(November 15, 2012) – A major study of Illinois’ vastly underfunded public pension system has deemed the problem “unfixable.”
The Civic Committee of the Commercial Club of Chicago, a influential non-profit group of business leaders, told its members in a public letter published this week that only drastic action would make a dent in the state’s $83 billion in unfunded pension liabilities.
“The pension crisis has grown so severe that it is now unfixable,” the committee’s president, former state Attorney General Tyrone Fahner, wrote. “We do not make that statement lightly. It is an honest statement that no one – not our legislators, nor our governor, nor labor leaders—is willing to say publicly.”
The Civic Committee argued that the state no longer has the capacity to “preserve all state pension benefits as currently structured.” However, it outlined steps that it says the state must take to “to minimize the long-term damage” to state employees, retirees and taxpayers:
1) Eliminate all members’ cost-of-living increases, which are currently 3% compounded annually.
2) Cap the final salary on which pensions may be based.
3) Increase the retirement age to 67.
4) Shift the employers’ share of teacher pension contributions to local school districts.
Illinois Governor Pat Quinn has aggressively pursued drastic pension reform, but thus far been unable to get legislation passed. In August, he called lawmakers back for a special session to vote on a bill for dealing with the unfunded liabilities, which did not pass.
“This is a date with destiny for our state,” Quinn said before the vote. “We have to deal with this. We can’t just shuffle it under the rug and pretend it doesn’t exist. It’s an $83 billion [unfunded] liability for Illinois.” This is the official figure. The Illinois Policy Institute, an economic think tank, estimated the total state and local retirement debt to be $203 billion.
“I’ve tried to make it very clear that our state is now spending more on pensions than on education,” he said.
Both Republican and Democratic leaders agreed on reducing liabilities by boosting the retirement age and limiting the cost of living adjustments, according to ABC reports at the time. Republicans, however, opposed shifting the cost of suburban and downstate teacher pensions from the state to local school districts, fearing property tax increases.
The Civic Committee insists that all of these measures are now necessary.