Newsletter: The Simple Math of Pension Reform
This edition of The Policy Shop is written by Adam Schuster, vice president of policy at the Illinois Policy Institute.
The numbers don’t lie. Our recent polling shows 61% of Illinois voters want pension reform.
A big factor? Taxpayers contribute 84 cents of every dollar public pensioners receive in retirement.
Our elected leaders in Illinois seem to want to ignore the state’s $313 billion in pension debt, but if we just tackled the problem using the Illinois Policy Institute’s hold harmless reforms, we’d save $50 billion by 2045.
Simple math. A supermajority of Illinois Democrats, Republicans and independents support changing the state constitution to address Illinois’ worst-in-the-nation pension crisis. Support comes from:
- 66% of Independent voters
- 60% of Republican voters
- 60% of Democratic voters
Bi- (or tri-?) partisan support on an effort that will save taxpayers money and maintain pension protection for state employees seems as easy as two plus two.
Bottom line. New research shows: We’ll never keep up with pension costs if nothing changes. Taxpayer contributions accounted for 56% of the money that flowed into Illinois’ pension funds in 2000. Two decades later, residents funded 84% of public employees’ retirements, yet pension debt is still growing. State and local taxes, which are driven by public pensions, remain a top concern for Illinois voters. Illinois is home to the nation’s highest state and local tax rates, second-highest property taxes and second-highest gas tax, thanks to shortfalls in funding our nation-leading pension debt.
Negative numbers. Illinois spends more of its budget on pensions than any other state and still has the biggest gap between what it currently pays and what it would take to pay down the debt without reform. Illinois’ pension crisis has been rated the worst in the nation, measured by pension debt relative to state gross domestic product, since fiscal year 2014. Pension debt increased 19% from $261 billion at the end of fiscal year 2019.
Number comparison. Looking to neighboring states can be a helpful indicator of financial health for a state government. Illinois spends more of its state and local revenues on pensions than any other state, about double the national average. Neighboring Wisconsin employees are legally required to pay for 50% of benefits. Contributions are recalculated each year to ensure this happens. Wisconsin has no pension debt and the best funding ratio in the nation.
Count the votes. In 2020, taxpayers shot down an income tax hike in the form of the progressive income tax Gov. J.B. Pritzker pushed using his personal fortune. This year, we'll finally get to vote for property tax relief via Amendment 1. But Illinoisans deserve to have a say on pensions. Will state lawmakers be willing to put it on the ballot? Or will the 61% of voters who want it decide time’s up and replace the current legislature with leaders willing to act?
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