The path to our pension problem

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If you feel as though you don’t quite get how the state pension systems came to be in such dire condition, Sunday’s Springfield State Journal-Register helps you get caught up with a front page story titled, “History of Neglect.”

Doug Finke’s article points out that concerns expressed about the solvency of the pension systems in a 1959 report presented to Gov. William Stratton were by no means the first to be aired.

But in the 54 years since that report was issued, the debt of the state’s pension systems has grown exponentially, and mostly for the same reason the Pension Laws Commission warned of in 1959 – inadequate contributions by the government.

The reason for those inadequate contributions hasn’t changed either.

Putting more money into pension obligations meant funds had to be taken away from something else, such as education or health care. It might have meant cutting the state work force or forcing officials to try to pass an unpopular tax increase. 

If you’ve been following what IEA, the We Are One Coalition and others have been saying about pensions, there aren’t many surprises in the story, or in the accompanying graphs and charts.

But the evidence that the state over many decades ignored its duty to the pension systems, the participants in the systems and to all Illinois taxpayers, remains compelling.

Sandor Goldstein has done actuarial work on state pensions since 1979. He said that instead of basing payments on actuarial standards, in which contributions are made as benefits are earned, the state was basing payments on a “pay as you go” approach.

“You wait until the employee retires and whatever is needed to pay his pension, that’s what you contribute,” Goldstein said. “That was always quite a bit less than the actuarial cost.”

For a while, Goldstein said, the state at least contributed 100 percent of the pay-as-you go costs.

“Then, during the Thompson administration, they came up with this proposal that they felt they really don’t need to contribute even this 100 percent of payout because there’s been good years of investment return,” Goldstein said. “Because of that, they proposed they would only pay 60 percent of the payout.”

The original plan was to pay as you go for only one year, but that stretched into several years.

But not everyone agrees that, just because past legislatures and governors took the actions that created the financial fiasco, politicians should shoulder the blame.

But some lawmakers contend that argument doesn’t take into consideration what would have happened if pensions had been fully funded. Spending for education or state operations might have been cut to pay for pensions, and the impact might well have been felt by public workers.

“I don’t have a lot of sympathy for those folks who claim that we underfunded pension systems,” said Senate President John Cullerton, D-Chicago. “They were in there lobbying for more money for the school aid formula, for paying our contracts that they negotiated with huge benefits, for more money for higher education.”

For the record, “huge benefits” are not being paid out when one considers what the average pension system annuitant receives. For every administrator pulling down a big pension, there are thousands of pensioners who get far, far less and who receive little or no social security.

The We Are One Illinois coalition continues to try to convince Gov. Quinn and the legislative leaders to work with the unions to develop a fair and constitutional solution to the problem that, this newspaper story again makes crystal clear, the public employees did not cause.

Making the blameless bear the entire burden for the irresponsible decisions by politicians (as in Senate Bill 1) is plainly wrong. The system participants didn’t cause the mess but they’re willing to help fix it.

Illinois has a revenue problem, not a benefits problem. Diversion of revenue got us where we are. Addressing revenue needs to be part of the answer.

Read the coalition “White Paper” on pensions and the union framework for a solution

Senate Bill 1 fact sheet