The Illinois General Assembly rejected a pension-reform bill proposed as part of a 12-bill “grand bargain” compromise budget package, Senate Bill 11, which includes income tax increases and a full state government budget plan.
Legislative leaders and Gov. Bruce Rauner (R) have been unable to reach an agreement on state government spending and taxation for more than 18 months. In January, Rauner and Senate leaders agreed to a “grand bargain” containing 12 bills, including a state government budget.
Senate Bill 11 would have allowed government employees to choose whether to trade annual increases in pension payments for higher starting levels for employees’ pensions upon retirement.
Despite the “bargain” struck by legislative leaders, a majority of lawmakers in the Senate rejected the bill by an 18–29 vote, with 10 senators abstaining.
Bill Bergman, director of research at Truth in Accounting, a nonprofit organization dedicated to promoting transparent government financial reporting, says Illinois lawmakers have been cheating current and future taxpayers by playing number games with government pension liabilities.
“Today’s and tomorrow’s taxpayers are bearing the burdens of longstanding failure to responsibly manage the state’s finances, with untruthful accounting being a big part of that,” Bergman said.
“Illinois isn’t alone, but it’s among the biggest miscreants,” Bergman said. “We’ve been told that we have met the balanced budget requirement in the state constitution, and yet the state and the City of Chicago are still able to spend much more than they take in. Budget accounting is a big part of that, with the failure to recognize pension costs as they rose to allow for the accumulation of debt off the balance sheet.”
Taxpayers Fleeing Illinois
Bergman says the state’s pension problems are causing taxpayers to leave the state.
“If you look at migration trends, Illinois is among the leaders in the 50 states in outmigration,” Bergman said. “That reflects the fact that a growing number of people are concerned about what fixing this mess will cost. The states that are in bad shape are seeing higher rates of outmigration. The Gallup organization has a poll across the 50 states that shows that states with higher financial stress, as we measure it, also tend to have lower trust in the state government. You can see an impact in states with bad financial stats on the delivery of social services for those in low or middle classes.”
Putting Politicians First
Kayla Weems, a media relations manager with the Illinois Policy Institute, says lawmakers’ refusal to reduce government spending is the main problem with Illinois’ budgets.
“For too many years, politicians have put themselves first, along with the unions and special interests,” Weems said. “We see this in how the state continually spends money that it doesn’t have on government waste, bloated administration salaries, and inefficiencies in the system.”
Weems says enrolling new government employees in a defined-contribution pension plan—similar to pension plans enjoyed by many private sector employees—instead of the current defined-benefit system, is one way to help solve the state’s pension problems.
“Illinois can begin to end its $130 billion pension crisis by passing a holistic 401(k)-style retirement reform plan,” Weems said. “This plan enrolls all new workers in a new, hybrid self-managed retirement plan based on the State Universities Retirement System’s existing [self-managed retirement plan], giving all current workers the option to enroll.
“This SMP is the only one that protects worker benefits under the Illinois Constitution, protects funding for social services, avoids harming Illinoisans with another tax hike, begins an end to the broken pension system, … and provides real retirement security to state workers,” Weems said.