The four leaders of the Illinois
legislature have come up with a deal to solve the state’s public pension deal
crisis. Perhaps I should clarify here;
the one leader of the Illinois
legislature and the other three poseurs have
come up with a deal to solve the state’s public pension crisis. The plan will
be voted on this week, after the filing deadline for the 2014 primary has
safely passed so that legislators, mostly but not exclusively Democrats, who
curry the favor of the public employee unions, can vote for the necessary legislation
without fear of retribution in the primaries.
So have yours truly and others who are convinced that our
once great state’s $100 billion plus unfunded pension liability will sink us as
surely as the iceberg sunk the Titanic, been proven wrong? Won’t this bill, as its champions argue,
save the state $160 billion over the next half century or so and result in the pension
plans’ being fully funded by 2044? The
answer to both questions is a resounding “No.”
Not that this isn’t a decent bill. Ending the nonsensically generous 3% compounded
increase in pensioners’ entire pension payment while protecting those at or
near the bottom of the pension ladder makes eminent sense. So does increasing the retirement age, though
this provision would have been better had it not been limited to those under
45. Taking one or more COLA adjustment
“holidays” is also fiscally sound.
Offering the option of a defined contribution plan for some state
employees could have ultimately solved the entire problem…if it weren’t
voluntary and necessarily limited to 5% of employees due to the systems’
needing those contributions to stay afloat…or, more properly, to continue
slowing the systems’ descent to the bottom.
The 1% reduction in the required contributions by employees, which seems
counterproductive at first glance, might, but only might, help the plan pass
Constitutional muster. All these are great
ideas, and Representative Elaine Nekritz and others who worked so hard on this
plan, and even Speaker Mike Madigan, the only guy that matters, who pledges to
push this plan, deserve some praise for these attractive plan features.
The whole plan falls apart, however, with what is perhaps
its most widely touted feature, i.e., the supposedly legally enforceable
requirement that the state make supplemental payments to shore up the
plan. The payments amount to $364
million in FY 2019 and then $1 billion each year thereafter until 2045.
What do you suppose the odds are that the state will
actually come up with the spondulicks when the time comes to write these
checks? Our distinguished public
servants in Springfield (and Chicago ,
but that’s another matter) have made such pledges before only to break them
when the time came to fork over the dough.
Why should it be any different this time? Oh, yes, we are told, under provisions of
this plan, the state’s promise to make those supplemental payments is legally
enforceable; the unions can go to court to compel payment. But our esteemed legislators can, under terms
of the plan, declare a “crisis” and decide to forgo or reduce the payment. What do you suppose the odds are that a “crisis”
will surely arise when the chips are down and our modern day versions of
Pericles decide they’d rather spend the money on something more directly
related to keeping their jobs?
But suppose that last question is more than rhetorical and
our selfless, dedicated legislators decide not to do their typical dodge and
actually come up with the money the plan demands? Where will they get the money? Does the state have an extra $1 billion here
and there lying around every year? Will
these guys cut the programs that they feel are so vital and that, doubtless as
a surprise by-product, help prolong the lifelong sinecures they call careers? Will the populace stand for higher taxes and,
if they do, what will such higher taxes do to our already miserable business
climate?
One more point. The
legislators are telling us that the reason they are supposedly so hell bent on
fixing this one of the many problems that they have created is because funding
pensions will “crowd out other functions of government.” Translating, this means that funding
pensions will result in our public servants’ being unable to spend our money on
constituents and contributors who will keep them on the public payroll and, not
for nothing, eligible for generous public pensions. So even if this plan somehow works and the
Land of Lincoln avoids fiscal doom wrought of pension underfunding, it will
surely run aground, perhaps a few years later than currently scheduled, due to
the spending the legislators intend to do with the “savings” generated by the
pension deal.
In other words, the legislature and the governor will either
spend the money funding pensions or spend the money on something else. This is largely a moot point, however,
because we are discussing spending money the state doesn’t have and can’t possibly
generate because the level of taxation necessary to come up the money in
question would force businesses and people out of the state and hence be
self-defeating.
Does this mean I oppose the bill? By no means.
While substituting one meant to be broken promise with another meant to
be broken promise seems silly, this plan ought to be passed because of its
aforementioned salubrious provisions. They may delay doom for a number of years.
But make no mistake; this state of Illinois
is doomed and it is too late at this point to change that. The only feasible long run solution would be
to file bankruptcy, if such a thing is possible, and do so right away before
the hole gets deeper. But that isn’t
going to happen. And even if we were to
face reality by declaring the obvious, one can bet that the legislature would
take the opportunity presented by a clean fiscal slate to spend us back into
bankruptcy within a very short time period.
And, perhaps saddest of all, the voters in the Land
of Lincoln
Merry Christmas.
See my two books, The Chairman, A Novel of
Big City Politics and The Chairman’s Challenge,
A Continuing Novel of Big City Politics, for further illumination on
how things work in Chicago and Illinois politics.
