When it comes to state pensions, Illinois is in a financial hole as deep as $90 billion and digging out will be a formidable task, according to a panel of west suburban experts who met this week to discuss the issue.
Panelists met Wednesday at Seven Bridges Golf Club in Woodridge to discuss how Illinois got in the state-pension hole and what it might take to get out.
"Pensions have created the majority of the problem in our non-discretionary spending," said Lee Daniels, former speaker of the Illinois House of Representatives and now a Distinguished Fellow and Special Assistant to the President of Elmhurst College.
Daniels moderated the discussion with a panel of experts that included 21st District State Senator Ron Sandack (R-Downers Grove), Illinois Municipal Retirement Fund Executive Director Louis Kosiba and For the Good of Illinois Executive Director Bruno Behrend.
"You either raise taxes or you reduce the debt, and therein lies the problem," said Daniels of what would be needed to balance the books in Springfield. "Since raising taxes is not an option, the only viable option is to reduce the debt."
Daniels introduced options that have been discussed in Springfield for reducing the debt, such as reducing the cost of living increases for those covered by state pensions, raising employee contributions, raising the retirement age, limiting public pensions to state employees or shifting the responsibility of pensions back to local school districts.
Those proposals, however, would mean changes to what many state employees were told when they signed their contracts in better times, and those benefits are ones that people are willing to go to court to protect.
"If you begin with that [mindset] and don't ever pass any law that changes that, there's precious little you could do to avoid A) insolvency of the funds or B) massive tax increases the kind of which will literally make businesses flee the state even faster than they already are," said Behrend.
Behrend said that until January, For the Good of Illinois will be lobbying for a law that will impact the amount out of money draining out of pension funds.
Corruption/abuse of the pension system
One cause of the lack of funding for state pensions is abuse of the system. Practices such as tacking, where consultants and contractors to the state join pension plans even though they are not state employees; double dipping, in which a state employee may be working while collecting a pension or collecting multiple pensions and exit spiking (end of career pay raises) are practices legislators want to stop.
"When these rules were written way back when, what was the retirement span—15 to 20 years? Now we're looking at double that ... Giving a lifetime benefit based on two pensions ... never was the plan and is unacceptable," said Sandack.
Louis Kosiba, who has served as the executive director of IMRF for more than 20 years, pointed out that abuses can happen at the local level as well and suggested two ways to stop it.
"If power is given back to local governments to set pensions ... you ought to have citizens vote on [benefit enhancements,] said Kosiba. "Secondly any pension legislation that is ever written is based on assumptions...there should be a "clawback clause" ... if assumptions don't work out, that benefit [should] be terminated going forward."
What's the fix and what can taxpayers do?
Behrend said he believes state spending caps are the answer.
"If this nation had caps on spending where you had to go to the voters to get [benefit] increases, it would solve this problem," said Behrend.
Sandack said the pension issue has flown under the radar for many people in Illinois, and he feels that the problems with the system could improve if voters made it known to their legislators that pension reform is a priority to them.
"Illinois is sick. We are problematic. We have so many malformities and issues. On this issue, hold your electeds accountable ... Get in his face, get in her face, say, 'Where are you on pensions?' Find out their position and hold them accountable," said Sandack.