New pension plan will not solve crisis
SPRINGFIELD – On Tuesday, the Illinois General Assembly passed a measure they contend will solve the state’s pension crisis.
If only it would.
The reality is it likely lays the groundwork for future tax hikes and does little to solve the state’s fiscal woes.
Mind you, Illinois has the worst-funded state pension system in the nation and the worst credit rating in the country and it is paying its bills months late.
In short, Illinois is a fiscal basket case. Such a situation demands strong medicine.
Instead, what we got was a placebo treatment – a sugar pill disguised as a potent remedy.
At the end of the day, the savings from this bill mainly comes in two forms: gradually raising government workers’ retirement age and lowering cost-of-living adjustments, or COLAs, for retirees.
That’s it, folks.
Union bosses are already calling these moves onerous. The reality is it is too little, far too late.
Under the legislation that Gov. Pat Quinn says he will sign, government workers will still be retiring in their 50s for many years to come. And they will still be receiving COLAs in their retirement, while most of the rest of us can look forward to retiring in our mid-60s and not receiving a dime in COLA money from our private retirement plans.
And the burden of funding government workers’ early and generous retirements falls on the shoulders of those of us with private retirement plans.
Three years ago, lawmakers passed a temporary 67 percent income tax increase that is slated to partially sunset in a year and a half.
The money was supposed to go toward helping the state pay its bills and bring its pension systems back toward solvency.
But the state pension systems are at their worst level of funding ever.
And that’s despite the state taking in more than $7.5 billion a year as a result of the tax hike.
Spending went up after the tax hike.
And even with legislative leaders’ optimistic projections, this pension “reform” bill would save the state at most $1.5 billion a year, according to Crain’s Chicago Business.
So even if those rosy projections were to become reality, those same legislative leaders would have to come up with more than $3 billion annually in savings elsewhere to ensure the income tax hike partially sunsets as promised.
Come 2015, I can already hear the politicians explaining away making the tax hike permanent: “Well, we tried pension reform and it just wasn’t enough …”
That’s right, it’s not nearly enough.
The savings, to be blunt, are picayune in comparison to the pension system’s overall fiscal woes.
The people of Illinois deserve better.
• Scott Reeder is a veteran statehouse reporter.