Ill. Leaders Take Pension Reform Show on the Road

Published April 1, 2006

Republican lawmakers in Illinois are making group appearances around the state to discuss what they say may be the worst state government pension system in the country.

With an unfunded liability of $38 billion–despite having borrowed more than $10 billion in 2003 to boost funding–Illinois has the largest unfunded pension liability in the nation. And continued deferrals of scheduled pension payments to use the funds in other areas of the budget are making the situation worse, according to Republican lawmakers in the state.

“Not one–not one Republican Senator–voted for Senate Bill 27,” said state Sen. Wendell Jones (R-Palatine) to loud applause during a presentation February 9 before about 200 persons, most of them retired teachers, in Arlington Heights, a suburb of Chicago. Senate Bill 27, passed by lawmakers last year at the urging of Gov. Rod Blagojevich (D), defers about $4.8 billion in scheduled pension payments over 10 years, including a combined $2.3 billion deferral in 2005 and 2006, to divert the money to other programs.

Jones said pension funding is likely to be a key issue in budget negotiations this year, with Republicans fighting the diversions.

Other area Republican lawmakers who addressed the crowd with Jones included Rep. Sidney Mathias (R-Arlington Heights) and senators Pamela Althoff (R-McHenry), Sheryl Axley (R-Park Ridge), John Millner (R-Naperville), Bill Peterson (R-Long Grove), and Steve Rauschenberger (R-Elgin).

Spokespersons for the governor did not return calls for comment.

Unfunded Liabilities Climbing

Republican Senate staffer Mark Gordon said the diversions will push the funding ratio below 60 percent for the Teachers Retirement System, which makes up more than half of the state’s pension obligations and assets. Unfunded liabilities are expected to exceed $45 billion next fiscal year, according to Gordon.

Next year’s scheduled payment to the pension system is supposed to increase by $840 million, according to Gordon. That in itself would consume most of the new revenue the state expects to receive, and there are further pressures on state revenues. In February Blagojevich presented a budget that includes more than $3 billion in new capital spending, much of it with borrowed money, and a program to provide free preschool to all 3- and 4-year-olds in the state, regardless of family income.

This comes on top of the state’s All Kids program, which lawmakers approved at the governor’s insistence during last fall’s six-day veto session. All Kids provides state-subsidized health insurance through Medicaid for all children in the state, regardless of family income.

Diversions Grow Government

Rauschenberger, a candidate for the Republican nomination for lieutenant governor, expressed disappointment with the state’s teacher unions for sitting on their hands while teacher pensions are raided to support such spending.

“This administration has hypnotized some of the leadership in the active teachers unions by saying somehow we’ll recover later,” Rauschenberger said. “But the way this administration spends, we’re not recovering anything at all.”

Millner was more blunt: “We’re growing government with your money. We’re not even paying bills. We’re growing government. What happens in 15 years when it costs about $3,500 for every man, woman, and child in this state [to cover the pension obligations]? It’s got to stop today.”

Chicago Gets Extra Cash

Petersen noted Chicago public schoolteachers, who have their own pension system funded by their contributions and payments from the city, have been receiving state money anyway.

“We don’t have anything to do with the Chicago teachers pension, yet you see money being diverted from the state coffers to Chicago,” Petersen said. “The city of Chicago runs the state of Illinois now. The Speaker of the House, the President of the Senate, the Attorney General, the Controller are all from Chicago–and the governor.

“So you can imagine, everybody around here got road funding cuts. Not in Chicago. All of the community colleges [outside Chicago] got cuts. Not only did they not get cuts in Chicago, they got $15 million more than they should have. The only state university that got more money was Chicago State University,” Petersen said.

Off-Budget Move Proposed

Rauschenberger suggested the state move pension payments “off budget,” as is done with debt repayments.

“When we meet each year in the General Assembly, we do not have discussions about whether we are going to make our payment on the bonds Illinois owes,” Rauschenberger said. “Those are eliminated from the calculation of the budget. A lot of us have talked about treating pension payments the same way we treat bond payments. But to be honest, we don’t have the votes in either chamber to pass it. The long-term solution would be to carve it out, the same way you carve out the bond payments.

“Every single year since Rod Blagojevich was sworn into office [2003], he has expanded the Medicaid program and has expanded the welfare rolls,” Rauschenberger said. “That’s where your money went.”

Steve Stanek ([email protected]) is managing editor of Budget & Tax News.