No real progress on pensions
The legislative standoff continues on public employee pensions.
Gov. Pat Quinn signed pension legislation this week. Unfortunately, it's wasn't the big pension reform bill he's been asking legislators to pass.
It was, instead, legislation that requires the state to hire an actuary to report on its employee pension systems.
Illinois' public pensions are underfunded by more than $80 billion. Presumably, the actuary will examine the financial issues surrounding the public pensions and report to the governor and state Legislature that the pension systems are underfunded by, well, more than $80 billion.
In other words, however important it may be to have an actuary keeping tracking of public pensions, it won't change the current numbers or fix the problem.
Illinois' public pensions are in big trouble, thanks to the decisions of past governors and legislators not to make the state's required contributions over the years.
As a consequence of their decisions, Illinois (along with Rhode Island, Kentucky and Connecticut) has the worst-funded public pensions in the country. They have just 45 percent of the money they need to meet their future obligations.
Those numbers come from a recent study conducted by the Pew Center on the States. The study found that 34 of our 50 states have failed to maintain a safe level of funding for their public pensions.
Clearly, Illinois' elected officials are not alone in making terrible decisions to skip required pension payments and use the money to fund other state programs. It's a common failing among politicians everywhere to spend freely today and not worry about tomorrow.
Unfortunately, there's not much that can be done to come up with the money to erase the $80 billion in underfunding. That's why Quinn and legislators have focused on reducing benefits for future retirees and coming up with alternative sources of revenue for pensions from universities and school districts.
Quinn was hoping that legislators would pass a bill changing the rules surrounding public pensions during the recent legislative session. When that plan fell through, he started pushing for legislative leaders to reach agreement on a plan sometime in June. That's not likely to happen either.
The sticking point, according to news reports, is a disagreement between Democrat Quinn and legislative leaders about transferring pension costs to local schools over a 10- to 15-year period.
Republicans are resisting the plan because they say it would drive up costs for local districts and force property-tax increases, and they're right.
It would be extremely expensive for districts like Champaign and Urbana to pick up the state's costs. It would cost Champaign $500,000 the first year, $500,000 the second and $2.5 million by fiscal year 2022. Urbana schools business manager Carol Baker was less precise, stating that she has seen so many proposals that she could not estimate how much costs would go up. But she said it would cost the district $220,000 for each 1 percent increase in payments based on employee salaries. The district currently makes a 9.4 percent contribution per employee.
Quinn has said those extra costs would have "an almost imperceptible impact on property taxes; there is no impact on property taxes." But his cheerleading is not credible.
Quinn has indicated that he won't let disagreement on one issue stop him from reaching agreement. House Speaker Michael Madigan and Senate President John Cullerton, however, are sticking to the position that districts outside Chicago should pay for their employees, just like Chicago does. Republican Senate Leader Christine Radogno has indicated she doesn't believe Madigan and Cullerton are sincere and simply are trying to "stall" the issue until after the November election to protect Democratic incumbents from casting a tough vote.
Politics aside, the cost-shifting comes across as an effort by state officials to push their self-made problems on someone else.
But local districts do not have completely clean hands.
Hundreds of school districts all over Illinois engaged in irresponsible salary spiking to encourage older teachers to retire. There would be nothing wrong with the state calculating the extra costs forced on the Teachers' Retirement System by the spiking and presenting a bill to local school boards. Indeed, it would serve them right for their profligacy at the state's expense.
But that's the kind of legislative negotiation that — at least so far — has stalled. Eventually, state officials must face up to this problem, one that gets worse each day. But for now, they hire an actuary to tell them what they already know.