Back to work on pension problem

Back to work on pension problem

When legislators return to Springfield Oct. 22, they will confront the same issue they've been avoiding for years.

All the talk about same-sex marriage aside, the big issue on legislators' plates as they prepare for the start of next week's fall veto session is the public pension mess.

Legislators have proven — repeatedly — that they can run from this issue, but they can't hide. It dogs them and will continue to do so every day of the week until they act.

Illinois' pension woes are a permanent black cloud, the biggest shadow of crippling financial problems that have turned our major industrial state — a hub of Midwestern commerce, the Land of Lincoln — into a national joke.

With the state's five public pension systems facing an underfunding problem of nearly $100 billion, our elected officials must act.

A special panel of House and Senate members has been meeting since mid-summer to try to put together a legislative solution that everyone can live with. So far, it's proved rough going.

Senate President John Cullerton has expressed some optimism about a proposal that would reduce the pensions' liability by roughly $138 billion over 30 years, and he's expressed hope that it will win a bipartisan majority. State Rep. Elaine Nekritz, a Northbrook Democrat who's played a leading role in the discussions, also is hopeful but warns that "it's possible it all breaks down."

Democratic and Republican legislators, who put their own political interests above all else, are rightly terrified by the possible consequences of casting a vote that angers current and retired members of the pension systems. So it would be no great surprise if they do nothing, pushing the issue into next year.

State Rep. Jim Durkin, the Republicans' new House minority leader, has said the goal of a vote during the veto session that begins Oct. 22 is "a bit lofty."

In other words, don't get your hopes — or your fears — up that legislators will act.

They have specialized in inaction and indecision, and even when they have acted, it's been ineffective. That's why the details of the pending proposal raise real concerns about a repeat of their previous blunders.

The full reform package has yet to be released. But legislators say projected savings come mostly by reducing the annual 3 percent cost-of-living increases retirees currently receive. The plan calls for reducing employee contributions by 1 percent while simultaneously limiting COLAs to half the rate of inflation or a maximum of 4 percent.

In the context of other proposed changes, things like raising the retirement age or shifting current employees into a 401(k)-type plan, the COLA proposal would not be catastrophic for pensioners, although it still will infuriate many.

The main problem, however, is that most of the savings are pushed way into the future.

The General Assembly has gone down this road before, promising future fixes that never materialized.

Back in 1994, former Gov. Jim Edgar and legislators agreed on a 30-year plan to fully fund the pensions, pledging escalating payments to address the underfunding problem. Then legislators reneged on the arrangement by not making the payments they promised.

"Then when the recession hit and the stock market went down, since much of the (pension) reserves were invested in the market, that made the deficit even greater," Edgar recalled.

The lesson, of course, is that problems ignored don't go away; they get worse.

Illinois' public pension woes have grown into a disaster, a real-life failure that will have adverse consequences for thousands of current and former public employees.

It's understandable that, having created this problem, our legislators can hardly abide the political fallout that will accompany any serious fix. But, if not now, when? If not them, who?

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Sid Saltfork wrote on October 14, 2013 at 2:10 pm

"a real-life failure that will have adverse consequences for thousands of current and former public employees" depends on the State of Illinois Constitution.  Of course, a right wing newspaper wants to steal the earned pensions of elderly people rather than pay taxes to solve the problem.  What about ending the tax deduction for "ink and paper"?  The current legislators did not create the problem.  It was created by previous legislators some who are still in the General Assembly, and governors.  Now; the only solution is to steal rather than pay taxes?  What will the state bondholders think is coming next?

aszakmary wrote on October 14, 2013 at 4:10 pm

"In the context of other proposed changes, things like raising the retirement age or shifting current employees into a 401(k)-type plan, the COLA proposal would not be catastrophic for pensioners...."

Sorry, but this statement is simply not accurate. According to the latest survey of a panel of 29 economists conducted by the Philadelphia FED, the mean forecast for the average annual increase in the CPI over the next 10 years is 2.39%. Thus, in expectational terms, the conference committee proposal replaces a 3% AAI that employees PAID FOR with specific, dedicated contributions from their salaries with a COLA that is expected to average 1.2%. While this may appear at first to be a small difference, given compounding it most assuredly is not: after 15 years, for example, a pension that increases 1.2% annually will be over 23% less than one that increases 3% annually. If someone proposed cutting your salary by 23%, would you similarly characterize it as "non catastrophic?"

I would have no objection to replacing the existing pension plans with a fair, properly-structured 401 (k)-type plan GOING FORWARD. This is exactly what was done by private industry. However, the conference committee plan, via draconian cuts to the earned benefits of retirees and those close to retirement, is simply unprecedented in the history of the United States (short of bankruptcy, which states cannot declare), and is a clear-cut violation of both the Illinois and U.S. Constitutions. No way will it be allowed to stand by the Illinois Supreme Court, let alone federal courts. This whole exercise is a waste of time.

Sid Saltfork wrote on October 14, 2013 at 4:10 pm

aszakmary;  Thank you.  I have no faith in the Illinois Supreme Court; but I do in the federal courts.  Thanks again for the CPI, and COLA explanation.

samret wrote on October 15, 2013 at 7:10 am

 

" If not them, who?"

I suppose the "them" refers to the retirees.  So, it is okay to soak the retirees, to make up for the fiscal malfeasance of the legislators?  Why not let the people of the State of Illinois pay for the privilege of enjoying the benefits of the pension fund for years without seeing an increase in tax rates?  The only courageous person involved with trying to solve the pension mess appears to be Sen. Linda Holmes...at least she has the courage to state the problem as it really is...the rest of them are either "comfortable" (Sen. Biss) with the current Committee plan to soak the retirees or think that the retirees are not being "bled" enough (several GOP members).  Like the other poster said...what a collosal waste of time!

 

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