OPINION: Illinois is in a fiscal crisis because of unfunded pension liabilities

Scott Reeder, guest columnist
Posted 12/10/18

Last month, I wrote a column on an idea being pitched by State Rep. Jeanne Ives that contends that state pensions may be illegal contracts because they violate the state constitution.

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OPINION: Illinois is in a fiscal crisis because of unfunded pension liabilities

Posted

Last month, I wrote a column on an idea being pitched by State Rep. Jeanne Ives that contends that state pensions may be illegal contracts because they violate the state constitution.

The Republican from Wheaton contends that during the past several decades lawmakers knowingly underfunded pensions, violating the balanced budget clause of the state constitution.

As I said in my earlier column, I’m skeptical whether the Illinois Supreme Court will buy into the argument. They have been hostile to previous proposals to reduce pensions, noting the state constitution prohibits doing this. 

But that doesn’t mean such reductions will never happen. Arizona had a similar non-diminishment clause in its constitution, but last month voters in the Grand Canyon State voted to eliminate this provision from the constitution so cuts can be made.

Are Illinois’ voters likely to someday follow suit? Who knows? 

But one thing is certain — Illinois is in a fiscal crisis because of unfunded pension liabilities. 

The blame rests squarely on the shoulders of governors and lawmakers – both Republican and Democrat – who made pension promises, but left funding those pledges for future elected officials to figure out.

That, of course, never happened. 

Now, we are left with more promises than cash and no easy solutions to solving the problem. 

Politicians as divergent as Pat Quinn and Bruce Rauner have called for reducing pension benefits.  But I’ve heard no one in public life call for entirely eliminating retirement benefits.

In fact, Ives says she would have no one who is already retired receive a smaller check. Her plan focuses on giving retirees cost of living adjustments equal to the rate of inflation rather than the current level of 3 percent compounding annually. For those who haven’t retired, she would transition them into 401k-type retirement plans. 

“Let’s say you have been paying into a pension plan for 20 years, you’d still be able to retire with a pension for those. But the remainder of your time with government, you’d pay into a defined contribution plan,” she said. 

Those who worked for local and state government deserve secure retirements. But that doesn’t mean they should be above sharing some of the burden.

It’s not that anyone on the left or the right is delighted by the idea of making cuts.

It’s just that the math doesn’t add up. The state has promised more than it has money to pay. 

Governor-elect J.B. Pritzker has proposed amending the constitution to tax some people at a higher rate than others. But he’s mum on just who he would raise taxes on. 

The Arizona route to amend the constitution to reduce pension benefits might someday prove to be a more popular route with Illinois voters than voting to amend the constitution in order to raise taxes. 

But regardless, amending the constitution is difficult, usually unsuccessful and can’t be voted on for at least two years. 

For the time being, Pritzker and lawmakers need to find a way to operate state government within its means. Good luck with that. 

 

Scott Reeder is a veteran statehouse journalist and a freelance reporter. ScottReeder1965@gmail.com