Crain’s Chicago Business published the following opinion piece by Institute Vice President of Policy Ted Dabrowski.

There’s no question that Gov. Pat Quinn’s decision to hold hostage legislators’ paychecks until pension reform passes is, in Mr. Quinn’s mind, a political slam dunk. What better way for Mr. Quinn to show he’s serious about reform than making legislators “pay” for missing the umpteenth deadline he set.

But the stunt could backfire on him, and here’s why: Sadly, Illinois politicians aren’t ready to pass real pension reform. If taxpayers were underwhelmed by the reform options on the table earlier, just wait to see whatever lawmakers pass just to get Mr. Quinn off their backs.

The first sign that lawmakers aren’t ready for reform is that they refuse to acknowledge the true size of the problem.

The number that’s thrown around when describing Illinois’ pension shortfall is $100 billion. This figure stems from a 2012 report by the state’s number crunchers, the Commission on Government Forecasting and Accountability, or COGFA. This number grossly understates Illinois’ pension debt because it assumes the state will earn an average 8 percent return on pension investments — nearly double the industry standard.

Moody’s Investors Services, which has already rated Illinois’ state debt the riskiest in the nation, recently recalculated Illinois’ unfunded liabilities using 2011 numbers and a more appropriate market return rate of 5.67 percent. Moody’s reported that Illinois’ unfunded liability, using 2011 numbers, actually totals $133 billion. That’s 65 percent higher than what the state officially reported, and what Mr. Quinn’s pension committee is discussing.

In coming months, when Moody’s recalculates Illinois’ pension shortfall using 2012 numbers and today’s discount rate of 4.13 percent, Illinois’ pension hole will approach $200 billion.

That is the number that lawmakers need to be talking about.

Since Mr. Quinn’s conference committee has failed to acknowledge the true size of the problem, lawmakers somehow still believe that taxpayers will be able bail them out of it. This is the second sign that lawmakers aren’t ready for real reform; they still think a tax hike here and there will be enough.

On July 3, the committee met in Chicago. More than two hours of the three-hour meeting were spent discussing new “revenue” streams for Illinois. Tax increase proposals included an expanded sales tax, transaction tax for traders, higher business taxes and the public employee unions’ favorite, a progressive tax that would increase taxes for 85 percent of Illinoisans.

State Sen. Kwame Raoul, chair of the pension committee, even said during the meeting: “I’ve been a long-term advocate of the progressive tax. . . .I think expanding the sales tax base is worthy of discussion.”

The third, but certainly not final, sign that politicians aren’t ready to enact real reform is that the conference committee refuses to admit the failures of the state’s defined benefit pension plan. Determining how Illinois got into this mess really should drive how the state climbs out of it.

Lawmakers like to blame their predecessors for the pension crisis, and claim that “pension holidays” are the root cause of the problem. They’re not.

Since 1996, Illinois’ unfunded liability has increased by $76 billion. According to COGFA, nearly 60 percent of this increase stems from underperforming investment returns, faulty actuarial assumptions and the overall doling out of benefits that were more generous than planned.

HERE’S THE PLAN

Pension plans — especially plans as generous as Illinois’ — are unmanageable, unpredictable and unaffordable. That’s why the private sector abandoned defined benefit plans in droves. North Shore University Health System, Verizon, American Airlines and Boeing — these are just a few of the companies that have said goodbye to the defined benefit system to protect their financial solvency and their employees. Today, more than 80 percent of private-sector workers are covered by defined contribution plans such as 401(k)s.

States have also begun to move in that direction. Michigan converted all new state workers to 401(k)-style plans in 1997. Alaska did the same in 2006. Even Democratic-controlled Rhode Island, with the nation’s second-worst pension system, added defined contribution plans for existing workers in 2011.

Illinois needs to not just replicate but exceed the efforts of these states and private companies. Fortunately, there’s a plan on the table that does just that.

House Bill 3303 and its companion Senate Bill 2026, sponsored by state Reps. Tom Morrison and Jeanne Ives and state Sen. Jim Oberweis, would protect what workers have earned to date and put them in 401(k)-style plans going forward. It would establish a level payment plan for Illinois to pay off the unfunded liability, and it would give government workers the same choice and control over their retirement that private-sector workers have. It’s constitutional, because it protects what has been earned to date.

Better yet, the numbers show H.B. 3303/S.B. 2026 is the best plan on the table.

The Cullerton plan reportedly would reduce Illinois’ official unfunded liability between $5 billion and $10 billion. The Madigan plan would reduce the unfunded liability by $21 billion — taking Illinois back to 2011 crisis levels. But the core components of H.B. 3303 and S.B. 2026 were scored by COGFA and found to immediately cut Illinois’ unfunded liability by nearly half, $46 billion.

Mr. Quinn’s stunt this week might pressure lawmakers to do something — anything — to get their paychecks back. But the real question is: Will they do the right thing?

The answer to that will be Mr. Quinn’s legacy.