions from the state to local school districts outside Chicago, to community colleges and to public universities, is a major sticking point in the reform process because of the inherent property tax increase for homeowners and businesses to fund the new responsibility for local taxing bodies. It will also inevitably result in tuition increases for university and community colleges to cover additional costs.
One proposal would be to phase in the liability shift over 12 years. Some think that’s a reasonable approach, but it is problematic because there are too many variables. We don’t know how large the liability-shift will get because we don’t know how many will elect reforms, future returns on investment, or future mortality tables.
There is a need for more accountability/responsibility on part of school districts in setting pensionable salaries but, again, it must be done in a way that protects property taxpayers.
This is not a new problem. Illinois’ public retirement systems are consistently ranked as the most underfunded in the nation.
The state’s staggering $83 billion in unfunded pension liabilities (which could rise as high as $140 billion under different actuarial and accounting standards) is a threat to our fiscal solvency.
The credit rating agencies cite Illinois’ pension debt and its bill backlog as the state’s two worst problems. Illinois will get downgraded again if pensions are not fixed soon.
Without change, payments will continue to rise over the next 30 years, crowding out other priorities. Pensions are now about 17% of Illinois’ general funds budget and will take up a bigger piece of the pie each year unless reforms are enacted.
As a member of the pension reform working group, I believe we were very close to a framework for reform that would have ensured the vitality of our retirement systems, safeguarded the pension benefits of state employees and teachers and protected the wallets of our taxpayers.
Instead, the Democrats have thrown a poison pill into the bill that would have increased real estate taxes for homeowners and small businesses and raised tuition for our college and university students.
Comprehensive reform is vital to the fiscal health of this state, and I stand ready to work whenever, wherever and with whomever to put us quickly back on a path toward a bipartisan and comprehensive restructuring of benefits and funding of the state’s five public retirement systems.