Wednesday, December 04, 2013

Illinois Policy Institute's Jim Tillman on Illinois's meager pension reforms.

An email from IPI's Jim Tillman,

Today the Illinois General Assembly sent a pension bill to Gov. Pat Quinn. It is important to be clear about what this bill is and is not. Let's start with what this bill is not.
This bill is not the sweeping reform that Illinois has been waiting – fighting – for over the past few years. This bill does not fundamentally change the way pensions are calculated and paid out in Illinois. This bill does not set up a system that is fair to both taxpayers and government workers.
The passage of this bill was not the moment in which the very same politicians who drove this system into the ground finally stood up, did the right thing and fixed it.
Here is what the bill does: delays addressing the problem head on. It buys time.
The conversation about pension reform became serious in 2011. At that time, Illinois had an unfunded liability of approximately $80 billion.
Today, the official unfunded liability is $100 billion. The bill passed today would – at best – reduce the unfunded liability to $80 billion. It dials back the crisis just to 2011 levels.
The bill passed today purportedly cuts the state's pension payment by $1 billion next year. Know where that gets us? To the same level payment as the state had for the fiscal year that ended on June 30, 2013.
It's universally accepted that this bill does not represent a "solution" to Illinois' pension crisis. Many politicians who voted for this bill have said as much, and have defended their vote by saying, "This is not a solution; it is a first step."
A "first step" necessarily means there is a second step. Now the real reform begins; now we start working toward the next step.
For examples of what that next step is, look around the country. There is something in common with states enacting pension reform and turning their fiscal houses back in order: Michigan, Alaska, Rhode Island. They're all moving away from pensions and to the defined contribution model.
If Illinois is going to turn around, it will have to do the same. In February 2013, we proposed a landmark bill that would pay government workers everything they've earned so far in the pension system, and start a 401(k) system for all benefits going forward. It would immediately cut the unfunded liability in half, by $46 billion, and would save the state more than $221 billion over the next 30 years. The benefits would be so generous that it also would not require the state to participate in Social Security.
The bill that passed today may get the governor's signature, but it does not mean the pension crisis is solved. We will continue working diligently to enact real pension reform to get Illinois back on the path to prosperity.

In liberty,

John Tillman

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