Ideas on how to fix the pension crisis
Wednesday, April 28, 2010
Civic watchdogs, unions, taxpayers groups and lawmakers propose several ways to deal with the state's $78 billion debt to public pension systems:
Illinois General Assembly
Reform measure signed April 14 by Gov. Pat Quinn.
Key point: Changes apply only to people not yet hired.
Pro: Lowers future costs by more than $200 billion over decades.
Con: Doesn't touch state's $78 billion debt to the pension system.
• Raises minimum retirement age for teachers, state and university employees, judges and lawmakers from 55 to 67.
• Calculates pension only up to $106,800 of salary.
• Lowers pension percentage for new judges and lawmakers from 85 percent to 60 percent of salary.
• Generally limits pension cost-of-living increases to half of the Consumer Price Index or 3 percent, whichever is lower.
Civic Committee of the Commercial Club of Chicago
Civic business group
Key point: Would limit benefits tied to future earnings of current employees. No changes for current retirees' benefits.
Pro: Would save an estimated $2 billion a year immediately.
Con: Reduced benefits might keep top employees out of public service, unions say.
• Increase employee contributions by at least 1 percentage point (public school teachers and administrators now pay 9.4 percent.)
• Require retirees to pay more for health care.
• Better yet, replace pensions with a defined contribution plan such as 401(k).
Center for Tax and Budget Accountability
Board includes unions and social advocacy groups.
Key point: Depends on new revenue, not benefit reductions.
Pro: Quickest to pay off state's pension obligation and reduce interest payments.
Con: Would raise taxes significantly.
• Tax services such as dry cleaning and auto repair to raise state revenue.
• Require the state to pay its full pension obligation each year.
• Change the Illinois Constitution to create a progressive income tax, with a higher tax rate for higher incomes.
Illinois Policy Institute
Supports "free market" policy
Key point: Borrow money and rein in spending to pay the pension debt.
Pro: Ultimately designed to balance budget.
Con: Borrowing would merely delay day of reckoning, conservative critics say.
• Borrow $18 billion over the next 15 years to make required annual payments to pension fund.
• Freeze state budget for three years at 2010 levels.
• Limit future state budget increases to inflation rate plus population increase.
• Use projected excess revenue to pay down the pension debt and then pay tax refunds.
• Sell or lease state assets like the tollways.
National Taxpayers United
Conservative taxpayers group
Key point: Would abolish state pensions.
Pro: Would save an estimated $50 billion in coming decades.
Con: Reduces benefits far below other public-sector workers'.
• End pensions for new state hires and replace it with Social Security, Medicare and 401(k) contributions.
• Require current workers to contribute 8 percent more of their income toward pension and health benefits and $250 per month after retirement.