Kudos to the Atlanta Park District for winning a $25,000 “Cause An Effect” grant for its Empowering Atlanta Youth Cause from State Farm.
The Atlanta Park District project includes a playground makeover, which will be a community-built project where students, families, staff and surrounding businesses plan and labor together.
REPORTS UNDERSCORE NEED FOR PENSION REFORM
A new report issued during the week underscores the need for sweeping reforms to the state’s retirement systems, as negotiations on the contentious issue continue between Illinois’ legislative leaders and Governor Pat Quinn.
The Pew Center on the States – a respected, nonpartisan think tank – is once again reporting that Illinois has the worst-funded pension system in the country. Ranked dead last as of fiscal year 2010, Illinois had only 45 percent of the assets needed to pay $139 billion in long-term pension liabilities, according to the report. Many experts maintain a healthy pension system should be funded at least 80 percent.
Though the report notes that most states sustained continued investment losses as a result of the 2008 financial crisis, The Pew Center pointed out that these shortfalls were exacerbated by states’ inability in flush years to set aside enough to sufficiently finance retirement obligations.
The Pew Center report also revealed equally staggering state liabilities with regard to retiree healthcare. Though states’ 2010 liabilities for these benefit add up to about $660 billion, The Pew Center found states only had assets to pay $33.1 billion – a $627 billion hole. The report noted, “States set aside pension dollars in advance, but most pay healthcare costs or premiums as retirees incur those expenses.”
HEALTHCARE SUBSIDY REDUCED
Illinois claims liabilities of $54 billion in state retiree healthcare – a cost concern that prompted the Governor’s signing June 21 of a new law that will reduce the state’s healthcare subsidy for retired employees.
With the approval of Senate Bill 1313, the state took a first step to bring state retirement obligations to a manageable level.
The new law repeals the state’s health insurance subsidy, which covers up to 100 percent of healthcare costs for most retired public employees with 20 years or more of service. The state’s Department of Central Management Services is directed to issue a retiree health insurance premium payment plan for retirees in state pension systems, including state employees, university employees, lawmakers and judges.
I.P.I. REPORT SHOWS $200 BILLION DEBT
Concerns surrounding the costs of retiree healthcare and state pension obligations were echoed on June 20 when the Illinois Policy Institute (IPI) unveiled figures showing the total debt for Illinois’ state and local retirement benefits tops a staggering $200 billion.
IPI Vice President of Policy Ted Dabrowski wrote, “State taxpayers are local taxpayers. And Illinois taxpayers aren’t on the hook for ‘just’ the $83 billion that the state owes; they’re also facing pension shortfalls borne by local government.”
The IPI points out that while state pension debt equals about $83 billion, Illinois taxpayer are on the hook for significantly more than just the states’ retirement systems. Other obligations include:
• $15.5 billion state pension obligation bonds
• $54.2 billion state retiree health insurance
• $38.2 billion local government pension debt
• $1.9 billion local government pension and benefit bonds
• $10.7 billion local government retiree health insurance
According to the IPI, this is equivalent to approximately $41,000 in retirement debt per Illinois household.
COST-SHIFT PROPOSAL A STICKING POINT
Discussions continue on a proposal that would require suburban and local school districts to eventually cover the cost of teachers’ retirement benefits, as is already the case in Chicago schools.
During the week, the Quinn Administration released numbers they say show that more than half of the 800+ downstate and suburban school districts have enough money on hand to operate for six months. They contend the numbers suggest schools can afford to shoulder a phase-in of pension costs.
However, the State Board of Education warned that Governor Quinn’s numbers may not accurately portray the districts’ ability to incur additional costs, pointing out that the figures are a year out-of-date, and saying that the cost shift could lead to “significant property tax increases.”
Additionally, ISBE officials pointed out that the upcoming fiscal year 2013 budget currently relies on cutting the education budget. School officials also note those “extra” funds are frequently used to cover bills and other financial obligations, as they struggle to contend with budget reductions and delayed state payments.
I am reviewing the Quinn Administration’s information, but am still not on board with the proposal. This information only provides a glimpse into the schools’ ability to take on the proposed cost-shift. School districts will likely look to property tax increases, or reduced programs, for the needed revenue to cover pension costs.
NEW LAW CREATES STATE ACTUARY
On June 18, Governor Quinn signed Senate Bill 179, creating the position of a state actuary charged with reviewing, monitoring and reporting on Illinois’ retirement systems.
The state actuary will review the figures presented by the actuaries employed by the retirement systems’ boards of trustees, essentially reviewing and fact-checking the information. The actuary will be responsible for issuing annual reports regarding his or her findings to the Governor and the General Assembly.