By Jeffrey Brown and Avijit Ghosh
The Illinois General Assembly is expected to gather in Springfield in early December to consider a new pension bill. Although details of the new bill have not been released, it is expected to include provisions that could destroy the very foundation of retirement security for many public employees. This will put higher education in Illinois at grave risk.
As public employees, as taxpayers, and as individuals who care deeply about the future of public higher education in Illinois, we have been among those strongly advocating for public pension reform. The state's failure to adequately fund public employee pensions over many years has placed the State of Illinois in a precarious financial situation that has gotten worse with time. Our ability to maintain a world class public university system in Illinois is threatened by continued inaction.
We continue to believe that sensible reform is essential. But pension reform must not be considered solely as a cost cutting issue: it must also preserve the ability of public universities — such as the University of Illinois — to attract and retain the world's best talent. A reform plan that fails to recognize this could do more harm than good.
Of the features reportedly under consideration, the most troubling is one that would disregard all future salary increases when calculating pension benefits for those earning above the Social Security earnings limit. For perspective, a 40-year-old engineering professor with 25 years of world-class research productivity in her future would experience a nearly 50 percent cut in annuity at time of retirement (assuming a 3 percent annual salary increase). On top of this enormous cut in initial annuity, other features would limit the annual annuity increase — commonly known as the COLA. Even the reduced COLA would only be provided in five of the first 10 years after retirement. Still other provisions would reduce lifetime benefits in other ways.
For many of our employees, who by virtue of being Illinois public employees are not covered by Social Security, these provisions would decimate their retirement security. What would our very best faculty do in this case? Absent other actions to substantially offset these reductions, our best faculty will leave to go to another university—most likely in a different state—that provides meaningful retirement security.
An exodus of top intellectual talent would place the future of Illinois at risk. The faculty members at the University of Illinois come from across the globe to train the next generation of workers and entrepreneurs who propel this state's economy. They provide critical clinical care to some of the state's most needy citizens. Their research creates the innovations that seed new startup companies and create jobs. They bring much needed federal dollars to benefit the state; on average, each faculty at the University of Illinois brings in over $200,000 of federal grants to the state annually. Unreasonable pension reform provisions will ground this economic engine to a halt.
It is rumored that as a political bone to employees, the proposal would also reduce employee contributions from the current eight percent of pay to seven percent. A one percentage point reduction in contributions does not come close to compensating for the enormous benefit cuts being proposed.
Our legislative leaders appear to be viewing pension reform as a narrow exercise in cutting costs, rather than an effort to balance human resource needs of universities and colleges with fiscal constraints.
We are fully aware of the depth of the state's fiscal crisis and the need to reduce pension costs over the long term. That is why we proposed a package of reform proposals earlier this year—a package endorsed by the Presidents and Chancellors of every one of our public universities—that would achieve comparable cost savings for SURS while maintaining the ability of public universities to recruit and retain the talent that they—and the state—need.
Unfortunately, balanced reform proposals such as our Six Step plan have been drowned out by extreme voices on both sides.
One side denies the fiscal reality that makes reform necessary. The other side denies the moral and legal rights that public employees and retirees have to a reasonable retirement plan, based on past promises made to them by the state.
It is time for the voices of reason to join together for reasonable pension reform and save the future of higher education in Illinois. As a first step, we must stop the General Assembly in December from driving away our most valued public employees from this state. The future of higher education depends on it.
Jeffrey Brown and Avijit Ghosh are professors of the College of Business at the University of Illinois at Urbana-Champaign.