Illinois pension reform talks continue without end in sightSPRINGFIELD — It’s said that misery loves company, and Illinois has plenty of company when it comes to its public pension woes, according to a recent report.
Illinois has the worst funded public pension system among the 50 states, according to a Pew Center on the States study released Monday. The Land of Lincoln joined Connecticut, Kentucky and Rhode Island for having among the poorest funded public pension systems in the nation.
In 2010, the most recent year data for all 50 states is available for the study, each of those four states had an unfunded pension liability of at least 55 percent, according to the report.
“For states that do face really severe funding challenges … it’s a competition between raising taxes, cutting services or finding ways to reduce the costs for both current employees and retirees,” David Draine, senior researcher for the Pew Center on the States, a nonprofit that studies issues facing state governments.
It’s a sentiment that Gov. Pat Quinn and others have been reinforcing. Quinn often says that as public pension costs in Illinois rise, they squeeze out other areas of state government.
“How much more information do we need from independent, outside entities to tell us we must make this giant step?” Quinn said during a news conference Monday.
A plan that would have forced current public employees and retirees to choose between better cost-of-living adjustments and participation in a state health-care program faltered at the end of the General Assembly’s spring session in May.
The main source of contention in the legislation was shifting the main responsibility for teachers’ pensions from the state to local school districts. The Teachers' Retirement System is the largest of the five public pension systems administered by the state.
Republicans rejected that idea, saying school districts would either have to increase property taxes or cut classroom spending to pay for the pensions. But Quinn, who wants local school districts to pick up teacher pension costs, has said any impact on property taxes would be so small it would be “imperceptible”
Sara Wojcicki Jimenez, spokeswoman for Illinois House Republican Leader Tom Cross, R-Oswego, said every aspect of pension reform is still being debated between Quinn and lawmakers.
Cross headed a last-ditch effort this spring to pass a comprehensive pension reform plan. His measure kept many of the same elements of the stalled pension reform plan, but stripped the cost-shift element. It too stalled.
Patty Schuh, spokeswoman for Illinois Senate Republican Leader Christine Radogno, R-Lemont, said the cost-shift issue is a non-starter for Radogno at this point. Schuh said the leader wants serious reform to pass before revisiting the idea of making local school districts responsible for their teachers' pensions.
The urgency to control Illinois’ public pension costs comes after years of the state borrowing from or skipping pension payments. The fallout from the Great Recession and decisions of politicians was evident, as the state’s annual pension payment jumped by $1 billion between this year and next, going from $4.1 billion to $5.2 billion.
Currently, Illinois’ public pensions only have enough assets on hand to cover 45 percent of current and future pension benefits, according to the report. And without major changes, that $83 billion gap will continue to grow, as will the state’s annual contribution to its pensions systems.
Quinn’s office claims the pension reform that faltered in May, including a cost-shift element for the Teachers’ Retirement System, would put the state’s public pension system on the road to being fully funded in 30 years thanks to the money it would save.
Legislative leaders and Quinn will powwow Thursday in Chicago to try and hammer out some agreement, according to Wojcicki Jimenez. It is the second time this month such a meeting has occurred.
Quinn wouldn’t say Monday when he expected lawmakers to return to Springfield to take up any pension reform legislation.
Out of the four states with unfunded public pension liabilities of 55 percent or greater in Pew’s report, Rhode Island has taken steps to curtail its pension problems. The Ocean State suspended cost-of-living adjustments for retirees and increased the age of retirement for public employees.
“There are certainly some states that did make changes and have improved things” since 2010, Draine, the senior researcher for the Pew Center on the States, said.
Illinois was looking at increasing the retirement age for all employees from 65 to 67, but that idea fell out of favor because of concerns about its constitutionality. The Illinois Constitution promises that “membership in any pension or retirement system of the State … shall be an enforceable contractual relationship, the benefits of which shall not be diminished or impaired.”
Andrew Thomason can be reached at andrew.thomason@franklincenterhq.org.
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