If the pension reform bill passed Tuesday by the Illinois General Assembly was a first step in a series of reform measures still to come, we’d hail it as a small victory for taxpayers and the state.
Unfortunately, we fear that in the minds of Gov. Pat Quinn, Speaker Michael Madigan, and Senate President John Cullerton, this week’s reform effort is the only step, which it cannot be if Illinois is to right its fiscal ship.
With a $100 billion shortfall, Illinois has the worst-funded public pension systems in the country. For years, lawmakers failed to address the issue as the unfunded liability grew and ratings agencies repeatedly downgraded the state’s credit, which now is the lowest of all 50 states.
Senate Bill 1, which passed 62-53 in the House and 30-24 in the Senate, does address some of the problems.
It changes the cost-of-living adjustments that retirees receive every year. Currently, retirees get a compounded, 3 percent increase each year on almost their full pension. Under the new law, retirees will receive COLAs on only a part of their benefit, and the COLAs will be skipped some years for new retirees. That is the bill’s biggest accomplishment.
The bill slightly raises the retirement age, on a sliding scale, for public employees who are 45 and younger. While this is a positive step, it doesn’t go far enough. Many public employees are able to retire in their 50s with full pension benefits. As Americans live longer, those benefits get more and more expensive.
The bill also places a cap on the amount of salary on which a pension can be based. In 2013, the cap is about $110,000. A cap was long overdue, and this is a positive step, but it should be even lower.
In an effort to fight off a constitutional challenge, which certainly is coming, public employees will contribute 1 percent less to their retirement benefits than they do now. We think public employees should contribute more to their own retirements, not less.
Like many of the lawmakers who voted against this bill, we also question the savings that proponents say it will bring. Madigan, Quinn and Cullerton say it will save $160 billion over the next 30 years. But the nonpartisan Commission on Government Forecasting and Accountability was not given a chance to analyze the bill. And the $160 billion figure is based on an 8 percent annual return on the pension funds’ investments, which is unrealistic.
Though Quinn won’t admit it, Tuesday’s vote all but guarantees that the temporary income tax increase imposed on Illinois workers in 2011 will have to become permanent. That would be disappointing, but not surprising.
While lawmakers around the state will boast about the significance of Tuesday’s reform and think their job is done, the reality is that lawmakers did little to help right the state’s financial ship.
If they were truly determined to solve the problem, the state’s leaders would make it clear that more reform is in the pipeline, and then make even more difficult decisions to ease the pension burden that taxpayers continue to shoulder.