WGN’s “Pension Games” special defines the problem; Now we must focus on REAL Reform

Recently, WGN broadcasted a special called “Pension Games” highlighting the massive debt crisis we face in Illinois.  The first half of the special focused on how our massive pension debt was created – the highest in the country.  The latter half of the special featured an on-set rebuttal from Governor Quinn and a panel including Rep. Tom Cross (R), Senator Christine Radogno (R), Rep Elaine Nekritz (D) and a member from the Civic Federation.  

In general, WGN hit the mark in terms of identifying how Illinois created the massive pension debt.  Overly generous pensions & benefits, inaccurate actuarial calculations and sweetheart deals with public unions are the key contributors to our massive debt. 

WGN pointed out there is plenty of blame to go around but two individuals in particular have their “fingerprints” all over this disaster – Speaker Mike Madigan and Senate President John Cullerton.  Both have been in office since 1970 when the Illinois constitution was modified to include the now infamous language “benefits cannot be changed or diminished”.  

Even in 1970, Illinois had a pension funding problem because the math never worked.  According to the Civic Federation, Illinois has refused to adopt the “actuarial math” approach long used in the private sector and most other state governments.  This approach would have required the use of realistic investment growth rates, mortality rates and industry benchmarks to determine retirement benefits.  In particular, it would have surfaced the risks to the taxpayer if the state decided to provide benefits more generous than the industry benchmarks.  This of course would have had a profound impact on the promises made to state employees had they chose this method.  Instead our key elected officials decided to use a “political math” approach making unsustainable promises to powerful public unions who could deliver the votes to keep them in power.  This is the genesis of the unfunded liabilities in Illinois. 

Now Speaker Madigan wants to begin to shift the cost of the unfunded pension liability ($83B) to the suburban and downstate school districts. This would of course drive up property taxes which are already among the highest in the country.  This is another example of using political math to solve a problem. 

For REAL reform to occur, pensions and benefits MUST be recalculated using actuarial math to be sustainable – regardless of where they reside.  The payouts must change.  We agree that many school districts have abused compensation- through salary spiking and other perks to drive up their pension payouts.  This is because school districts have “no skin in the game” regarding pension payouts.  We are fine with making school districts more accountable to local taxpayers and ensuring public employees contribute more to their own retirements.  But we are against any sideshow that distract our elected officials from addressing the real reforms required on pensions, healthcare and work rules. 

The primary motivation for the state shifting pension costs to the school district (via eliminating state contribution to pensions) is to improve bond ratings so the state can continue to borrow more money.  This money will be dumped into the money pit call Illinois pensions (this is truly a money pit until the real reforms occur).  This move will guarantee public union support for the November elections. 

We are against any additional borrowing.  The taxpayers need to see the math on every move our elected officials make on our behalf.  Governor Quinn and others Democrats keep mentioning being “fair” to public sector workers.  This is obviously aimed at soothing the public sector union leaders and employees.  But the paradigm shift that must occur is being “fair” to the taxpayer.  This is why we insist on benchmarking everything against the private sector. 

Right now Illinois public sector employees make on average 23% more in total compensation than private sector equivalents during their working years.  Average pension payouts are 2-5 times the maximum social security payout – which is the primary retirement income for most Americans.  And there is no state tax on Illinois public sector pensions.   Healthcare subsidies are 100% above most American retirees.  

It is clear beyond any reasonable doubt that some of our key elected officials did not serve us well.  Pension and benefit abuse is the manifestation of corrupt leadership.  We need to hold them morally, politically and legally accountable for their actions.

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  1. Andrew Szakmary says:

    Your statement that “right now Illinois public sector employees make on average 23% more in total compensation than private sector equivalents during their working years” is either misleading or outright false. Numerous academic studies have examined whether public sector workers are overpaid relative to the private sector and have concluded the opposite: when you control for the substantial differences in the composition of the workforce (public sector employees have much greater education and experience on average), public sector workers are in fact underpaid, even when the more generous benefits in the public sector are taken into account. See, for example, http://slge.org/wp-content/uploads/2011/12/Out-of-Balance_FINAL-REPORT_10-183.pdf. The one issue where I agree with you is that retirement income in Illinois, including pensions, should be taxed just like other income; there is no economic or moral justification for levying lower taxes on old people than young people, when the current generation of seniors is probably more well-off, on average, than younger age groups.

  2. concerned taxpayer says:

    I disagree that public sector workers are underpaid, not when teachers routinely earn 6 figures for 180 days of work. Remember also that teachers are over-educated because their pay goes up for every graduate credit they earn. There is a huge incentive for teachers to continue to take classes because they “go up the pay scale.”This is NOT true in the private sector. Studies have also shown that there is no relationship between advanced degrees and improved teaching. Teachers also get reimbursed for tuition, which private sector workers do not. They also are “off” for every state and federal holiday, often have up to 15 sick days (which can be accrued), and 2-4 personal days, not to mention half days, institute days, etc. This is NOT the case in the private sector.

  3. There is no restructuring or reform plans to address the fraudulent millionaire public sector pensions…all parties to this fraud are the primary beneficiaries who will never cut their gravy train until total default forces it…as long as the corrupt two system remains there cannot be any reform…because it is the massively bloated Public Sector that is destroying the nation, state and municipalities …in the US the Public Sector has created a $50 Trillion obligation on the taxpayers to pay all 23 million their millionaire pensions…impossible and that is why the double digit tax, license and fee increases can never cover this fraud…only default can save the nation…state and municipality…

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