"Something Wicked This Way Comes" or "What, Me Worry" about What Ingram Said?

A few days ago in cold January, Dick Ingram, Executive Director of the Teachers Retirement System of Illinois, stated that “everyone acknowledges that the cost of public pensions under the current system will increase greatly over the next three decades and that these projected costs will hamper the state’s ability to meet its core responsibilities to all citizens.  That reality means that it is time to leave political science behind and focus solely on the actuarial science — the dollars and the cents that must be brought into balance. It is the only way the Teachers’ Retirement System and the other state pension systems will be able to fulfill their fiduciary duty to their members.” 

Will the definition of revenue “balance,” in this context, create a conflict between the public and private sectors’ interests?  Is it true that the only solution (SB 512) proposed right now for the state’s budget problems is a choice for public employees to reduce their constitutionally-guaranteed pensions?   “Fiduciary duty” entails confidence and trust.  Is it secondary to maximizing investments for the Civic Committee of the Commercial Club of Chicago, the Civic Federation, and cash flow for the State of Illinois? 
   
"The facts are indisputable. Over the next 30 years, the state will owe retirees in excess of $140 billion, but Illinois has less than $54 billion in the bank right now to meet those long-term obligations,” Ingram said.  Of course, this projected “excess” to be owed by the state includes the rising service debt or unfunded liability that the State of Illinois is largely responsible for because it has not fully fund the TRS system and the other four major public pension systems for decades.

Do any public employees prefer that the State of Illinois default on the money it owes to the public pension systems and not uphold its contractual obligations?  Do any other citizens of Illinois believe that the state has the means to pay all of its debts, without punishing public employees for the past reprehensible actions of some corrupt governors, legislators, and other unethical decision-makers, if it implemented the already-proven methods for enhancing revenue flow used in other states?    

According to Ingram, “The ‘unfunded’ portion of that liability creates tremendous pressure on state government because it essentially triples the annual cost of public pensions to taxpayers, money that could be spent on other services.” 

Thus far, “shared sacrifice” has targeted only the middle class, of whom public employees are members, and the poor that must continue to abdicate their hard-earned money and pay more taxes because of Illinois' inefficient state government.  Few people consider the fact that throughout the years state “services” were provided primarily because of the reallocation of public pension monies to those demands.   Perhaps an important question to ask is whether the “party of the privilege” (the Civic Committee, et al.) had anything to do with the state’s unreliable contributions to the public pension systems all these years?  In other words, whether past legislative irresponsibility enabled certain self-serving legislators (that were funded quite generously through legalized and normalized bribery) to displace public pension money to those very “special interests” (or business groups) without raising taxes on corporations and electorates.

“[Indeed] the way forward will be guided by a sober focus on the math: what has been promised; what will it cost: what can we afford.  It will not be easy, but there is enough common ground for us to stand on to get where we need to be.  It is what Illinois deserves,” Ingram also stated. 

One might ask how far apart is “what it will cost” and “what ‘we’ can afford?”  Surely, there are many political games that can be played with accounting rules and the legality of pension matters to deceive retirees and current employees about their pension systems’ liability.  

Though Article XIII, Section 5 isn’t a mathematical equation, it has helped prevent public employees from sinking into the quicksand of this rather indeterminate “common ground.”  Impelled by the Chicago Tribune’s yellow journalism, the Civic Committee’s ingenuous Illinois Is Broke, and the Civic Federation's skewed data, it is apparent that most legislators, moguls, and a swindled portion of the public want the Illinois pensions defunct.  

A few months ago, Dave Urbanek, Public Information Officer for the Teachers Retirement System of Illinois, stated that “pensions will not run out of money… [That] assumes that at a future date, state pensions will just cease and all outstanding financial obligations will come due… Unlike a corporation, a state government cannot go out of business… [Accordingly,] state law empowers TRS [40 ILCS 5/16-158c]… Payment of the required state contributions and of all pensions, retirement annuities, death benefits…, all other benefits…, and all expenses are obligations of the state… The state has waved its sovereign immunity in regard to the teachers’ pension because TRS is a qualified pension plan under the tax-deferred provisions of the IRS code.  Federal law would protect all claims… Pensions [are not] the problem [or] why Illinois has been unable to pay its bills.  The reason is a dramatic fall-off in state revenues over the last four years, costing the state $4.4 billion.”

There are few experts in the fields of retirement-and-benefit accounting and pension law (of which I am not one).  Current and retired teachers of Illinois can only hope that the Illinois Education Association and the Illinois Federation of Teachers have hired the most ethical and intelligent members among these rare specialists.   Indisputably, all public employees’ deferred and “earned” income that is “constitutionally protected” is what all public employees of the State of lllinois “deserve,” and every one of us needs to safeguard our pensions more than ever now, especially from those who want to diminish or impair Article XIII, Section 5 of the Constitution of the State of Illinois. 

-Glen Brown

(Read “Sustainability of the Teachers’ Pension,” June 5, 2011; “What We Believe We Know about the Sustainability of the TRS Pension,” June 10, 2011; and “Unfunded Liability and Sustainability of a Pension,” July 5, 2011 for further information on this topic).