The Daily Illini

Illinois’ financial problems originate in pension systems

Billy Galant

Billy Galant

By Austin Stadelman, Columnist

The claim that the state of Illinois has financial issues and a dysfunctional government has become a truism to the public in the last few years. Many people point fingers at who is to blame for Illinois’ woes, often seeking a sense of affirmation by tying a century of issues to a single name.

Governor Bruce Rauner has insisted that Illinois’ problems derive from a decade long Democratic stronghold in the General Assembly and, until 2014, the Governor’s office. Many people in the state of Illinois believe him or have formulated their own similar conclusions.

This attitude is not only disingenuous, but it is also flat out wrong. The bulk of Illinois’ financial problems come from government mishandling of public employee pension payment issues over the last 100 years. Yes, 100. Underneath the political rhetoric and campaign tactics, there is a much deeper and convoluted reason for the current state that Illinois is in.

In fact, it can be traced to exactly 100 years ago. A 1917 report evaluated the Illinois pension systems. Their findings — that the current pension systems “‘are inharmonious and often in contradictory with reference to each other, but that with perhaps a single minor exception they are financially unsound and moving toward a crisis.’”

Despite this report, dealing with the impending pension crisis was continually pushed back by lawmakers for the next fifty years. In 1970, an Illinois constitutional convention presented opportunity for the state to reform its unstable pension systems. However, instead of delivering reforms to the systems, the delegates doubled down on the pension payments by making it a part of the Illinois constitution to have payments be made to the pension funds as promised.

Though the pension system was insolvent from the beginning, this decision made in 1970 is the bedrock for the state’s pension problems. They modeled it after New York. But, while it worked for the Empire State, the Land of Lincoln was not as forthright with the payments, and the building pension issue persisted.

 1994 presented another opportunity to contain the growing pension deficit. Republican Governor Jim Edgar proposed a 50-year plan, known as the “Edgar Ramp,” which would be a gradual increase in payments made to the pension fund by the taxpayers with the idea that, by the end of the ramp, the debt would be 90 percent erased. It had bipartisan support, was incredibly politically expedient and was signed into law.

Unfortunately, this plan did not work either, and it is now infamous among Democrats and Republicans alike. The initial payments were made well short of the necessary amount, and an economic recession in the early 2000s made the ramp much more implausible going forward. By the time Rod Blagojevich was sworn into office in 2003, the pension debt had only risen substantially.

Edgar still defends his ramp today, claiming that if the economy was stable, payments wouldn’t have gone under. But that’s hard to believe when they weren’t satisfactory from the start. It’s similar to applying for a credit card and claiming that there’s no need to worry about most of the costs in the future as long as the company’s required minimum payments are made in the now. It’s fiscally irresponsible.

In 2013, the General Assembly and Democratic Governor Pat Quinn made monumental pension reform that greatly reduced benefits and would drive down pension costs. This was then struck down by the Illinois supreme court citing the clause, created by the 1970 convention, that stated contemporary pension funds can not be altered and must be paid as promised.

This was a crucial blow to a genuine attempt to reform pension payments and start filling the cracks of the state’s financial problems. It’s important to emphasize how these issues are not black and white or red and blue but a collective result from the sins of Illinois’ fathers.

Last year, the independent state Commission on Government Forecasting and Accountability said that the pension debt was up to $130 billion — the worst of any state. Though many see the state’s future as bleak as political bickering and in state political conflicts continue, there is light at the end of the tunnel.

In 2011, the General Assembly and Governor Quinn passed reform that greatly reduced pension benefits for those who were hired after the year 2011. This means that, many years down the road, the pension crisis has the potential to work itself out once those employees begin to retire.

This, of course, is not as immediate as some would like, and there should still be measures taken to make up for the pension debt that is going to grow substantially before the 2011 reforms kick in and begin to reduce its size.

But those measures would have to come from cuts to government services and/or more taxes, neither of the which are popular among Illinois voters. And therefore, hard political discussions are ahead for elected officials of each party.

Austin is a sophomore in Media. 

[email protected]dailyillini.com

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