Union pensions on a road to ruin
EDEN MARTIN email@example.com June 19, 2013 8:30PM
Updated: June 20, 2013 2:22AM
On Wednesday, the Illinois House and Senate created a 10-member conference committee to work out a deal on pension reform, but this changes nothing. It preserves disagreement. Reformers continue to advocate major reform — to reduce the state’s fiscal bleeding, and to save the pension systems. The unions continue to oppose real reform. So the status quo prevails.
Everything is upside down here. Retirees and state workers have by far the greatest interest in getting this fixed. Younger workers are paying into plans that will be broke by the time they retire. Yet their union chiefs block the proposed reforms and actuarial funding schedule, and threaten litigation.
In Springfield the defense has the advantage. It’s easier to block something than pass something.
So the reformers might as well relax. The union chiefs like the status quo? Fine. What does status quo mean?
◆ The pension plans stay unreformed. At some point they run out of money.
◆ Workers continue to pay into plans that are running dry. Retirees continue to receive their pensions until the end comes. Then the workers who retire — as well as those already retired — are out of luck.
◆ Retirees will say to the state: Pay up. But the state won’t have the money. The state can say: We never contractually guaranteed payment of pension fund debt. Back in 2013, the unions sought an explicit guarantee, but they failed to get it.
◆ The state can also say: We have statutory sovereign immunity except in the case of small claims. You can’t sue the state for billions. And no court can order the state to pay billions. And if a court were to enter such an order, there’s no way the unions could enforce such a judgment.
◆ Bottom line? The state doesn’t have the money. But hey . . . maybe we can rustle up 10 cents on the dollar. Like Detroit.
◆ K-12 school teachers will say: Surely the local school districts owe us our pensions. But the local districts will say: We don’t have the money either. If you don’t believe it, sue us.
◆ The union chiefs will repeat their mantra: Just raise taxes. Illinois has a “revenue problem.” Do whatever it takes! If you double the personal income tax rate from 5 percent to 10 percent, you can pay our pensions at 100 cents on the dollar, along with our retiree health premiums.
◆ The Legislature will shrug its collective shoulders: We were afraid to raise taxes even a nickel back in 2013 — or to tax retirement income (your pensions). So now you want us to double the tax rate? Just so you can continue to retire early and take home fat pensions with juicy COLAs that taxpayers and folks on Social Security don’t get?
◆ You want us to raise the student-teacher ratio in our schools from 40 to 60 — and cut health care and social services for the poor down to next-to-nothing?
◆ You want us to drive the few remaining businesses and wealthy taxpayers we still have out of the state — to nearby Indiana, for example?
◆ The unions will then turn to the federal government and ask for a bailout. President Christie — or perhaps President Clinton — will just smile.
Why does nothing get done in Springfield?
The union chiefs like the status quo. At some point, they may not like it so much.