The Old Reality versus the New Illinois Pension Reality

“Payment of the required State contributions and of all pensions, retirement annuities, death benefits, refunds, and other benefits granted under or assumed by this [Teachers Retirement] System and all expenses in connection with the administration and operation thereof are obligations of the State.  In addition, Article XIII, section 5 of the Illinois Constitution states, 'membership' in any state pension system is an 'enforceable contractual relationship' (TRS Issues Update, February 2011).

“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)… 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 [five] years…” (TRS Public Information Officer Dave Urbanek).

That was then, and this is now: “Where you are headed is more important than where you are… Pension costs are growing faster than revenue… The unfunded liability of $44 billion is bigger than the state’s general funds budget of $33 billion… TRS can no longer rely on old assumptions” (TRS).

“To be clear: Neither I nor Teachers’ Retirement System is proposing any changes in member benefits, especially a reduction in the current annual cost-of-living adjustment… It is not our role at TRS to suggest a solution to this problem… New revenues must be generated, and if they are not, benefits may have to be reduced… There are only a few options available and none is very pleasant to discuss – changes in the cost-of-living adjustment; in member contributions; in retirement age, and in the benefit formula; as well as increased revenues through new taxes” (Executive Director Dick Ingram, Chicago Tribune April 10, 2012).


Apparently, according to Ingram, the “new reality” for public employees is a constitutionally-guaranteed pension can now be considered a “benefit” that can be bargained through unfair consideration and is not necessarily a “contractual obligation.”   Indeed, this “new reality” is about destroying the public employees’ only lifetime income or guaranteed defined-benefit pension plan.  It is about the belief that public employees do not deserve their deferred benefits that they earned, even though they have sacrificed wages during their career. It is about distorting the issues and blaming the state’s budget deficits on teachers, firemen, policemen, and other state workers. It is about perpetuating the notion that the public pension systems are unaffordable and, therefore, unsustainable. 

This “new reality” is about warping the debate regarding who is entitled to a pension and twisting the logic. It is about Ty Fahner of the Civic Committee of the Commercial Club of Chicago and members of other wealthy federations and institutes calling for a theft of the public employees' pensions and distracting the public’s attention away from policy making that will yield exorbitant business revenues while essential services are cut for the vast majority of people. It is about anger over public employees that are living longer and; thus, the absurd idea that they should be working longer. It is about envy for those who still have a belief in a promised future, while others have been robbed of their financial future because of arrogance, corruption and greed in Illinois politics and the financial sector.

This “new reality” is about the financial industry where a large percentage of members of the Civic Committee want to maximize their self-interests, thereby diverting the state’s obligatory payment to public employees and cashing in on the diminishment of assured benefits.  It is about reducing wages for public employees to increase profits elsewhere.  It is about exacerbating income and wealth inequity; about shifting the state’s financial responsibility (its normal costs of pensions) to school districts and universities, regardless of the consequences.

This “new reality” is about reneging on promises and responsibilities, increasing contributions and cutting and freezing benefits, such as the cost-of-living adjustment, for public employees – proposals concocted by those who will never be affected by them. It is about coercing public employees to make an unconstitutional choice, or lose the state’s health insurance subsidy and creditable earnings in retirement. 

This “new reality” is about creating disposable public employees and ignoring the decline of middle-class income.  It is about a disregard for an active teacher’s and retired teacher’s dignity; about betrayal and indifference and not honoring the legal and moral commitment to proceed ethically in their proposals because what really matters for policymakers and wealthy business people is eliminating the state’s pension payments at any cost and ignoring the state’s antiquated revenue system and flawed Pension Ramp.

This “new reality” is about a state pension policy that is biased toward the inefficient, inadequate and inequitable defined-contribution savings (401 k) plan, because this savings scheme is profitable for pension consulting companies and bankers, contract and pension lawyers and actuaries and will enhance the bias toward tax breaks for the privileged class.

This “new reality” is also about falsely convincing a public employee to believe that he or she can possibly save enough retirement income in a 401 (k) plan or defined-contribution savings plan without having a defined-benefit pension or any Social Security income, It is about appealing to a public employee who believes that he or she can invest wisely and accumulate enough assets for a secure retirement and also understands how to distribute those assets to avoid longevity, inflationary and health care risks. It is about ignoring the fact that with a 401 (k),  there will also be administrative and investment fees that will substantially reduce the value of a defined-contribution, 401 (k) savings plan.

What if this “new reality” creates public school teachers who are willing to stop teaching in the public school classrooms across Illinois, and firemen who are willing to stop extinguishing fires in their towns and cities, and policemen who are willing to stop protecting peoples’ homes and their communities, and other state employees who are willing to stop working for the municipal and state governments? Perhaps then the citizens of Illinois would recognize the value and service that public employees of Illinois provide; perhaps the citizens of Illinois would realize that the state employees’ retirement plan is worth protecting and preserving just like the lives that these public employees have been safeguarding, supporting or assisting all along.  Dick Ingram is wrong and so are his cohorts. 

-Glen Brown