Pension Reform: Not Done Yet
Public employees, past and present, consider the financial sacrifices they’re being asked to swallow in the state’s pension deal an unconstitutional betrayal by the Illinois lawmakers who supported the bill.
And on the other side of the issue, many fiscal conservatives claim the bill doesn’t go far enough to put the pension plans back on solid financial footing.
But the legislation does include three important reforms that both sides should appreciate because, over time, they’ll eliminate abuses, close loopholes, and restore a measure of fairness and integrity to the pension systems.
The reforms are designed to:
- End public pensions for private employees. The BGA has investigated a loophole in the pension code that allows some private employees to receive taxpayer-funded pensions.
Dubious beneficiaries included lobbyists for private trade groups who were able to join public pension plans.
That will be prohibited in the future.
- Cap pension payouts at $110,000. The BGA shined a light on dozens of retirees — including high-level medical personnel, public officials and school administrators — who receive annual pensions of several hundred thousand dollars.
That’s excessive and it drains an already-underfunded system, so it’s being phased out.
- Ban pension padding. Retirees will no longer be able to add the monetary value of unused vacation, personal and sick days to their pension calculation, which can dramatically increase payouts.
For instance, more than 4,200 Chicago Board of Education retirees bumped their collective pensions by $9 million between 2006 and 2011 by cashing in unused sick days, according to a BGA investigation.
Fortunately, CPS canceled the payout policy following our story.
These loopholes and abuses have tended to benefit politically connected insiders more than public employees without clout, so fairness dictates they be eliminated.
But that’s not the end of the story. Lawmakers still have more pension abuse to attack, including:
- "Sweeteners," like the dubious inside deal that allowed a former Chicago fire commissioner to increase his pension by $27,000 a year by getting credit for running the department two years longer than he actually did.
Or a former Oak Brook police chief who used a "sweetener" approved by the state legislature to boost his pension by more than $30,000 a year.
- "Spiking," which means awarding end-of-career raises that boost pension payouts considerably.
Village officials in suburban Lansing did it to encourage cops and firefighters to retire early, but they canceled the program after the BGA disclosed its deleterious long-term impact on taxpayers.
- "Tacking," which allows contract employees and consultants to join pension plans even though they’re not government workers.
One example uncovered by the BGA is an attorney who had a contract to perform legal work for Calumet City, but still got enrolled in the village’s pension plan for regular employees.
That’ll be a "no-no" in the future.
- "Double-dipping," or in the case of two south suburban brothers, "triple-dipping," which means they’re eligible to collect three public pensions each.
This can be reformed by limiting individuals to one public pension, or stopping retirees from collecting a public pension while they’re still on another government payroll.
Here’s the bottom line: Lawmakers got off to a great start by attacking some of the worst pension abuses when they passed the reform plan.
Next year’s challenge is to finish the clean-up job.
Andy Shaw is President & CEO of the Better Government Association. He can be reached at firstname.lastname@example.org or 312-386-9097.