THE BLOG
05/28/2013 01:04 pm ET | Updated Jul 28, 2013

Illinois pension crisis built on bad decisions all around

Hi. We're Reboot Illinois. What's that, you ask? Well, we're a Web and social media company devoted to giving citizens the information and tools they need to act on improving government in Illinois, especially concerning corruption, improving schools, fixing state finances and improving the business/jobs climate. Reboot Illinois' views are those of Executive Editor Matt Dietrich, former editorial page editor of The State Journal-Register in Springfield, and Chief Operating Officer Madeleine Doubek former longtime executive editor of the Daily Herald. Together they have more than 50 years of journalism experience.
2013-05-25-madeleineauthor.jpg2013-05-25-DietrichMatthew_95x79.jpg
Madeleine Doubek Matt Dietrich

"You're breaking into our children's piggy banks, stealing from kids and schools and the disabled of tomorrow. You think you can get away with it because the public doesn't understand."

Those are the words of then-Sen. Dan Cronin, R-Elmhurst, during debate in the Capitol in 2005 on a bill that would skip $2 billion in payments to the state's pension systems to close a big hole in the state budget.

It was the same in the Illinois House.

"You are mortgaging our future. You are playing with fire, you are playing with potential bankruptcy of the pension systems." Said State Rep. Bill Black, R-Danville.

The bill in question was Senate Bill 27. It was not a simple proposal to stiff pension funds by $2 billion. It also contained some worthwhile reforms - like a provision that penalized school districts that granted large pay raises to teachers and administrators in the final years of their careers. That reform has helped curb the practice of spiking end-of-career salaries to drive up pension payments for retirees.

When SB 27 was passed - on Sunday of Memorial Day Weekend - its supporters touted savings estimated at $30-$40 billion through 2005. So really, they argued, it won't be a big deal eventually to make up the skipped $2 billion. But its opponents were emphatic that this was a very bad move. (We've posted a collection of news stories from that weekend, and they're loaded with warnings from various lawmakers.)

That's just one of the more obvious examples in a decades-long line of bad decisions that led us into the pension crisis we face today. That $40 billion in predicted savings somehow left us with $100 billion in pension debt a mere eight years later. We bring this up today, at the start of Memorial Day weekend, because we don't want the current legislative session to end with yet another bad decision in the timeline of the Illinois pension crisis.

And because we think it's important to realize that players on all sides over the years contributed to this epic tale of bad decision-making. This happened because so many people with so many different interest were afraid to make difficult but necessary decisions. That can't happen this year.

Cronin, now chairman of the DuPage County Board, now looks prophetic for his prediction that lawmakers were stealing from "kids and schools and the disabled of tomorrow." We know that because tomorrow is here. School funding has been steadily cut since 2009 as pension payments have eaten into the state budget. The disabled have lost services as the agencies that provide them struggle to deal with chronically late payments from the state. Payments are months late because the state, burdened with ever-increasing pension payments, has amassed a backlog of bills that has at times topped $9 billion.

The public employee unions that today want to be seen as victims of the pension crisis were accomplices in its creation on that Memorial Day Sunday eight years ago. They not only didn't oppose this deliberate underfunding of their members' pension systems, they actively supported it. Witness slips filed at the time show the Illinois Federation of Teachers, the Illinois Education Association and the Service Employees International Union among the labor groups offering to testify in support of the bill.

Bad decisions.

Back in March, we posted the transcript of a speech from former Gov. Jim Thompson, who urged lawmakers to pass the strongest pension reform bill possible, even if it meant starting over should the Illinois Supreme Court find it unconstitutional.

"If the Supreme Court finds it unconstitutional, start over, responding to the opinion of the court," Thompson said. (A transcript is here.)

Specifically, Thompson said lawmakers need to "look at abolishing the 3 percent COLA, the compounding COLA, which raises pensions to an unsustainable level the longer it runs, and switch to simple interest COLAs."

And why does Illinois compute its retirees' annual pension raises using compound interest instead of simple interest? Because Thompson signed the bill into law in 1989.

Bad decisions.

And the bad decisions came from both parties.

The point of this history lesson?

This week at a Capitol press conference, supporters of a bill backed by House Speaker Michael Madigan presented evidence from actuarial reports that showed a rival pension reform bill will trim a mere $5 billion from the state's current $100 billion pension debt. The Madigan bill will take an estimated $27 billion off that total, while saving taxpayers an estimated $150 billion through 2045. And it will bring all five of the state's public employee pension systems to 100 percent funding.

The other bill, which is supported by public employee unions and Senate President John Cullerton, will save only $46 billion ($30 billion according to House Republicans) and bring the systems to 90 percent funding. That's not enough to get the state on a path to recovery. It's a formula for keeping Illinois in its financial morass for decades to come.

We're heading into Memorial Day Weekend. The end of the spring legislative session arrives at the end of next week.

Lawmakers need to learn the lessons of the state's pension history. Don't give us another set of quotes, like those above, to dredge up in another eight years. Don't make another bad decision. Pass Senate Bill 1.