QUINN’S PENSION PLAN TAX INCREASE COULD THREATEN GOOD REFORMS
The pension reform plan proposed by Governor Pat Quinn April 20 contains worthwhile provisions that could lead to significant pension savings while safeguarding the viability of the state’s public retirement systems for state employees.
However, the Governor’s plans to shift the costs for teacher pensions from the state to local school districts outside Chicago, to community colleges and to public universities, will threaten support for the reforms because of the inherent property tax increase for homeowners and businesses to fund the new responsibility for local taxing bodies.
I do not support a property tax increase as any part of an answer to the state’s pension funding problems.
I do support adjusting the annual cost-of-living increases, increasing employee contributions, and setting a 30-year schedule for bringing funding levels to 100 percent. I would also like to see enhanced funding language added to ensure the state lives up to its commitments. I do not support the Governor’s call to increase the retirement age.
Pension reform should be about protecting these systems so they will be viable and have sufficient funds to meets their commitments and to pay the benefits promised to these workers under the Illinois constitution. We have a huge funding gap because recent Governors and Democrat leaders have not funded pensions at sufficient levels.
In January, the Governor asked the four legislative Caucuses to work together to address the need to stabilize our state pension systems. We have been meeting each week since then and looking at a number of ideas. We have not completed our discussions, so it is disconcerting that Governor Quinn has suddenly abandoned the bipartisan approach and rolled out his own plan.
It is my hope that we can continue to work with his aide Jerry Stermer and come up with a plan that addresses the problem, is fair to employees and meets constitutional muster.
FACTS ABOUT ILLINOIS PENSIONS SYSTEMS
Illinois’ pension systems are the worst-funded of any state in the nation, with money set aside now for only 43% of the pension benefits already earned. This is the worst funding level of any state. The national average is almost twice that – 80%.
Illinois’ total pension debt is $99 billion, which includes $83 billion in unfunded pension liabilities (owed for benefits already earned) and $16 billion in pension bonds still unpaid.
Illinois’ pension debt has almost tripled in the past decade – from $35 billion in 2002 to $99 billion in 2012. In 2002, each Illinois citizen owed almost $3,000 each for State pensions, and today they owe over $8,000 each. Local pensions add to the debt.
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.
Illinois’ annual pension payments have risen dramatically in the past 10 years, from $2 billion a year in 2002 to a projected $6.6 billion in the next budget year. Next year’s payment is $1 billion higher than this year’s, a 16% hike. Payouts (benefit payments) by the systems in FY13 are expected to be $8.6 billion.
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.
PENSION REFORM DISCUSSED ON ‘ILLINOIS LAWMAKERS’
I joined with Representative Elaine Nekritz of Des Plaines to talk about the need for reforming state pension systems in an interview with Jak [sic] Tichenor April 19 in the Speaker’s Gallery of the House of Representatives.
Representative Nekritz and I appear on “Illinois Lawmakers” (at 15:20 in April 20's “Tough Budget Choices”), a public television show that features the issues being considered by the General Assembly during the spring legislative session.
We are both members of Governor Pat Quinn’s pension reform panel.
PLAYING GAMES WITH CONSTITUTIONAL AMENDMENTS
A powerful tool of change is being abused by House Speaker Michael Madigan.
Our state’s Constitution provides a process by which constitutional amendments can be put to voters, but limits the number that can be considered during one election. No more than three articles of our state’s Constitution can be amended at one time.
One Constitutional amendment that deserves a public vote is a cost-savings proposal to merge the offices of the state Comptroller and Treasurer. The resolution was adopted by a unanimous vote of the Senate on March 31, 2011, but it is being held by the Speaker Madigan while other amendments are being given priority.
The Speaker is pushing his proposal to require a supermajority, three-fifths vote for passage of any legislation to increase pension benefits. Because of the cost-saving potential, I support his proposal and asked him to consider strengthening it by also requiring that no such vote take place during any lame-duck session of the General Assembly, a recommendation he did not take.
However, the Senate Executive Committee approved resolutions calling for two more constitutional amendments on April 18. One amends the Bill of Rights Article of the Illinois Constitution to provide additional rights to crime victims. Another requires each State’s Attorney to be a resident of the State. The issues addressed in these amendments are quite important and I support them; however, if they advance, there will be no room for the Comptroller/Treasurer merger amendment on the ballot.
Constitutional amendments should not be subject to political games or power plays. The state’s attorney residency amendment addresses a valid issue, but its passage is not particularly time-sensitive nor does it have the cost-savings impact of Comptroller/Treasurer merger amendment.
If Speaker Madigan is serious about addressing the state’s fiscal crisis, he needs to let Comptroller/Treasurer merger amendment have an immediate hearing in the House of Representatives.
VOTE TO ELIMINATE SCHOLARSHIP PROGRAM DELAYED
A vote on a measure to eliminate the state’s scandal-plagued legislative scholarship program has been delayed once again. Despite widespread Senate support for legislation to eliminate the General Assembly Scholarship Program, the Senate Executive Committee members weren’t able to vote on the measure as anticipated.
Instead, three bills to end the General Assembly tuition waiver program have been sent to an Executive Subcommittee on Education. Subcommittees are traditionally used by the majority to bury legislation they oppose.
I cosponsored the three bills that were sent to Subcommittee. I have also sponsored similar bills in recent years to end the tuition waiver program, but they too have been stalled in the legislative process.
In 2012, Senate Republican lawmakers voluntarily walked away from the controversial legislative scholarship program, citing the costs to public universities and reports of some scholarships being awarded improperly.
The state does not reimburse colleges for the cost of the program; instead, costs are passed on to the universities – to the tune of more than $13 million a year. In turn, the institutions pass those costs on to other students through increased tuition and fees.
Decisions about legislative scholarships in my district were made by a Scholarship Committee, which selected the students based on leadership qualities and academic accomplishments. I had no input into the selection process.
Kudos to all the central Illinois individuals and groups that come to the State Capitol and talk with me and other state officials about the issues important to you!
On April 18, I welcomed several 4-H members from McLean and Lee counties to my office. That same day, I also met with a group of bankers from Commerce Bank in Bloomington for Illinois Bankers lobby day.
On April 19, I had an opportunity to talk with a great bunch of students from Heartland Community College.