An email from State Rep. Mike Tryon:
Last week in Springfield, legislators finished up with the business of the 97th General Assembly during a lame duck session, and the 98th General Assembly was sworn into office. I
n the closing days of the 97th GA, it became evident that many critical issues like pensions would remain unresolved.
This was very disappointing.
The budget crisis continues to worsen in Illinois, and upon learning of Illinois’ failure to take meaningful pension action last week, Fitch, a major credit rating agency, relabeled Illinois’ financial status to “negative” from “stable.”
This Fitch action is embarrassing, and will most probably lead to it once again costing Illinois more money in interest payments to borrow money.
Craine’s Business Journal also weighed in on the financial crisis last week by publishing an article in when the 50 states’ pension fund were ranked for stability. Illinois was ranked #50.
Lame Duck Pension Proposal a Step in the Right Direction
There is no one issue that is more important in the 98th General Assembly than pension reform, and I am committed to helping find a solution that is constitutional, fair to all sides, and based on equal compromise.
Today, pension costs represent a significant portion of the Illinois budget, and those costs are rising every year. As pension costs continue to overtake more and more of the State’s revenues each year, critical state services, like education and human and social services, will continue to be crowed out of the budget.
The simple fact is, the funding put into the pension systems by the State and by employees does not cover the amount of pension benefits that must be paid out each year. That funding gap is growing significantly each year, and the pension obligation of more than $96 billion is growing by a staggering $17 million every day. It is not a situation that was created overnight, but rather is the result of four main factors over time:
The State skipping or only partially funding pension payments into the system
Benefits that changed over time without being actuarially calculated to ensure that payments covered benefits
A low rate of return on pension fund investments
The increased life expectancy for pension system participants
Pointing fingers and playing the “blame game” are not productive, and do nothing to move the General Assembly toward a viable pension solution. But until real pension reform is approved and implemented, the financial situation in Illinois will continue to deteriorate. At the same time, legislators need to respect that a contract was entered into with these employees as a condition of their employment, and certain provisions of the contract are binding.
During the lame duck session a new pension plan emerged, and while I felt it needed some work, there were some elements of the proposal that I believe were great steps in the right direction.
The proposal would have made changes to four of the State’s five pension systems (judges were excluded) and it would have only affected employees who were hired before January 1, 2011.
The new proposal created a pension stabilization fund to help in paying down the debt. The fund would rely on the transfer of pension bond payments after the bonds mature. For example, $2.7 billion in pension obligation bonds are set to expire soon.
Rather than allowing that money to be absorbed elsewhere in the budget or allocated toward new spending initiatives, that $2.7 billion per year would be channeled toward pension system debt. As additional bonds retire that money too would be transferred toward paying down pension debt.
The proposal also addressed fraud and abuses to the pension system by prohibiting non-public employees from earning a pension, and prohibiting public employees from using sick days to count toward their pension service.
Unfortunately, the proposal also included a Cost of Living Adjustment (COLA) element that I do not believe would withstand a Constitutional challenge in the courts. Similar provisions in other states have been found to be unconstitutional. Last year in June the courts in Rhode Island found a COLA provision to be unconstitutional, and in November the courts in Colorado made a similar ruling.
New pension bills that are very similar to the one discussed during the lame duck session have already been filed in the House and Senate, and I am very optimistic that during this new General Assembly we will find a workable solution.
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