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Editorial: Excellent time for a state pension storm

The Illinois State Capitol Springfield. (AP file)

The Illinois State Capitol in Springfield. (AP file)

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Updated: December 20, 2012 6:10AM

Here’s hoping this is the storm before the calm.

With the election over, the public conversation in Illinois is turning — thankfully — to the state’s pension crisis.

What crisis, you ask? The one that has but two outcomes if the state Legislature fails to act: The retirement systems for teachers, state workers, university employees, legislators and judges will run out of money in the near future.

Or, the state’s massive pension bills ($6.8 billion this year out of a roughly $33 billion budget) will crowd out spending on just about everything else.

As usual, this new round of pension conversations started with the hysterics and finger-pointing stage.

This must be followed by the let’s-get-to-work phase.

The best window for passing pension reform, politically speaking, is painfully short: during this fall’s veto session or in early January, during a lame duck session.

A failure to act should trigger a riot. We hardly exaggerate.

The Civic Committee of The Commercial Club of Chicago got the ball rolling last week, though few people are lining up to thank them. Its president, Tyrone Fahner, sent a scalding letter to the governor, claiming that Illinois has let the pension problem grow for so long that is it is now “unfixable.”

Fahner could drop the holier-than-thou attitude, but he is right to sound the alarm about the pension crisis, as his group has been doing for years.

Most interestingly, Fahner’s proposal to “slow the bleeding” roughly covers the same ground as a Gov. Pat Quinn framework from last April. This includes: dealing with the overly generous annual cost-of-living increases for retirees, raising the retirement age to 67, and shifting the burden for paying teacher pension costs from the state to local school districts.

We wholeheartedly agree with these targets — changes to the COLA and the retirement age produce the biggest savings compared to changes such as increasing contributions. And we are strong supporters of the “cost shift” as a way to hold districts accountable for the salary decisions they make that affect pensions. We are waiting for state legislative Republican leaders — who oppose this — to offer an alternative.

But we part company, vociferously so, on Fahner’s proposal to eliminate COLAs altogether. This would mean a $30,000 pension for a retired 70-year-old today — a retiree who gets no social security — would never change. Instead, we favor scaling back the compounding and overly generous COLA that retirees currently receive. We also support the strongest language possible to force the state to make its annual pension payments.

Fahner says his proposed changes won’t erase the unfunded pension liability, which the Civic Federation recently calculated at nearly $97 billion, up from $83 billion. And he could be right, though we can’t check because he won’t release his underlying data.

It also may be true that the pension bill on the table in May, which remains the working template, won’t fully fix the problem either.

We aren’t convinced the plan to let workers choose between retiree health benefits or a reduced COLA will produce the savings Democrats predict. The Democrats also should release their actuarial homework.

The bottom line is this: No solution will likely solve the state’s pension problem once and for all without adding new revenue. We can live with that because the alternative is unbearable: to so decimate a retirement system that is central to Illinois’ long tradition of providing a decent wage and retirement for its teachers and public employees.

The basic elements for meaningful, if not perfect, pension reform are at a hand.

Let’s get to it.

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