Naperville Sun

Pensions targeted for budget woes

Business leaders tell chamber reform needed

Tuesday, August 24, 2010

Rick Lochner showed up at the Naperville Area Chamber of Commerce Illinois is Broke luncheon Monday to find out just how dire the state's budget crisis is.

The president of RPC Leadership Associates and Literacy DuPage noted that there are different levels of being broke and wanted some context in which to put the factual data.

After listening to two speakers outline the cold, hard facts, Lochner said he had his answer. "Very bad," he said of the situation. "Scary bad."

R. Eden Martin, president of the Civic Committee with the Commercial Club of Chicago, joined Abbott chairman and CEO Miles White in speaking before about 100 local business and government leaders at the Holiday Inn Select about the situation in which the state finds itself.

"We are in the midst of the most severe financial crisis in recent memory," White said. Speaking of the report that the Illinois is Broke Committee recently completed, White said, "We found the state spending $3 for every $2 it took in."

And White stressed that the blame for the state's budget woes was largely due to a problem familiar to many taxpayers across the nation: public sector pension expenses. "They have not been funded appropriately for decades," he said.

Martin said the cumulative Illinois pension and health care liability was approximately $130 billion.

Recent Naperville Sun articles on the issue pointed out that this year's debt alone is projected to be $14 to $15 billion. Martin noted that about $10 billion of the debt was in pension and heath care spending. With the $130 billion in pension liabilities and $50 billion in state assets, the total unfunded liability is in the area of about $80 billion.

Or it could actually be worse, Martin noted. Some business scholars have claimed that, depending on which accounting method is employed, the real liability could be as high as $200 billion.

If those figures are not sobering enough, Martin said that when the group began studying the problem in 2006, it limited its investigation to the five pension funds that provided retirement for the state's retirees. So the figures don't include any unfunded liabilities from the city of Chicago or other municipalities throughout the state.

Naperville's unfunded liabilities for its police and fire departments alone are about $101.5 million; or 24 percent of the property tax levy, according to the recent Sun stories.

And the problem is getting worse. According to the Pew Foundation, Illinois ranked last in pension funding in 2008, being only 54 percent funded. Since then, that number has slipped to 47 percent.

Martin warned that the short-term consequences of the debt could mean squeezing out money spent on education and Medicaid. Long-term problems could include the state going bankrupt and "at least one pension fund will run out of funds in the next decade."

Martin acknowledged the responsibility of paying state retirees what is owed them contractually, but stressed that prospective benefits for the future would have to be scaled back, ideally by using a move toward the defined contribution systems so many in the private sector use for their employees.

Martin stressed that the pension reform legislation that was passed in March 2010 did nothing to roll back any of the state's current liabilities.

State Rep. Darlene Senger, R-Naperville, said even if a legislator or group of legislators put together a viable reform bill, it wouldn't do any good if House Speaker Mike Madigan kept it from coming to the House floor for a vote.

Martin stressed that his organization was not partisan. He believed there were "people on both sides of the aisle who see reality ... they need to hear from all of us."

Martin also said he believed Madigan would allow a bill on the floor for a vote.

White referred to the coming election and said the issue of unfunded liabilities should be "the No. 1 issue that candidates have to address."

State Rep. Michael Connelly, R-Lisle, approved of the straight talk on fiscal discipline, saying, "The era of state employees paying zero for their health care will come to an end."

Stephanie Wiese of Edgewood Clinical Services worried about possible cuts to other areas of the budget, such as education and social spending.

"What will we be able to do for the underprivileged?" she said.