While the media and politicians across Illinois celebrate the state’s “landmark,” “monumental” and “courageous” pension fix, for most Illinoisans nothing has changed.
Taxpayers will continue to hear calls for higher taxes to keep the state’s pension systems afloat.
Government workers and retirees are still trapped in a pension system that gives them no voice, no control and no escape from a looming bankruptcy.
And those dependent on core government services will continue to bear the brunt of indiscriminate cuts to the budget to pay for state worker pensions.
Illinois’ pension bill did little to take the state off the path toward insolvency. Here are the facts:
- The bill only reduces Illinois’ $100 billion pension shortfall to 2011 levels – levels that were then already the worst in the nation.
In fact, when Moody’s Investors Service downgraded Illinois in January 2012, it called the state’s 2011 $83 billion hole a “severe pension-funding shortfall.”
Standard & Poor echoed that sentiment. In its August 2012 downgrade of Illinois, it said this of the 2011 shortfall: “We do not believe there is upside potential for the rating in the next two years given the size of the accumulated deficit and the liability challenges the state faces.”
And since Illinois failed to transition to a defined contribution plan for all workers going forward, the state’s massive debt will continue to grow just as it has over the past two decades.
- Prior to the bill’s passage, Illinois’ pension funds had just 39 cents of every dollar needed to meet their future obligations, based on the most recent official numbers. After these recent “reforms,” the pension funds will have 45 cents for every dollar they should have.
That slight improvement shouldn’t give state retirees and workers any hope. At that level of funding, the pension funds are still bankrupt.
- The pension bill saves only $1.3 billion in its first year. That means the state’s yearly contribution to pensions will be the nearly the same as that in fiscal year 2013, when pensions were already squeezing out funding for other core services and drawing more downgrades from the rating agencies.
The savings are also far short of the amount necessary to help plug the state’s 2016 budget shortfall of $4.5 billion. Soon the very same people who called this pension bill “reform” will be calling to make the 2011 income tax hike permanent and progressive.
The rating agencies will have no real reason to celebrate Illinois’ pension bill once they’ve crunched the numbers. Illinois’ $9 billion in unpaid bills, a massive budget shortfall in 2016 and an unfunded pension liability of more than $80 billion means Illinois is no better off than it was before the bill’s passage.
Government workers and taxpayers should call out Illinois’ pension bill for what it is – a farce.
They’ll get another chance soon when the Illinois General Assembly attempts to use the bill as a template to reform pension funds in Chicago and municipalities across the state.
Workers and taxpayers will need to say no to fake reforms and call for the only sustainable solution going forward: giving state workers control over their retirements through defined contribution plans that workers own and control.
It’s time to get government out of the pension business for good.