Policy Documents

Budget Solutions 2014: Pension Reform and Responsible Spending for State and Local Governments

Ted Dabrowski, Benjamin VanMetre and Jonathan Ingram –
March 19, 2013

Illinois is in crisis. According to official government numbers, Illinois has an unfunded pension liability of $96 billion – the worst in the nation. This heavy debt burden, combined with the state’s culture of out-of-control, wasteful spending, has driven the state into an economic death spiral.

Illinois cannot be economically prosperous until real pension reform is implemented. And without reform, government workers are at risk of not having a retirement at all. Illinois’ largest and most troubled pension system, the Teachers’ Retirement System, is only 40 percent funded. Even the executive director of the fund has said that TRS will run dry by 2029 if reform is not enacted. Meanwhile, taxpayers – who are tapped out – continue to see money meant for core services used by lawmakers to fund retirements.

Over the years, Illinois has enacted a variety of pension “fixes.” Former Illinois Gov. Jim Edgar’s widely hailed pension ramp, which was meant to fund state pensions by 2045, failed within 10 years of its inception. Former Gov. Rod Blagojevich borrowed $10 billion to pay for pensions. His successor, current Illinois Gov. Pat Quinn, borrowed another $7 billion to pay for pensions. These plans all failed to fix pensions because they ignored the root cause of Illinois’ problem: a defined benefit system. The state must change course. The Illinois Policy Institute’s plan shows lawmakers how.

Reforming pensions is the foundation of pulling Illinois out of its economic death spiral. But pension reform alone isn’t enough. As outlined in this publication, reviving Illinois’ economy will also require implementing a multistep plan that: returns $7 billion to taxpayers by repealing the 2011 income tax hike and implementing spending reforms; pays down the state’s $9.3 billion in unpaid bills by 2016; and improves health care and education to ensure the state’s most needy residents receive the support they deserve.

Paired with the Illinois Policy Institute’s pension reform plan, these measures provide Quinn and the Illinois General Assembly a roadmap to making Illinois first in economic outlook and job creation.