Illinois' pension crisis: An unfair approach to eform

For 33 years, Clyde Tome served the city of Detroit as a firefighter. Every day he was on duty he knew his life was on the line; in one encounter with riot fires, Tome watched a colleague die. Another time, he saw a nearby fireman killed in a random shooting.

For his commitment, Tome counted on a city pension to take care of him and his wife in their retirement years. But the city of Detroit’s summer bankruptcy filing means city pensions are likely to be cut – including the pension upon which Tome’s widow now relies.

“He thought I would be well provided for,” said Rose, Tome’s 74-year-old widow. “What do you do?”

U.S. Bankruptcy Judge Steven Rhodes is expected to issue a ruling in Detroit’s bankruptcy filing on Tuesday.

The timing could not be more fitting; as Detroit takes the first step toward climbing out of bankruptcy — a bankruptcy driven by insurmountable pension debt and decades of financial negligence — lawmakers here in Illinois will be voting on whether they want to follow the exact same path.

The proposed “deal” hatched by House Speaker Mike Madigan and his allies sounds like tough pension reform, but it isn’t. The words “retirement age” and “cost-of-living adjustments” cause panic. Politicians say “$160 billion in savings” because they know large numbers are hard to comprehend, and most have no idea what that number really means.

While no hard details are yet available, legislative leaders are telling their caucus members that Illinois’ $100 billion unfunded pension liability would be reduced to roughly $80 billion. That’s not reform; that’s exactly where Illinois was in 2011 when the same voices said Illinois had a crisis.

Even worse, this “deal” contains a guarantee provision. Madigan’s spokesman, Steve Brown, sent around a summary that said, “If the State fails to make a pension payment or a supplemental contribution, a retirement system may file an action in the Illinois Supreme Court to compel the State to make the required pension payment and/or supplemental contribution set by law each year.”

The key is in the details of the language. If this bill follows previous bills on guarantee language, it means that pension payments will be the No. 1 priority over virtually all state spending except bond payments.

Not caring for the poor. Not public safety. Not education.

That is an unfair approach to reforming pensions. It does not balance the interests of government workers with those who depend on government and the taxpayers, the people who fund government.

All indications are that this bill will continue the charade and pretend that it will all work out. But it won’t; and the irony is that because the defined benefit pension scheme is inherently broken, promises to both government workers and the taxpayers ultimately will be broken.

Government workers in Detroit have learned that no amount of constitutional protections and funding guarantees can protect workers from politicians and federal bankruptcy laws. Nor can those guarantees force taxpayers to stay put and pay — Detroit is now a shell of a city, with just more than 700,000 people remaining from its one-time peak of 1.8 million taxpaying residents.

Guarantees mean nothing without a means to pay them.

We’ve all seen the headlines and pictures of Detroit. Neighborhoods full of rundown and abandoned homes. Street lights that don’t work. Police transporting injured people to hospitals in the back of a squad car because waiting for an ambulance would take hours. Downtown is a ghost town.

They said it couldn’t happen there, and it did. Now the elected officials who created Illinois’ crisis say it can’t happen here. Who do you believe: lawmakers trying to sneak through a bill? Or do you believe Rose Tome?

Rose Tome is bracing for Tuesday’s ruling. To make ends meet, she’s thinking about renting a room in her house so she can afford to stay there. She may even end up selling the home where she and her husband spent their last years together.

Sadly, Madigan’s proposal means that rank-and-file union members and private sector taxpayers are the ones who will pay the price, just like Rose Tome is now paying in Detroit. Meanwhile, the politicians and union bosses who sanction this charade carry on unscathed.

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John Tillman | CEO
John Tillman is one of the nation's most prominent leaders of a state-based think tank. As CEO of the Illinois Policy Institute, he has transformed what many wrote off as a blue state into a place ripe for free market reform.