Real pension reform includes a reality check for retiree health benefits

Illinois’ budget battle took a turn for the worse earlier this month. A decision by the Illinois Supreme Court put the state and its taxpayers at risk. The Supreme Court ruled that Illinois has its hands tied when it comes to reforming retiree health insurance benefits for government workers. The problem is that Illinois has...

Illinois’ budget battle took a turn for the worse earlier this month. A decision by the Illinois Supreme Court put the state and its taxpayers at risk.

The Supreme Court ruled that Illinois has its hands tied when it comes to reforming retiree health insurance benefits for government workers.

The problem is that Illinois has more than $56 billion in retiree health insurance debt – but has no money set aside to pay for this benefit.

Today, most retired state workers in Illinois pay almost nothing for generous health benefits that allow them to retire in their 50s with full health coverage, or that supplement Medicare coverage in their later retirement years. This benefit is almost unheard of in the private sector.

Even in the public sector, Illinois’ retiree health insurance benefits are out of sync with the rest of the country. State retirees pay, on average, 54 percent of their health benefits in retirement in other states.

If Illinois were able to enact similar comprehensive retiree health insurance reform it could save up to $800 million per year. Among other things, any health insurance reform should, at a minimum, increase the amount government retirees in Illinois pay for health insurance to the national average – 54 percent. Going forward, the state should eliminate this benefit for new workers. It’s unfair for taxpayers to work longer and pay higher taxes to fund retirement benefits that are unattainable in their own careers.

The recent Supreme Court ruling makes that reform much more difficult. And without benefit reform in Illinois, the state’s financial problems will worsen.

Tax hike proponents will call for more revenue to solve the problem. But that won’t work. Look no further than the last tax hike. Since it was passed, the 2011 tax hike is slated to raise more than $30 billion by the end of the current budget year. Yet the state’s finances are in no better shape.

Continued budget uncertainty coupled with higher taxes will only push people out of this state faster than they are already leaving. Illinois already loses residents at a rate of one person every 10 minutes, meaning fewer and fewer Illinoisans will be left to pick up the tab.

This trend will only make things worse for the hundreds of thousands of people who woke up this morning either unemployed or underemployed in Illinois.

The bottom line is this: Taxpayers are on the hook for generous retirement health benefits that they will never enjoy and that never should have been offered in the first place. It is unjust to keep taxpayers on the hook for this.

If Illinois lawmakers are not allowed to reform government worker benefits, the state and its taxpayers are at risk.