Rutherford: Legislators must address pension obligations
CHAMPAIGN — Calling it "the big alligator," State Treasurer Dan Rutherford said the state's ballooning pension system obligations must be addressed by lawmakers this spring.
Even if pension costs are tackled, Rutherford said other spending also will have to be limited.
And the treasurer, who was a member of the state Senate last year when the Legislature approved a 67 percent income tax increase but did not vote for it, said the tax hike should not be phased out before it is scheduled to be reduced from 5 percent to 3.75 percent in 2015. Some Republicans have said they want the tax increase to be repealed this year.
"It would be disingenuous to the public to have them believe it could be repealed," Rutherford told reporters after speaking to the Champaign-Urbana Kiwanis Club in Champaign. "I believe we need to manage where we are and try to put together the best method to wean off that addiction (to increased spending.)"
He said state spending has to be controlled.
"Don't spend this (tax) increase because you've got it. Figure out how to get us off this addiction, this addiction to debt," he said. "And plan for 2015 because there is going to be a cliff and we'll either be able to scale down safely or we're just going to go free-falling off of it. Everybody knows that day is coming."
Even with all the recent grim state budget news — including a report earlier this week from state Comptroller Judy Baar Topinka that the state has an $8.5 billion backlog of unpaid bills — Rutherford said he was optimistic the state could work its way out of the financial crisis.
"A part of who I am is optimistic. A part of who I am is realistic," he said. "And at this moment the optimism overrides the realistic.
"You have to believe that way. I am the treasurer of the state and I probably see the dark underside of the ugly beast from a perspective better than most. And I believe that Illinois can and will turn itself around."
The key, he said, is pension reforms. That issue dwarfs even Medicaid spending.
"I think the politics of fixing the pensions is much harder than the Medicaid," Rutherford said. "The Medicaid will be a challenge. I don't disagree. But there is a whole political dynamic to the pension issue that does not come to the Medicaid debate."
Rutherford said retirees would be unaffected by pension changes. But current employees would have to either contribute greater premiums or accept reduced benefits.
"Even if we did that it won't fix the (budget) problem. But we can't begin to fix the problem unless you do that," the treasurer said.
MoreMoreI hope Rutherford (and others) address their own pension obligations...as in getting rid of them. No lawmaker should ever get a pension, much less health care or any other benefit. Can you imagine how much money our state could save if they just quit spending money on retired politicians?
This should be a priority movement nationally. Pensions for lawmakers are wrong.
I do not fundamentally understand why the benefits of current retirees are "off limits" while current and future employees will bear the cost of past pension system mismanagement. Also, shouldn't the taxpayers be partially responsible for the cost of the mismanagement since they were the ones that voted in the politicians that raided the pension funds over the years? I believe that the pension funds need to be at least partially bailed out by the general fund and current retirees in order to make sure that the sacrifice is equally shared.
As relatively new state employees who chose not to participate in the pension system and rather bear the risk of the market because I foresaw these problems, is my wife's and my 401k contribution from the state (which is paid as a % of my wages, and is not excessive compared with the private sector) going to decrease as a result of a pension system external to my retirement plan?
Are we just going to continue to raid the cookie jars of future generations without solving the fundamental spending and taxation imbalances in Illinois?
@poudresteve: My previous comment to poudresteve was deleted. I will be more tactful in my present response. The State of Illinois Constitution is the reason for current retirees pensions being "off limits". After the Legislators, and Governors repeatedly skipped the employer required pension payments; they "promised" that pensions would not be diminished by putting the "promise" into the state constitution. They continued to skip the employer pension payments while the employees paid into their pension system every paycheck. The Legislators continued to fund their pension system, and the Judicial pension sytem; just not fund the employees pension system. They admit this. The monies that were to be paid into the employees pension system were used for increased services to the public, pork barrel projects, and tax breaks for big business. You are asking that the pensions earned by the retirees to be reduced, or eliminated to assist your retirement as a new state employee. The average state employee does not receive a huge pension. The average is about $26,000 per year. The elderly retirees; who earned, and paid into their pensions; are to have their pensions stolen to assist a new employee who has not earned a pension yet? As a new state employee, you knew what you were agreeing to when you took your job. I am sorry about your attitude regarding "cookie jars"; but the retired employees earned, and paid into their pensions.
