Neighborhood Effects readers know that Illinois’s pension problems are much worse than reported. According to the state’s numbers, Illinois’s unfunded pension liabilities amount to roughly $85 billion but as Eileen Norcross and I have argued, the amount is actually closer to $173 billion.
There have been many discussions regarding pension reform in Illinois during the past few months and, unsurprisingly, little has been accomplished. In fact, an article in Statehouse News earlier this week provided evidence that Illinois is continuing to deliberately avoid dealing with the problem by providing temporary quick fixes and banking on the idea that the state’s pension problems will simply disappear when the economy recovers.
According to the article in Statehouse, Illinois’s
12 percent increase in higher education spending this year isn’t going to benefit students. Instead, the additional funding for fiscal 2012 is going into the State Universities Retirement System, or SURS, to address its underfunded pension program…. The dramatic increase in the amount of money being given to SURS, and the other state pension systems, seeks to make up for decades of chronic underfunding by governors and legislators, and shrinking returns on investments because of the stagnant economy.
Education costs are increasing across the country. Students in Illinois paid 30 percent more for a year of college education at a university in 2011 than they did in 2007. Instead of using the additional 12 percent in higher education funds to curb these increasing costs, the state put the money towards its SURS system. This fiscal year students in Illinois are dealing with the consequences of the state’s failure to properly manage its pension system. As pension costs continue to grow in Illinois, the state will likely continue putting more money into the system – which means less money will be available for other areas of the budget.
In related pension news in Illinois, the Daily Herald provided the following quote from Hanover Park Village President Rodney Craig:
We have a fear that at the end of the day the pensions won’t be there
Without serious structural pension reform, Mr. Craig’s fear will most certainly become a reality. Labeling Illinois’s recent pension quick fix as a disappointment would be an understatement. This is nowhere near the type of reform that needs to happen in Illinois. If the state legislature wants to ensure fiscal stability in the future of Illinois’s pension system then they must start by removing the constitutional protection of pension benefits, reducing the rate of accrual for current employees, increasing current employee contributions, closing the current defined benefit plans and moving all employees to a defined contribution plan.