The bad feature here is that Illinois would in effect become the contract guarantor of the several pension fund liabilities. The state would irrevocably commit now to annual funding of the liabilities — however large they may become, at whatever annual level the actuaries determine, and regardless of the state's circumstances at the time.
Also, the guarantee provides that if the state fails some year to fund at the level determined by the actuaries, the pension funds "shall" go to court and obtain a judicial order compelling the state to pay up.
This open-ended guarantee is extraordinarily dangerous. After the impact of the proposed reforms, the remaining stated unfunded liability of about $70 billion would increase at a rate of about 8 percent each year — perhaps more. No one knows how large the liabilities may become.
What happens if Illinois is hammered by another recession, causing the state's revenues to drop or the values of assets in the funds to plummet? What if local school boards, knowing the state has become the contract guarantor for the funds, approve changes that drive up the pension obligations? What if actuarial assumptions turn out to be wrong?
The Southern picks up this from the vocal Rep Bost Local legislators discuss Madigan bill
Rep. Mike Bost, R-Murphysboro, said he doubted he would support the bill crafted by state Speaker Mike Madigan, D-Chicago. Bost said he questioned the bill's constitutionality and wondered why individual aspects of the proposal were not given severability if challenged in the courts.
"If Madigan was real with this, and believe he's the expert at this, he would have put a severability clause in it," Bost said.