Illinois struggles to find funds for pensions

A proposal to solve Illinois’ vastly underfunded pensions system could be on the way.

Illinois Gov. Pat Quinn said last week during a campus visit that he would provide an update about the issue during his budget address, which he will deliver at noon Wednesday. However, Andrew Mason, spokesman for Quinn, declined to comment on the specifics of the address.

Quinn has created a group to discuss the issue from both sides, as well as reaching out to all constituents involved. The goal is to have a proposal presented to state legislators by the end of the year.

“I think a lot of the university presidents understand that pension stabilization and strengthening involves everybody who employs those who are beneficiaries,” Quinn told the press last week. “I think universities, community colleges and school districts have a role to play here.”

The pension system has worried university presidents and chancellors because it might drive away highly recruited faculty members, which would “brain drain” the University, said Tom Hardy, University spokesman.

Mason said Quinn agrees that this needs to be addressed as soon as possible, as it has state budget implications.

“We’re having trouble paying our bills. We are funding other priorities, so we’re trying to look at ways to change the pension system that would make it sustainable for the future … and it fits into our larger state budget picture,” Mason said.

While underfunded pension systems is a national issue that many states are facing, Illinois ranks last in the country when it comes to financing public pensions, according to the University’s Institute of Government and Public Affairs, or IGPA.

These systems are underfunded when legislators borrow money from the system instead of increasing taxes or cutting spending. These series of actions have resulted in billions of dollars in liabilities shared by the five state pension funds, including the State Universities Retirement System, or SURS.

Just last week, two University professors proposed changes to SURS in their report that reiterated that all accrued benefits will not be diminished, an ongoing concern of many lawmakers in Springfield. This system would be partly funded by increased amounts from workers and universities. In addition, the plan is designed to reduce the state government’s payments into SURS by billions of dollars over time.

“(However,) we make it clear that the state must commit to funding its share of the burden in order for this to work,” said finance professor Jeffrey Brown, who co-authored the proposal with IGPA director Robert Rich. “(If) participants and institutions agree to share the burden, I think the political pressure for the General Assembly to make good on its (previous) commitments would be intense.”

Brown added that this plan is better than Senate Bill 512, which drew much criticism from University President Michael Hogan and other state university presidents. They jointly wrote a letter in early November to Quinn and other legislators stating that the controversial bill would shift the burden to state employees, who are “least prepared to shoulder new unplanned obligations.”

However, under almost any change, the pension system would leave employees with reduced benefits or force them to pay more than the current system.