Editorial: Without action, state’s liabilities only grow worse

2013-03-06T07:00:00Z Editorial: Without action, state’s liabilities only grow worseBy The Pantagraph Editorial Board pantagraph.com
March 06, 2013 7:00 am  • 

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.

Copyright 2015 pantagraph.com. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

(6) Comments

  1. Harcourt
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    Harcourt - March 07, 2013 5:05 am
    No doubt the paper and other civic organizations are exagerating the problems. Nevertheless, there is some level of problem and our one party system will not tackle it--so far. Probably there will need to be sacrifices from all sectors to solve the problem. Just do it.
  2. cdequaker
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    cdequaker - March 06, 2013 3:49 pm
    It’s a difficult problem. It seems like those who do not work for the state think that all of those who do are overpaid, lazy & getting rich off of Illinois citizens’ taxes. Meanwhile, those who do work for the state feel like they’re being screwed out of negotiated compensation. Clearly, the state has financial issues that must be resolved, and when they are resolved someone is going to suffer for the poor management and dishonesty of elected officials.
    Here’s the thing: I and my wife both work for the state. We’re both employed as civil servants (which, if you don’t know, translates to “we don’t make a lot of $$$$”). Combined, we have 25+ years of employment time working for Illinois. For both of us, and many others, the decision to take employment with the state was largely based on retirement and insurance incentives, since our salaries are nothing to be excited about. If you take that away, we are left with very little. Yeah, I know, “boo-hoo”, too bad for me –but contrary to popular perception, not all state workers are paid too much money just to sit around.
    If you are hired by a private company under a contract, you expect the contract to be upheld legally, unless the company goes bankrupt, in which case you would most likely get a share of the bankruptcy proceedings. Illinois is in bad shape, but it is not bankrupt. Taking promised and contracted pension payments and insurance availability away from state workers is both illegal and morally reprehensible. BUT, there are ways to fix this. Nobody wants to talk about it, mostly because those doing the talking are the ones it might affect.

    1. It makes sense to change the pension system, but it should not affect any promised benefits for those who have already been hired. Change it now, starting immediately. All new state hires would receive reduced incentive in terms of compensation, insurance & pension. Lots of people need jobs; finding employees shouldn’t be a problem. Would the quality of employees suffer? Uhhh….look around you next time you’re in a government office; I don’t think so.
    2. If we absolutely HAVE TO reduce promised pension in order to survive, then let’s put it on those who can most afford the loss, those whose salaries are in the upper 10% of state employees. Here is where Illinois state employees have been overpaid. Many of these employees are responsible for the problems that we now face anyway.
    3. ALL state legislature members should take a sizable salary cut. Compensation and benefits should be similar to other state positions. Let our leaders set an example, rather than profit from our misery
    4. Let’s enforce the speed limit on the streets and highways. EVERYBODY speeds, all the time. Why do we even pretend to have speed limits? If we are going to have them, why not make them real, not just meaningless “pretend” signs. Ever go 20 mph in a school zone? Drivers will give you dirty looks and pass you like you don’t know what you’re doing. Drive 30 mph in the city? Nobody else does. 65 mph on the highway. What a joke! Come on, if we just enforce the speed limit and give out tickets like candy, two things would happen. First, we would reduce traffic accidents. Second, the state would take in a large amount of much needed revenue.
    5. Okay, here’s the kicker, here’s where I lose anyone still around—especially the right-wing conservatives, the religious fanatics, the (let’s face it) uneducated and those who are in bed with the health insurance industry or the tobacco industry or law enforcement in general. SO…let’s legalize marijuana. That’s right; make the intelligent move that will bring in much needed revenue, help solve our overcrowded prison problems and put Illinois on a progressive, rather than a regressive, path. I won’t go into all of the arguments here; you can find them easily enough. But, if you’re really honest about it, you know it’s time. The whole situation is beyond ridiculous. Didn’t we learn anything from the prohibition era?!

    So there it is. Let me keep my meager pension; I worked for it. Let’s all stop being idiots for once and just get on with what needs to be, should be done. Please. Well, somebody had to say it.
  3. justagoodoleboy
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    justagoodoleboy - March 06, 2013 10:44 am
    Ok, I was off on the budget which is 33.7 billion which still makes the pension payment 10% and remember half of that comes from the employees wages.
  4. justagoodoleboy
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    justagoodoleboy - March 06, 2013 10:26 am
    Where do they get these numbers? If you use for an example 500,000 employees, making an average of $60,000 per year and an average combined contribution of 12% you get 3.6 billion per year going to the pension systems. Make it 600,000 employees and it is 4.32 billion. I don't believe there are that many employees, but this shows that someone is inflating the numbers.
    What is the state budget? $250 billion which makes the pension payment 1.4%, that's a far cry from 30%. Lower the budget to $200 billion and that is 1.8%. Someone is crying wolf.
    The COLA does not come out of the general fund as they would like you to believe but from the pension funds.
    Another thing the pensions do not need to be 100% funded. That would only be needed if every worker retired which I doubt will happen at the same time.
    The only thing the state wants is to back out of what they owe and they are lining up all the liberal organizations and media to support it.
  5. Responsibleone
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    Responsibleone - March 06, 2013 9:53 am
    The retirees will not be crushed....their union and the all knowing state politicians passed legislative agreements which are beyond all common sense.....else we wouldn't be talking about it today!
  6. parrot
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    parrot - March 06, 2013 7:53 am
    The kind of pension reform the Pantagraph advocates (Nekritz and friends) will crush retirees who were only following the rules. Day in, day out, for over a year this paper and other media have been bashing state employees and retirees. We're subscribers too. Maybe not for much longer.
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