Pension Crisis is Attack on the Working People of Illinois
By Jim Vail
May 6, 2013
If there is one thing we need to know when following the so-called "pension crisis" in Illinois, it is this.
There is a pension crisis. There is a budget crisis. The crisis was created by the business class to siphon away funding for the people (education, pensions, health care, etc.) in favor of corporate subsidies and privatization.
What else explains giving UNO $98 million a few years ago when the Illinois state budget is "broke?"
Maybe the fact that UNO plays a big role to re-elect Michael Madigan, then he in turn steers state money their way.
Who cares if UNO is corrupt, and we don't have the money, right?
So now our dear politicians say we have to cut the pensions, not corporate tax giveaways like TIF funding.
Below is a cute letter state senator Heath Stains sends out to her constituents. Stains family is connected to funding charter schools. She is in full support of pension "reform." (read: eliminate guaranteed pensions to workers).
Read on ....
We are at the half-way point in this Legislative Session, with most of our work left to do. This is a crucial time for the State with urgent needs to create fiscal stability. This email provides an update on issues critical to fiscal stability and maintaining core services for our residents.
Illinois has the worst funded pension system in the nation and due to this lack of funding the lowest credit ratings of any state. Without meaningful reforms, our pension crisis will deny state workers retirement security, crowd out spending on vital education and human services, and lead to wasteful expenditures on unnecessary interest payments from poor bond ratings.
The House and Senate have been pursing two different approaches regarding pension reform. The House has been voting on individual aspects of pension changes, and has passed 3 changes to the current systems:
1. Capping pension benefits to the social security wage base of $113,700;
2. Phasing in an increase in the retirement age; and
3. Capping Cost of Living Adjustments (COLAs) at 3% ($750) for income over $25,000 (anyone earning less than $25,000 would continue to receive compounded 3% annual COLAs until the cap is hit).
The Senate voted on a single, comprehensive pension bill that includes similar elements that the House has passed, and also includes a pension funding guaranty and a phased in employee contribution to the pension systems (Senator Biss's SB35). The comprehensive pension Bill received only 23 votes (11 Democrats, 12 Republicans) and therefore did not pass. A narrower bill, SB1, did pass with 30 votes. This bill affects only current teachers (NOT retired teachers) and is based on the principle of consideration: teachers would have the choice between keeping a compounding, 3% COLA or giving up state-subsidized health insurance as a retiree.
The difference between the two approaches in the Senate involves Constitutional interpretation and projected savings from pension reforms. While legal experts disagree on the Constitutionality of the different Bills, the Bills generate far different savings. SB1 would reduce the pension system's unfunded liability by $5 billion (about 5% of our unfunded liability) and reduce pension payments the State would need to make by $18 billion over the next 30 years. In contrast, SB35 would reduce the unfunded liability by $28 billion (about one-third), reduce the state's pension payments by $150 billion over the next 30 years, and cut our pension payment the first year by $1.9 billion.
I voted for SB35 and against SB1 because Illinois has been pursuing all possible options to fully fund the pension liability and none of our efforts will stabilize pensions and protect vital state services without substantial pension reforms. Even with an income tax increase and more than $2.2 billion in cuts last year alone to health care, education, human services, and public safety programs, pension payments have risen from 5% of our general revenue budget to next year's projection of close to 20% of our budget. With further reductions needed in the coming fiscal year to balance our budget, we have no choice but to enact meaningful pension reforms.
To be sure, public employees/retirees have done nothing wrong, and always made their payments to the pension systems. In my view, however, pension reform brings honesty and integrity to the false promises we have made in the past. Thus, I will continue to support pension reforms that allow us to ensure security of pension benefits for retirees and to ensure the State can continue to fund the fundamental services for our residents.
The Governor presented his budget plan earlier this month. While revenues increase over $800 million, pension payments increase over $900 million and the State continues to have an enormous backlog of unpaid bills (estimated to be about $7.5 billion at the end of the current fiscal year). As a result, the Governor's budget includes cuts again in discretionary spending, most notably over $300 million reduction in elementary/secondary education and $82 million reduction in higher education.
The Governor's budget proposal is based on General Revenue Fund (GRF) revenue estimates of $35.6 million. The Commission on Government Forecasting and Accountability (COGFA) estimates that GRF revenues will be $35.1 billion. The House passed a resolution using COGFA's revenue estimates, and the Senate will use COGFA's estimates as well (as we did last year). Senator Kotowski and I, the Senate Appropriations Chairs, will be meeting with our Senate colleagues to understand their budget priorities. I have already been hearing that reductions to General State Aid for elementary/secondary education (the Governor cut $150 million in GSA) are not acceptable to our members. I believe there will be alternatives to creating a balanced budget which do not further cut funding for schools and will be working to achieve this goal.
It is difficult to do justice to such pressing financial issues in even an admittedly long email. If you would like further information or have questions/concerns about any of these thorny subjects please call me at 773-769-1717 or email me at Steans@senatedem.illinois.gov.
Senator Heather Steans
7th District – Illinois