Thank you for your thoughtful response. I realize that many state employees live modestly in retirement, as you point out, but there are others that don't. I work hard as a state employee not eligible for social security, and it looks like I will be working harder and longer than other generations did to earn a secure retirement, going without raises, with skyrocketing health care costs, nauseating prospects for higher education costs for my kids, dealing with a housing bubble, overall in a more difficult economic environment in Illinois. But I am very frustrated that the politically expedient thing to do at both the national and state level is to cut and run from pension/social security problems without anyone but current and future employees feeling the pain. Those promises were made by the State to you just like they were to me when I started my job.
Don't get me wrong, I feel very fortunate to have a good job, and am grateful to the taxpayers to have the opportunity to do what I do, and take pride just like the rest of the U of I in that I give back to the state much more than I personally get. I chose my job as an educator to help future generations succeed more than mine, but it seems like the deck just keeps getting stacked more against economic security for young people despite many hard-working bright minds.
I was a state employee before retirement. I realize now that you are a university state employee. Our pension systems are different. I was required to pay into Social Security to differ the amount the state paid into my pension system. My pension was calculated on .0167% per years of work on the highest four year average of pay. For example: 30 years would be 50% of the average pay of the highest paid four years. For example: If the highest four year average was $40,000, the pension would be $20,000 per year. Forty five years would be 75% of the highest four year average. Not many employees make it to 45 years. I understand your frustration as a new employee worried about your future. I had the same fears raising a family. I still have them now with people wanting to take my pension. I had no choice in retirement investments. I was required to pay into the pension system. I disagree with you on taking retired employees pensions. We paid into the pension system when our employer did not. We earned our pensions. Do you think that by taking the elderly's pensions that your retirement plan will be safe in the future? The taxpayers; which you, and I are part of; will howl for yours later on if what you propose happens. I am sorry; but I do not understand your logic. I do understand your fears though. I had them; and still do. Are you an academic professional?
Yes I am an academic, and have been my whole career (except working in a meat market during high school/college). Thus, I am not allowed by law to pay into social security, so all of my eggs are in the 401k the state contributes to, and extra savings that I have. In my case, I pay 7% of every paycheck into an account, and the state matches my contribution up to 6%. If all of a sudden, the state comes in and says that due to the pension funds being empty and the state being broke, going forward all current employees will no longer receive state contributions to their 401k, or those in a pension in order to get the same pension that was promised, they need to contribute 6% more of my paycheck every month, or chose a 401k going forward instead of a pension, I don't think that's fair. I think it's especially unfair for my more senior colleagues where these changes not only will impact their current earnings, but drastically change the amount and timing of the final salary for the calculation. I can save more, but they can't. And I realize that many people on retirement can't save either.
If we don't want this to happen, someone needs to pay for the shortfall. Are state employees simply going to bear 100% of the costs? Where did the money go that should have been paid into the pension funds? It certainly went a lot of places that benefited the entire state. Shouldn't the state be at least partially responsible for bailing out these pension funds?
Your right. The current employees, and the retired employees are not the culprits. The culprits are the legislators, judges, and governors of both parties. Add to the state's pension problem the municipal employees ( firefighter, and police ) pension problem. The municipalities did the same thing as the legislators. They diverted pension payments into public projects (statues, parks, etc.) to appease the voters who are the taxpayers just like you, and me. Illinois with it's tax increase is still the lowest in the Midwest. Tax increases were delayed for years due to the politicians getting re-elected ( the Gov. Ogelvie lesson ). Now, the solution being sought by the Chicago Civic Committee, and the Illinois Policy Institute (both who are nothing more than lobbies) are for the existing pensions to be stolen. They do expect the state employees to simply bear the cost. The problem for them is the State of Illinois Constitution. In order to continue to "borrow" from the employees pension systems, the legislators added the language into the constitution that prevented just what they want to do now. Don't expect "justice" in having your contributions, and the state's contributions stolen in the Illinois Supreme Court. However, it will continue to the U.S. Supreme Court. This is not just an Illinois problem. All but three of the states have done it to their state, and municipal employees also. Stealing is stealing no matter how you justify it. You, and I have a common cause; not one that divides us.
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