Heartland Institute Experts Comment on Illinois Pension Reform Bill Vote

Published December 3, 2013

The Illinois Legislature today will vote on a bill to reform the state’s public pension system, which is $100 billion in debt and has contributed to Illinois having the worst credit rating of all 50 states. Supporters of the bill say it would save $155 billion over 30 years by reducing benefits for younger workers and gradually increasing the retirement age, among other measures.

The following statements from budget and pension experts at The Heartland Institute – a free-market think tank based in Chicago – may be used for attribution. For more comments, refer to the contact information below. To book a Heartland guest on your program, please contact Director of Communications Jim Lakely at [email protected] and 312/377-4000 or (cell) 312/731-9364.

“Illinois’ faux pension reform bill is being heralded by many as real ‘fundamental reform’ but the minor changes being proposed are not significant or ‘extreme.’ The fundamental problem with the current pension system in Illinois is the unsustainable ‘defined-benefit’ pension plan system, which goes practically untouched by the proposal except for a few minor tweaks to retirement age and COLAs (cost of living adjustments).

“This could be the one opportunity for Illinois to get pension reform right, and this proposal gets it wrong. More than likely, this proposal will set back the true fundamental pension reform that is required to protect taxpayers from further tax hikes, give public employees more job flexibility, and put Illinois on a sustainable fiscal path.”

John Nothdurft
Director of Government Relations
The Heartland Institute
[email protected]

“Michael Madigan has spent 30 years as Illinois House Speaker. He is more responsible than anyone for the state’s pension crisis. Madigan was part of a supposed pension fix in the 1990s that amounted to nothing. Now we’re supposed to believe he has helped orchestrate a solution to the massive problem he has caused?

“There appear to be many bad aspects to the plan, probably the worst being a pension-funding guarantee that puts all other state spending behind pensions in priority. Madigan and the other legislative leaders apparently think it’s more important to fund their impossible pension promises than anything else including roads, education, and other vital services.

“Further, Madigan’s supposed fix apparently allows workers now in their 40s to continue to retire in their 50s, many years earlier than most taxpayers who fund these pensions will be able to retire. And it keeps giving annual increases in pension payments to retirees, up to a certain amount. While this would reduce lifetime pension benefits for people who enjoyed the state’s higher-paying jobs, those people already retire with high pension benefits. Few people outside government can even dream of such lavish retirement benefits.

“This fix probably wouldn’t do much more than the failed 1990s fix that Madigan helped arrange.”

Steve Stanek
Research Fellow, Budget and Tax Policy
The Heartland Institute
Managing Editor
Budget & Tax News
[email protected]

“The pension reform package now being touted in Springfield is an illusion, a patch job that is unlikely to stem the growth of the unfunded leviathan that stands to drown our state. Illinois has been here before and enacted plans designed to fully fund the state’s pension plan over an absurdly long time period. These reforms failed because Illinois legislators have never followed through on their side of the bargain and paid for the pension plans as promised; it was too easy to push the obligation aside. How is this likely to change?

“Small-scale pension fixes do little to solve the systemic issues created by Illinois’ flawed pension system. Instead of relying on the state to fund their retirement, a situation that has proven to be flawed, the state workers should support a defined-contribution plan that places their retirement income under their own control. These plans, which are used extensively in the private sector, would allow the state to lower its pension costs while giving employees control over their retirement plans.”

Matthew Glans
Senior Policy Analyst
The Heartland Institute
[email protected]

The Heartland Institute is a 29-year-old national nonprofit organization headquartered in Chicago, Illinois. Its mission is to discover, develop, and promote free-market solutions to social and economic problems. For more information, visit our Web site or call 312/377-4000.