Pension action unlikely in upcoming session
Despite Gov. Pat Quinn's deadline for legislators to come up with a plan to deal with the state's pension crisis during the lame-duck session that starts Jan. 3, it now appears that action is unlikely at least until the spring. Meanwhile, the unfunded liability keeps growing.
Illinoisans are getting a double dose of bad fiscal news this holiday season from elected leaders in Washington, D.C., and Springfield.
The nation's attention is riveted as Republican Speaker of the House John Boehner and Democratic President Barack Obama have gone back and forth without success to try to avert hurtling over the so-called "fiscal cliff" — a series of tax increases and spending cuts totaling hundreds of billions of dollars starting Jan. 1 unless the two can craft a deficit-cutting package that can get through the Republican House and Democratic Senate.
Unfortunately, Illinois already has experience with fiscal cliffs — we went over our version long ago and we haven't reached the bottom yet.
It would be impossible to overstate the desperate financial situation Illinois finds itself in.
The biggest financial problem besetting the state is the chronically underfunded pension system, the worst in the nation. At the start of this fiscal year July 1, estimated underfunding was $85 billion. That's now at $96 billion and growing. The state also faces a growing backlog of unpaid bills, which stood at about $8 billion at the end of the fiscal year June 30, and is growing at a faster rate this fiscal year than last, according to state Treasurer Judy Baar Topinka.
Gov. Pat Quinn has been trying to force the General Assembly to deal with the pension issue, but he's been mostly ignored by the two powerful Democratic leaders, Speaker of the House Michael Madigan and Senate President John Cullerton.
Here's why it's so important. A decade ago, the state's annual contributions to the pension system totaled about $1 billion. This fiscal year, it will be five times that amount, and it is increasing every year. Coupled with the bill backlog, the state cannot meet its obligations, which more than eat up the influx of new revenue generated by a 67 percent income-tax increase enacted in 2011, and this has forced the state to cut or delay payments to schools, medical and social-service providers and vendors and cut other vital state services. There is a cost to every resident of the state of Illinois, and some of most vulnerable are being hurt the most.
Quinn called a special session of the Legislature in August that went nowhere. Despite a lot of talk, the Legislature did not deal with pensions in the fall veto session, fueling speculation that action would come during the lame-duck session that runs from Jan. 3-8 before the new General Assembly is sworn in. Quinn, in fact, set a deadline of Jan. 9 for legislators to come up with a plan, but there is no indication that any action is likely despite pressure coming from public employees and frustrated legislators.
Public employees called on lawmakers last week to address the pension crisis, saying they'd be willing to contribute more money toward their retirements and that they plan to host a pension summit after the new Legislature is sworn in.
A coalition of unions released a study blasting other proposed pension overhauls and making recommendations to address the state's approximately $95 billion in unfunded liability. Their recommendations include closing tax loopholes to bring in an estimated $2 billion in revenue for the state.
A group of bipartisan lawmakers introduced a proposal earlier this month that would reduce annual cost-of-living increases for retirees and require workers to contribute more to their retirement. It also would require younger employees to work longer into their careers, and gradually shift some costs for teacher pensions to some school districts. The proposal also includes a guarantee that the state will make sufficient annual payments.
The seeds of Illinois' pension crisis go back many years. State employees do not share the blame but will suffer the consequences of the cumulative effects of bad decisions made by elected political leaders of both parties, including some still in office, to sweeten pensions with no way to pay and to defer or not make payments at all to free up money to use for other purposes — or to help them get re-elected. Bad public policy got us into this mess, and there are no easy solutions that will make things right. There are only tough, unpopular decisions to be made. It took years to get into this mess and it will take years to get out.
It's disappointing that no action will come until the spring session at the earliest. It's a sure bet that whatever plan emerges from the General Assembly will face a lengthy court challenge, further delaying action.
Meanwhile, they dither, and the problem only gets worse.