Pension problem began long ago
RICH MILLER email@example.com May 9, 2013 9:18PM
Supporters, opponents, and lobbyist crowd the hearing room during a Senate Executive committee on pension legislation at the Illinois State Capitol Wednesday in Springfieldl. (AP Photo/Seth Perlman)
Updated: May 10, 2013 2:26AM
Lawmakers are human beings, and like most human beings they don’t make any major changes until it’s clear that something absolutely has to be done.
Pension reform is a good case in point.
It’s been obvious since just after World War II that Illinois’ pension systems were dangerously underfunded. But nothing was done until the problem was discussed at the state constitutional convention in 1969. The delegates came up with a plan that they believed would scare the Illinois General Assembly into finally providing adequate funding for the pension systems.
The idea was simple. Legislators were forever barred from cutting pension benefits. Constitutional delegates figured that legislators wouldn’t be so irresponsible as to short the pension systems and raise benefits to the point where it threatened the very existence of the government. The delegates were wrong.
Pension payments continued to be skipped and skimped while benefits continued to rise. In the 1980s, legislators compounded the interest on annual pension increases, making the problem far worse.
In the 1990s, Gov. Jim Edgar put in place a 50-year solution. But like those crazy mortgages in the last decade, the big balloon payments were put off until far into the future.
Even with Edgar’s “ramp,” pension payments still were skipped, and when the stock market crashed after the mortgage industry collapsed, billions of dollars contributed by taxpayers simply vanished.
The unfunded liability now tops $100 billion. Annual payments are so high and are rising so fast that they are literally eating up the rest of the state budget. Almost every dime of 2011’s huge state income tax increase now goes to the pension systems.
Two years ago, House Republican Leader Tom Cross along with Ty Fahner at the Civic Committee pushed a pension reform plan that actually increased annual payments by a billion dollars and knocked just $3 billion to $5 billion off the state’s unfunded liability.
Despite strong editorial support, unions flat-out rejected Cross’ plan and a bipartisan consensus developed against it. The bill went nowhere.
This past Monday, the unions unveiled a compromise plan with Senate President John Cullerton that knocks $10 billion off the unfunded liability and actually saves taxpayers $45 billion over the next 30 years.
But instead of being praised for their difficult compromise, the unions have been hammered for an insufficient effort.
If the unions had proposed their current plan two years ago, it would’ve immediately passed and they would’ve been praised for saving the state. Nothing proposed by that point even came close to the savings that the unions have now agreed to.
The problem for the unions is that House Speaker Michael Madigan passed a pension reform plan before they unveiled their own proposal. Madigan’s plan saves far more money than the union proposal and knocks billions more off the unfunded liability.
The delay in reaching an agreement with the Senate meant the unions could not go to sympathetic House Democrats and plead their case before the House voted.
So now we are once again stuck with two competing pension bills. The gridlock has not been broken. The irony here is after 65 years of pension woes, a one-week delay in coming up with an agreement may have made a huge difference in how the state ultimately decides to deal with the issue.
Timing is everything. And that’s really too bad. The solution to the pension problem ought to include the voices of those who are being asked to give up something that has been guaranteed by our Constitution.
Rich Miller publishes thecapitolfaxblog.com.