Magitutude of pension problem dictates compromise and prompt action

Seventeen million dollars a day and downgrades from Bonding  rating agencies costing us millions in increased interest, and a 100 billion dollar  economic hole dictates that the Illinois State legislature must act to dig us out of this public pension mess. There is plenty of blame to go around, but at this juncture we need to deal with the facts on the ground, and how it happened is not really too relevant. It affects every citizen  of the state since this deep hole impedes the ability to maintain a safety net for those in need, stifles our ability to address our needs in education and infrastructure and roads and transportation and everything else,and will not allow us to keep taxes in check whether it be our state income taxes or local property taxes. The bottom line is that this issue is the elephant in the room and important to all regardless of anyone’s individual hot button issues.

The stalemate in Springfield between competing philosophies and positions and proposals in the Senate and the House is simply not acceptable. Everyone needs to give in and compromise to get this job done. Contrary to what has been articulated about the inability to meld the ideas, there are some ideas  which could be utilized to move this process forward.  The Illinois constitution mandates that public pensions may not be diminished or impaired. The House approach is that the magnitude of the public problem itself could impair the pension system will allow some latitude,  and the Senate approach is that only by getting people to select between alternatives will we be able to get over this constitutional hurdle. The courts will ultimately decide what is or is not constitutional, and it is  a virtual certainty that whatever is passed will be challenged in court by someone. Let us get a proposal passed and get this process of resolution underway. The House proposal is probably the better  proposal to tweek since it saves about three times more than the Senate proposal, and financially can make a significant and meaningful dent in the 100 billion dollar hole. Both approaches have strong advocates and arguments can be made in favor of each, but it is time for some melding of these competing proposals.

The core proposal in the House proposal is  to deal with compounded Cost of living increases which public employees get each year.  I emphasize that this core principle deals with increases and merely means that those increases will  be more under control and more sustainable. Since this is not going to diminish anyone’s pension but only give less increases it seems that this proposal will be easier to stand up to constitutional standards especially coupled with the magnitude of the public financial problem which impairs the sustainability of the pension system. The basic concept puts a cap on the amount of money on which one can get a COLA and eliminates the compounding. If there was going to be a change in this concept to make it more reasonable and acceptable it would be changing the cap to be closer to the average teacher pension amount of 48,000. I think making a cap around $40,000 would be reasonable and would mean at current 3% rate  there could be increases of 1200 a year without compounding. This might be worthy of consideration when one considers most public employees do not get social security and do not even get survivors benefits upon death of a spouse.

Three other key components of the house bill are increasing the retirement age and increasing the member contributions and capping the salary amount on which pensions are paid to the social security wage base. Though these concepts are reasonable on their face and it might be arguable that they should stand up in light of the magnitude of the economic problem  which in itself could impair  the sustainability on the pensions, it might be possible for one to argue that that they are a diminishment of the pensions. Hence some or all of these proposals might be stronger from a constitutional standpoint if the choice concept from the senate were injected in a relatively simple manner. Employees could be asked to elect an alternative to be able to retire earlier as currently allowed or to retire at a more reasonable retirement age. They could either give up access to state subsidized health insurance in retirement which is not constitutionally protected and agree to pay an increased payroll contribution and agree to a cap on pensionable salary to the social security wage base and have a right to retire early between 55 and 59 with 20 years of service and a reduced benefit or at 60 with a full benefit as currently allowed; or they could have access to state subsidized health insurance and avoid the full increase  in contribution or have a lesser increase and forfeit COLA for a certain number of years  if they retired at between 60 and 64 for reduced benefit or at 65 for full benefit.

To address the possible shift to local districts which has been talked about and to avoid changing a long standing approach that as been relied upon in planning budgets and avoid any major increase in local property taxes, injecting a shift of the payment obligation on pensions might be reasonable to include in any compromise proposal if it was prospectively only  for newly  hired employees, and possibly for some category of administrative personal with salaries above a certain dollar amount .

A critical component of both bills is the requirement that the state be obligated to pay the full amount of it annual contribution to the pension systems each year to and to make this obligation fully enforceable

It is also essential that the legislature address and reform the   pensions systems for local municipal employee pension systems in a similar manner since those systems without meaningful similar reform are an essential ongoing contributor to increasing local property taxes.

I would urge that some or all of these ideas for compromise  might be a reasonable balance of the two  competing proposals on which the Senate and House have been deadlocked. Though it cannot be certain what the amount saved would be, such a compromise would no doubt be somewhere between the  the existing proposals, and would be respectful of the two competing legal philosophies and most importantly move us towards a solution of one of the most vexing problems facing our state.