September 10, 2014
Many Illinois citizens are aware that for decades the past state’s governors and legislators have not fully funded the public pension systems; that instead of paying into the pension systems, they have used that money to pay for other services without restructuring revenue sources. Hence, without having to pay for services, state legislators have created an enormous pension debt or unfunded liability for the public pension systems in Illinois. It is important to note that in Rhode Island, the state made all of its payments to the pension systems. Public employees in Illinois have been the victims of corruption, incompetence and irresponsibility for nearly 60 years.
The Illinois “Pension Ramp” (Public Act 88-0593), or the repayment schedule of 1995, has also greatly increased the total pension debt or unfunded liability and needs to be re-amortized, though legislators continue to ignore this most significant issue. “If retirement benefits and salary increases were the only drivers of the unfunded liability, the state retirement systems would be about 94 percent funded today [because public employees’ benefits are not overly generous]” (Ralph Martire, Center for Tax and Budget Accountability). Approximately one-third of the total pension payment each year is for “normal costs” to the system; the other two-thirds of the payment is the interest owed on the debt the state incurred for not fully funding the pension systems.
Illinois state legislators continue to ignore the essential fact that current revenue growth does not match the state’s need for public services and for payment of debts. In other words, the State of Illinois uses a “flat, low-rate income tax that does not adequately capture income growth, and income tax revenues thus routinely lag behind economic growth. The state relies heavily on a state and local sales tax that is almost exclusively applied to goods and excludes almost all services. Rhode Island does not have an antiquated flat-rate tax system like Illinois.
“Because Illinois is chronically short of the revenues it needs to cover its expenses, it has engaged in a number of poor fiscal practices over the years. Unlike Rhode Island, Illinois has postponed payments to vendors, failed to make adequate pension contributions or borrowed money to make the contributions, securitized or sold assets, and taken other dubious actions” (the Center on Budget and Policy Priorities).
Cutting pension benefits for public employees, through so-called “pension reform,” will not solve the state’s budget deficits in Illinois. Creating and passing any bill that diminishes “promised” benefits, such as the compounded cost-of-living adjustment that is already in place for retired and current teachers, is a breach of contract and trust. It’s a discriminating and unjust forfeiture and theft of one particular group of people in Illinois, and it’s wrong.
Though the State of Illinois has a serious pension debt and revenue problem that must be rectified, legal and moral sense dictates that the Illinois General Assembly must align with the U.S. and State Constitutions and sanction the vested rights of its middle-class public employees.
A final note: the state’s constitutional provision, Article XIII Section 5, protects current employees and retirees. So-called “pension reform” is an attempt to break a constitutional contract. It is a matter of moral and legal concern for every citizen of Illinois to pay attention to any proposed violations of rights and benefits (that are earned, deferred compensations) of the state’s 693,000 public employees. It should be of vital concern for all citizens that the government of Illinois would want to prove its contracts are worthless, especially when the “most basic purposes of the impairment [of the contract] clause [Article XIII, Section 5] as well as notions of fairness that transcend the clause itself, point to a simple constitutional principle: government must keep its word” (Laurence H. Tribe, American Constitutional Law).