Lawmakers will return to Springfield for special session Friday to consider a woefully inadequate fix to the state's pension system. Illinois' government unions recently offered their own "framework" for pension reform. Union bosses said they are willing to increase government employee contributions to retirement funds, but there's a catch: pensions must become the state's second highest funding priority - second only to bond debt and ahead of education, law enforcement, prisons, roads, social programs and just about everything else that taxpayers expect government to do. Oh, there's another catch, too: no changes to the generous, annual cost-of-living adjustments enjoyed by government pensioners.
The unions did not say how much the would be willing to kick in to replenish badly underfunded pension funds. That's a crucially important part of any supposed pension "reform." Even under very generous assumptions, the state's pensions are underfunded by $83 billion. To be reasonably certain of keeping its promises to retirees, the state would need to find $83 billion, preferably by tomorrow morning. The total retirement shortfall facing Illinois is much higher. When underfunded state retiree health care programs and local pensions are accounted for, that figure climbs to $203 billion.
It has been understood for a long time that any workable fix to government pensions will require that current workers make a larger contribution from their own salaries. Union officials claim that every percentage point of contributions made by government workers would be worth $15 billion, but that amount would be spread out between now and 2047. The problem is that the longer the state has to wait to put money back in the pension funds, the more money it will eventually take to get those accounts in balance. That's because of inflation, and the fact that the state is supposed to invest pension funds - but the state can't invest money it doesn't have.
The unions say they are willing to put more money into pensions, but the deal that the unions are offering would leave the state and taxpayers even more vulnerable if there is a shortfall. Why? Because pension spending would trump everything else that state government is supposed do.
If unions want to maintain the pension system as it currently exists, then they should be prepared to put up the money to make them fiscally sound. Only then should the state and taxpayers even think about considering the unions' proposals. We have yet to see any indication that the unions understand the magnitude of the pension problem, or how much money is needed to put state employee pensions on a sound footing. Until they do, and they offer the kinds of amounts that will be needed to make these pension and retiree benefit funds solvent, we can only conclude that the unions are not serious about reform.
And as long as that's the case, it is up to the rest of us to restructure government employee benefits so that they can function with the money we have on hand.
It has been understood for a long time that any workable fix to government pensions will require that current workers make a larger contribution from their own salaries. Union officials claim that every percentage point of contributions made by government workers would be worth $15 billion, but that amount would be spread out between now and 2047. The problem is that the longer the state has to wait to put money back in the pension funds, the more money it will eventually take to get those accounts in balance. That's because of inflation, and the fact that the state is supposed to invest pension funds - but the state can't invest money it doesn't have.
The unions say they are willing to put more money into pensions, but the deal that the unions are offering would leave the state and taxpayers even more vulnerable if there is a shortfall. Why? Because pension spending would trump everything else that state government is supposed do.
If unions want to maintain the pension system as it currently exists, then they should be prepared to put up the money to make them fiscally sound. Only then should the state and taxpayers even think about considering the unions' proposals. We have yet to see any indication that the unions understand the magnitude of the pension problem, or how much money is needed to put state employee pensions on a sound footing. Until they do, and they offer the kinds of amounts that will be needed to make these pension and retiree benefit funds solvent, we can only conclude that the unions are not serious about reform.
And as long as that's the case, it is up to the rest of us to restructure government employee benefits so that they can function with the money we have on hand.
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