Time has passed to address pension problems
Comments (...)The following editorial appeared in the (Decatur) Herald & Review on Jan. 12:
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(MCT) — Gov. Pat Quinn signed a necessary and politically easy pension reform bill last week.
The action, however, does not address the larger issue of the state’s pension payments taking up more and more of the state’s money.
The bill signed by Quinn would outlaw double-dipping by union officials who were gaming the system to secure their own six-figure public pensions. In effect, union members were being allowed to use the pension system set up for public employees. Fortunately, that type of behavior won’t be allowed any longer.
But the larger issue of pensions still hangs over the state and its budget issues. Currently, the state faces an $83 billion shortfall in funding for its public employees. That sum, however, does not need to be paid all at once.
What does need to be paid is about $5 billion for this year’s current pension obligation. That’s a huge amount, nearly the entire sum gathered from the tax increases in January.
One of the ramifications of the problem was evident last week, when Moody’s downgraded the state’s credit rating, partially because of a failure to address the pension issue.
Republicans in the statehouse say the pension problem is due to an overly generous system and abuses such as ones addressed by the new laws. Union officials say the abuses are only a small portion of the pensions and that, overall, the state’s pension payouts average out to about $32,000 per retiree. Some pension critics have targeted the pensions for educators, which tend to run higher. Union officials argue the problem is that the state has ignored paying into the pension system for decades. That’s why just 43.4 percent of the long-term pension burden is currently funded, they say.
Union officials say the state must pay for the shortfall, even if it means raising taxes. That’s a hard sell in a state where income tax rates were increased 67 percent just a year ago. It’s also clear that those personal and corporate tax rate increases have stalled job creation.
Pension reformers say some public employees, primarily those not near retirement age, need to pay more into the system or the system needs to change into a 401K system.
In a 401K-type system, the state and employee both contribute to a fund, but the amount available for retirement would depend on how well an individual invested and market forces. Most businesses have converted to a 401K-type system.
Raising taxes is a bad idea and one that shouldn’t be contemplated.
But the other suggestions could all be a part of the solution. The state, without a doubt, needs to stop the practice of delaying pension payments to fund other areas of government. Cuts in government expenses need to be made to fund the pension obligation.
At the same time, the pension system currently in existence is unsustainable. Lawmakers should change the system so it is less of a burden on taxpayers.
That needs to be done cautiously and should affect only employees who are far enough from retirement to adjust. There are constitutional questions about changing the pension system, but the General Assembly should get them answered in court, instead of using them as an excuse to avoid taking action.
The time for action on the state’s pension system has long passed.
A solution needs to be enacted during the spring legislative session that begins in a few weeks.
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