When Gov. Pat Quinn gives his budget speech to the General Assembly today, he should re-emphasize these numbers:
- $96.8 billion
- $8 billion
- $6.7 billion
Those numbers represent the current amount of the state’s unfunded pension liability, the amount the state currently owes in unpaid bills and the amount that pension payments will require of the state general fund this year.
And if nothing is done, all of those numbers will increase. It’s been estimated that the state’s unfunded pension liability grows by millions daily. The Civic Federation of Chicago estimates that unless something is done, the state’s unpaid bills will total $22 billion at the end of five years. And the $6.7 billion that the state is now paying toward pensions will grow to $8.6 billion in five years. The Federation estimates that, without some action, the pension payments will consume 30.9 percent of the general operating revenue by fiscal year 2018, up from 22.1 percent in fiscal year 2013. “The State cannot comply with statutory pension funding requirements and also pay for the costs of running state government,” the Federation’s report concludes.
The governor should make a strong statement today that pension reform has to happen — now. The best bill we’ve seen is one filed last week by two Democrats, Rep. Elaine Nekritz and Sen. Daniel Biss, and House Republican leader Tom Cross. The bill would, over 30 years, eliminate the $96.8 billion pension obligation and cut by nearly half the amount taxpayers would have to pay into pension funds.
But the key point is that something has to be done and the responsibility lies solely with Quinn’s fellow Democrats. The party controls both houses of the General Assembly and the governor’s office. As much as Democratic leaders would like to pretend otherwise, they now own the problem, and the solution.
Unless there is a solution that reduces the amount of general fund dollars going into the pension system, the rest of the budget discussion is dismal. There won’t be money to pay for schools, public safety, social services or other state government functions. Without pension reform, the rest of the budget will consist of severe budget reductions, including closing more state facilities.
Pension reform is also crucial to ending the disastrous increases in personal and business income taxes that were approved by the Democrats in early 2011. These increases — a 67 percent increase in personal income tax and a 46 percent hike in the corporate rate — have proven to be job killers. To add to the frustration, despite the additional revenues from these taxes, the state is in worse financial shape than ever.
In fact, some politicians are already arguing that’s why the tax increases need to be extended. Since the state’s unpaid bills have increased and pension payments are eating up more of the general fund, they argue the increases need to be extended beyond Jan. 1, 2015.
That sort of logic thrives at the Capitol, but reasonable people understand that extending the tax increases will only give lawmakers more excuses to avoid tough decisions and make Illinois less attractive to businesses. While Illinois is wallowing in financial distress, our neighboring states are operating with tighter budgets and are actually decreasing taxes.
Quinn ushered this job-killing tax through the lame duck General Assembly — giving plum state jobs to some lame duckers who voted for the increase. Today, he should admit the tax increase was bad policy, since it simply allowed the state to ignore its fundamental budget problems. And he should vow that the tax increases will be allowed to expire and that the state should begin preparing today for that eventuality.
And the first step has to be lowering the state’s unfunded pension liability.