Illinois taxpayers shelling out more to pay for state lawmakers’ retirements

by Ted Dabrowski Legislators’ contributions to the General Assembly Retirement System, or GARS, have gone up by 33 percent since 1998.  During the same time period, taxpayer contributions to legislators’ retirements increased by 237 percent. In 2012 alone, Illinois taxpayers contributed nearly $9 million more to GARS than legislators did. And the disparity between taxpayers...

by Ted Dabrowski

Legislators’ contributions to the General Assembly Retirement System, or GARS, have gone up by 33 percent since 1998. 

During the same time period, taxpayer contributions to legislators’ retirements increased by 237 percent.

In 2012 alone, Illinois taxpayers contributed nearly $9 million more to GARS than legislators did.

And the disparity between taxpayers and legislator contributions is projected to get worse. Between 2013 and 2045, taxpayers can expect their annual contribution to GARS to increase by 226 percent, to $46.3 million. Legislator contributions, on the other hand, will rise 237 percent, to only $5.4 million. The increase in taxpayer contributions occurs because taxpayers, and not the employees, are required to pay for any shortfalls in the pension system.

These shortfalls are largely a byproduct of the pension system’s defined benefit structure. Defined benefit systems are chronically underfunded due to poor investment returns, changed actuarial assumptions, overly generous benefits and structural underpayments.

For example, taxpayers have to make up the difference when the fund’s investment returns are lower than projected. From 1996 to 2012, missed investment targets added $18 million to the retirement system’s shortfall, according to the Commission on Government Forecasting and Accountability.

Similarly, changes in actuarial assumptions since 1996 mean taxpayers will have to cough up an additional $42 million.

Legislators, however, continue to pay a constant percentage of their payroll to the pension system, regardless of shortfalls or growing liabilities. This situation creates the massive disparity between employee and taxpayer contributions.

Ultimately, politicians have proved they can’t manage defined benefit systems.

Illinois must move away from defined benefit plans and embrace 401(k)-style plans if it wants to avoid a fiscal disaster. A defined contribution plan, such as the one the Illinois Policy Institute has developed, does just that.