Illinois lawmakers could vote as early as this afternoon on a pension proposal put forth by Illinois House Speaker Michael Madigan, but the proposal falls dramatically short of the serious policy changes Illinois’ pension systems need.

The Illinois Policy Institute has been a leading voice for pension reform in Illinois for years. In February, the Institute released a detailed pension reform plan that is constitutional, would protect benefits workers have earned to date, immediately reduce the unfunded liability by nearly half and free government workers from a politician-controlled retirement system by moving all future benefits to a 401(k)-style system. The Institute’s plan is supported in bill form by state Sen. Jim Oberweis, and state Reps. Jeanne Ives and Tom Morrison. Components of the Institute’s plan have been scored by the Commission on Government Forecasting and Accountability. The Institute’s plan would achieve savings of at least $220 billion – more than any other pension proposal on the table.

Unsurprisingly, Speaker Madigan’s plan falls dramatically short of the reform Illinois needs. After a thorough legal and policy analysis, the Institute has determined the Madigan bill would worsen the pension crisis rather than improve it largely due to a “pension guarantee” clause within the bill.

How Madigan’s bill falls short:

• NO PUBLICLY-AVAILABLE COST SAVINGS ESTIMATE: An actuarial analysis has not been released, and to our knowledge the plan has not been scored by COGFA (the Commission on Government Forecasting and Accountability).
• DEBT WILL STILL GROW BY $15 MILLION/DAY: Currently, Illinois’ unfunded pension liability grows by $21 million each day. Based on estimates for similar proposal, under this bill, the unfunded liability would continue to grow by approximately $15 million each day.
• EDGAR RAMP V.2: Speaker Madigan was one of the chief proponents of the 1995 pension-funding law, dubbed the Edgar Ramp. Since that law was enacted, Illinois’ pension debt has grown by more than $76 billion. Madigan’s current proposal is based on yet another ramp.
• PRETEND REFORM: Madigan’s bill asks workers to contribute 2 percent more into the pension systems. It sounds like tough medicine, but in reality union leadership could blunt or eliminate the effect of this requirement by negotiating a pay raise or terms in workers’ next contract.
• FUNDING GUARANTEE: Madigan’s bill contains a funding guarantee that would make paying for pensions more important than public safety, education, health care or other government services. Many believe it is noble to require a guarantee so the state won’t “skip” payments to the system, but that is not what this guarantee is about (and not the sole reason it is supported by government unions). The guarantee would force taxpayers to pay not only for annual state contributions to the pension systems, but also to pay even more when investment returns are lower than expected. As the Daily Herald reported this spring, this model is already crippling cities and towns across Illinois.

“Politician-controlled pension systems are a failure. We simply can’t trust politicians to manage the pension system moving forward. Government workers deserve to control their own retirement savings in ways that meet their own needs, not the needs of the political leaders in Springfield,” said Ted Dabrowski, Vice President of Policy at the Illinois Policy Institute. “A 401(k)-style plan is the only moral solution that delivers a reliable retirement for government employees and liberates taxpayers from funding a failed system. The Madigan bill is merely tinkering at the margins, leaving in place a system that has failed before and will fail again.”