Pension fix just halfway measure

Thursday, April 15, 2010

Financial problems surrounding Illinois' public pensions remain severe.
Amid much fanfare and self-congratulation, Gov. Pat Quinn signed what's touted as landmark legislation to help bring the costs of the state's public pension systems under control.
The legislation, passed in lightning speed last month, requires public employees hired on or after Jan. 1 to work until age 67 to earn a maximum pension and limits the salary on which that pension can be based to about $110,000 – big changes from the status quo.
These would be common-sense changes in any situation. But considering Illinois' desperate fiscal situation, it's the bare minimum legislators could do. There has been considerable speculation about the money this will save the state, but it's certain to be in the many billions of dollars over future decades.
Unfortunately, the legislation doesn't solve the problem with public pensions.
The Civic Committee of the Commercial Club of Chicago warned this week that the state public pension funds will be insolvent – that means pensioners won't get their checks – within 10 to 15 years unless further dramatic changes are made.
There is some good news in the report. It was prepared before the recent legislative action that is expected to ease pressure on the state's public pensions. Further, it is based on the pension funds' assets as of June 30, 2009, and the market has gone up considerably since then. But these are relatively minor pluses in the context of a negative report.
The state's public pensions could be Exhibit A for the proposition that Illinois has for decades robbed Peter to pay Paul in the name of creating new programs while refusing to fully fund old ones or establish meaningful priorities.
The state has chronically underfunded its mandated obligations to its public pension systems while spending profligately elsewhere. Like the spendaholics they are, our governors and legislators recognized their problem regarding public pensions and passed legislation in 1995 that committed the state to a 50-year program to solve the problem. Unfortunately, they didn't keep their word, and unfunded state pension liabilities are estimated to be $90 billion and growing.
It's a mixed blessing that the public pension problem is not right at the front door. There's time to address this problem, but that means there's also time to ignore the problem.
State officials ignored our current disastrous budget/debt situation for as long as they could. Will they take the same disastrous approach with public pensions?