Illinois politicians spent decades creating an $83 billion pension problem, so a quick solution is probably out of the question.
Still, it would be nice to see a little progress on filling this gaping hole. Instead, we've seen state political leaders turn in an Olympic performance in finger-pointing, buck-passing and grandstanding.
Earlier this month, when the Legislature convened for a one-day special session to deal with the pension issue, the only measure that came to a vote was a mostly symbolic amendment to cut the legislators' own pensions. In the end, even that didn't pass.
Moody's, the credit-rating agency, doesn't like what it sees. It already considers Illinois the riskiest state for bond investors, and it issued a statement last week calling the pension issue “a credit negative.”
Failure to cut pension costs, Moody's said, “will further strain this lowest-rated U.S. state's finances.”
Pension costs, including payments on pension bonds that Illinois issued a few years ago, will eat up 20 percent of general fund spending this year, up from 13 percent in fiscal 2010.
The Civic Federation, a non-profit good-government group in Chicago, estimates that pensions will eat up 28 percent of the budget in just a few years. That leaves less money for schools, health care and other state services.
Ted Dabrowski, vice president of policy at the Illinois Policy Institute, estimates that the pension underfunding costs taxpayers $18 million a day. “Inaction means that the hole gets bigger, and the tools we need to dig out of it need to get bigger, too,” he says.
Being the nation's biggest fiscal basket case also has its intangible costs. “There are companies and there are people who are trying to decide where to build a business or build a family and a career,” Dabrowski says. “When you read about what's going on in Illinois, you really have to think twice about moving here.”
Meanwhile, even the people who manage the state's pensions are getting worried. The Teachers Retirement System commissioned a study last winter that said it could be insolvent – and unable to pay full benefits – as early as 2029.
The only way to end the pension stranglehold is to be less generous with employees. Illinois makes some pretty nice pension promises, including 3 percent cost-of-living increases every year and full retirement as early as age 55.
The state constitution says those promises “shall not be diminished or impaired,” but Gov. Pat Quinn proposed giving employees a choice: Opt in to a new, less generous pension and keep your retiree health care plan, or keep your current pension and lose the retiree health care. The constitution says nothing about retiree medical benefits.
Quinn's plan was hotly debated in the Legislature this spring, but got hung up on the issue of shifting pension costs to state universities and local school boards. (Where the cash-strapped schools were supposed to find the money, Quinn didn't say.)
Months later, they're no closer to a solution. Some politicians say they'll be ready to deal with pensions after November's election, but Laurence Msall, president of the Civic Federation, says that's far too late. He says the Legislature's irresponsibility has already raised borrowing costs not just for Illinois, but for hundreds of local governments too.
“It might be politically convenient to wait until after the election, but it is irresponsible to let this crisis continue,” Msall said. “We're in overtime already in terms of fiscal responsibility.”