Bill would stop Illinois lawmakers from getting public pensions
State lawmakers have significantly abused and underfunded their own pension system. Ending it would be a plus, but only a constitutional amendment will stop pension debt from swallowing Illinois.
In the gaping pit of Illinois public pension debt, the worst of the five systems neglected by state lawmakers is the one they created for themselves – the General Assembly Retirement System. It has only 17% of the money the state projects it will need to pay out lawmaker pensions.
But a bill in the Illinois House proposes lawmakers do not try to fix the system, but rather start to put it out of taxpayers’ misery.
House Bill 2428 would stop state lawmakers from joining the system. State Rep. Dave Vella, D-Rockford, introduced the bill as one of his first after winning a close race against former state Rep. John Cabello.
Vella also refused to enroll in the retirement system.
“We need to make sure we are not wasting resources to fund unnecessary perks for politicians,” Vella said. “As our state continues to face financial problems, we should not be adding new financial burdens by promising to pay for the retirements of career politicians.”
Illinois’ five public pensions systems have a total debt of $144.4 billion by the state’s accounting, but an independent analysis shows the debt at over double that – $317 billion. Illinois’ pension crisis since fiscal year 2014 has been rated the nation’s worst, measured by pension debt relative to state gross domestic product.
The state typically assumes its pension systems will achieve much higher investment returns than has been the experience. The higher debt estimate by Moody’s Investors Service uses real-world assumptions in line with private pension funds.
Because the state is so overly optimistic about what the pension systems will earn, it also vastly underestimates the shortfalls taxpayers must make up to keep the pensions solvent. During the past decade, officially reported growth in pension debt outpaced the state’s initial projections by $24 billion. Growth in annual taxpayer contributions exceeded state estimates by about 15% per year, causing taxpayers to contribute $7.6 billion more than projected during the decade.
Still, that extra money has not slowed Illinois’ ravenous pension crisis.
Another part of the problem is that the employee contributions the system requires are far too small to meet funding requirements. Outdated pension rules also allow workers to retire in their 50s with multimillion dollar pensions, while folks in the private sector can’t even collect Social Security until they’re in their 60s.
But lawmakers took a bad problem and made it worse.
Former Illinois House Speaker Mike Madigan this month is expected to start collecting his $7,100-a-month pension after resigning Feb. 18. His monthly pension benefit will then jump to $12,600 a month a little more than a year later, thanks to a pension sweetener Madigan helped pass that is no longer available to lawmakers. The same perk will also allow former Senate President John Cullerton to retire with a pension that will spike to $128,000 annually just a couple of years into retirement.
Illinois lawmakers are considered public servants. Instead, the state’s pension system guarantees the public ends up serving them.
“We need to break the cycle of huge pensions for politicians and stop the abuse of Illinois taxpayers,” Vella said. “Our legislators are meant to be public servants working on behalf of all Illinoisans, but too many have decided to use public office and taxpayer dollars to cushion their own retirement.”
HB 2428 is a good, symbolic act of leadership by Vella, but the real fix for Illinois pensions cannot come just from reducing the lawmakers’ system’s $310 million pension debt. Attacking the $317 billion monster will require an amendment to the Illinois Constitution allowing changes to future, unearned benefits such as lawmakers passed in 2013 before it was blocked by the Illinois Supreme Court.
Ending the 3% compounding annual raises public pensioners receive and instead tying them to inflation is a modest measure that could save the state nearly $2.4 billion in the first year, and save taxpayers more than $50 billion from now until 2045. That change would also fully fund the pensions, not just shoot for 90% funding as the state currently does.
Killing lawmakers’ pensions is a good step. Reforming all five state-run pension systems is leap forward that would give Illinois retirees a solid future, taxpayers some hope and the state’s economy a boost when it is sorely needed.