>By Robert Reed
This Think Tank post was also published as an OpEd on Friday, Feb. 3, 2012 in the Chicago Sun-Times. Robert is the BGA’s director of programming and investigations. Contact him at firstname.lastname@example.org. Follow him on Twitter @RReedBGA.
Long after the state’s public pension alarm began to blare, Illinois’ leadership is finally roused and ready to answer the call.
This year, we’ll see how determined our leaders are as they launch various efforts to comprehensively fix a benefit system that’s teetering on financial ruin and may ultimately plummet the state government into insolvency.
The Better Government Association welcomes the reform effort and is also encouraged by recent crackdowns on individual pension abuses that have been uncovered in exposes by the BGA and media outlets. But this problem goes beyond such isolated repairs and it’s high time our leaders toughen up and hammer out systemic remedies.
Democratic and Republican powerhouses are ramping up for this legislative session:
- Having avoided aggressive pension reform for most of his tenure, Democratic Gov. Pat Quinn says he’s raring to go. Recently, Quinn forged a bi-partisan working group of lawmakers and others to embark on a comprehensive examination of the state pension crisis. Quinn’s goal: Prescribe remedies that the governor says can be accomplished in a “fair and constitutional manner.”’
- Meanwhile, the powerful Democratic House Speaker Michael J. Madigan is interested in the way state pensions invest retirees’ money. He’s convened a special House committee to examine the major funds’ financial strategies. Madigan’s goal: Determine how decisions are being made and how much risk these portfolios carry, especially in today’s choppy economic seas.
- Across the aisle, Republican House Minority Leader Tom Cross (who is chairing the special House panel on investments) is also again gearing up proposed legislation that would alter benefit structure for current state workers. Cross’ goal: Pass a law that protects worker benefits already accrued but reduce them going forward either by having employees pay more into a defined plan like a pension or opt for a defined contribution plan, such as a 401 (k).
It’s encouraging to see state chieftains address the larger pension issues and take a wider view.
That direction is a welcome departure from the recent past when the crisis has been ignored or when lawmakers settle for passing important but incremental reforms, usually after the BGA and media reports uncover embarrassing abuses of the current system that make taxpayers’ blood boil.
For example, lawmakers last session outlawed the egregious practice that allowed two education lobbyists, who were each substitute teachers for merely one day, to become eligible for hefty public pension payouts.
While such repairs provide momentary relief, they are not the real answer to this systemic quandary. We need solutions that match the size and scope of this enormous crisis.
Obviously, it’s a huge challenge and the BGA doesn’t profess to have all the answers.
But here are some issues the BGA would like to see addressed in the upcoming session: Suspending or limiting cost of living adjustments; capping the amount of money a retiree receives (as is done in the private sector) no matter how many public pension plans they have been in; prohibiting “back-loading” or “spiking” by ending the suspicious practice of state employees getting last-minute promotions or salary increases which translate into heftier pension payouts; and consider phasing out defined pensions for defined contribution plans, like a 401 (k).
The BGA knows there are stormy debates ahead especially whether any changes to the state pension rules for current workers is legal under the Illinois Constitution.
Moreover, organized labor can rightly argue that the state caused this massive shortfall by not keeping its word and properly funding its pension plans.
Yet despite the fiscal complexity and political reality that dogs this controversial issue, we are on the verge of disaster.
It’s time to stop stalling. The alarm bell is clanging and our state leaders must confront this emergency before it’s too late.