Following the swearing in of several new members to the Illinois General Assembly early last month, some Peoria residents are losing faith in the passage of a “perfect” pension reform plan.
The clock struck midnight for lawmakers in Springfield at the swearing in of the 98th General Assembly on January 9 of this year. Lawmakers and Governor Pat Quinn had hoped to pass a pension reform package before the arrival of new lawmakers in Springfield. But not even those that drafted the latest reform plan considered it even close to “perfect.” The plan passed a House committee by a vote of 3-6 just days before the new legislature took office. But the House adjourned without holding a vote on the pending legislation.
The latest plan of attack on Illinois’ $96 billion unfunded pension liability would have frozen cost-of-living adjustments for all workers and retirees for six years. Once COLAs were reinstated, they would have applied only to the first $25,000 of a retiree’s income. Current workers would not have received COLAs until age 67. The cost of retirement benefits also would have increased for state workers; the amounts deducted from current employees’ paychecks would have increased by 2 percentage points. The bill also would have required state lawmakers to fully fund the state’s required contribution each year.
The bill, sponsored by Democrats Nekritz and Daniel Biss, of Evanston, showed some sign of passage when House Speaker Mike Madigan—at Governor Quinn’s request—tabled a cost-shift that would have handed responsibility of state pensions to local school districts, community colleges and universities. Quinn had been confident that such action would spur a House vote given the fact that the cost shift had no Republican support in the House or Senate as it would raise tuition and property taxes.
House Minority Leader Tom Cross (R) had urged Republicans and Democrats to come together and support the measure so the bill can “get on the governor’s desk so he can sign it.”
But union leaders, citing the clause in the Illinois constitution that prohibits “diminishing or impairing” state pensions, said they would challenge the passage of the bill in court. Senate President John Cullerton preferred passage of a limited pension reform proposal, which already passed the senate last spring, and which he claimed would have a better chance of bypassing any heckling over constitutional law. Union workers, who would rather see lawmakers raise taxes on corporations, said if the House approved the Senate version, they would still go to court.
How Did We Get Here?
Too many promises. Not enough funds.
The past fifteen years have witnessed Illinois government either under-funding or skipping required annual pension payments and increasing retirement benefits without the money to pay for them. These actions combined with disappointing investment returns on public pension system assets has required taxpayers to pay approximately $4.9 billion into the five pension systems: teachers; state employees; universities; elected officials; and judges, according to the Civic Federation.
The Illinois Commission on Government Forecasting and Accountability claims Illinois’ pension system is the worst funded in the country. The approximately $96 billion unfunded liability has grown by nearly 12 billion in the last budget year, according to a report released by the Office of the Auditor General. The number represents the difference between what the state owes and what the government has the money to pay. Currently, assets in the five pension fund categories account for only 40 percent of what the state owes in pension benefits to government workers. The Teacher’s Retirement System (TRS) has the highest funded ratio of the five categories standing at approximately 42 percent and the General Assembly System the lowest at 18.5 percent.
Since the swearing in of the new General Assembly, all pension reform plans now have to be restarted, and legislation could take several more weeks to approve. Peoria taxpayers aren’t satisfied and say state government has to find a way to move forward.
“No action is never good enough,” says Greg Lancing, a 42-year old Peoria resident employed by the state. “The bottom line is the Governor needs to address our spending issue before he even thinks about raising taxes or freezing the cost of living adjustments.”
“I’m a public school teacher, so from a teacher’s standpoint, I in no way approve of the cost shift that’s been on and off the table for discussion. I just do not think it’s right for the government to be placing the burden of pension reform on our local school districts because it has not acted responsibly and budgeted money for our retired state workers,” says Pamela James.
It’s gonna really hurt our children when money that should be going toward classroom and curriculum improvements is going toward pensions. And it’s gonna hurt our young people trying to go to college if tuition has to be raised. And that’s what our legislators need to really consider is our children and the next generation.”
Illinois’ unfunded pension liability is rapidly steering funds away from important government programs, such as healthcare, public safety and education. Wall Street has already threatened to downgrade Illinois’ credit in the continued absence of a pension reform resolution.