Senator Bill Brady said today the pension reform plan proposed by Governor Pat Quinn contains worthwhile provisions that could lead to significant pension savings while safeguarding the viability of the state’s public retirement systems for state employees.
But Senator Brady cautioned, 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,” Senator Brady said.
The 44th District Senator does support adjusting the annual cost-of-living increases, increasing employee contributions, and setting a 30-year schedule for bringing funding levels to 100 percent. Senator Brady would also like to see enhanced funding language added to ensure the state lives up to its commitments. He does 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,” Senator Brady said. “We have a huge funding gap because recent Governors and Democrat leaders have not funded pensions at sufficient levels.”
Senator Brady is a member of the bipartisan, bicameral Pension Work Group charged with developing a comprehensive solution.
“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,” Senator Brady said. “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 runs completely counter to his original goal.”
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.