Illinois’ pension nightmare has long been a source of headline fodder, and lawmakers will again tackle the issue in the 2018 legislation session.
Several ideas are up for debate in the General Assembly this year, reported the Peoria JournalStar, but there is also the usual assortment of obstacles: the Illinois Constitution’s pension protection clause, the fact that it’s an election year, and the state Supreme Court’s ruling that Illinois cannot reduce benefits for workers once they have joined a pension system.
One option on the table is a bill from Rep. Robert Martwick that would give employees a cash incentive upfront to accept smaller annual increases once they retire. Currently, employees in Illinois’ Tier 1 pension system are entitled to 3 percent raises in their pension benefits each year, while workers in the Tier 2 system receive annual raises of 3 percent or half the rate of inflation, whichever is lower. Under Martwick’s proposal, the pension systems would calculate a rough estimate for how much the raises under each plan (Tier 1 and Tier 2) would amount to over a retiree’s life span and the employee would be offered part of the difference as an upfront cash payment if they accepted the Tier 2 version of increases going forward.
Another proposal—which has received mixed reviews so far—suggests selling $107 billion in bonds and repaying them over 27 years to save the state $103 billion by 2045 and to get the retirement systems to a 90 percent funding level.
Bottom line: Action is necessary. Currently, according to a December 2017 report from the American Legislative Exchange Council, Illinois’ pension funding ratio is 23.3 percent, the third worst in the nation. That amounts to $388,342,219,353 total in unfunded liability (also the third worst in the nation), or $30,336 per person (fourth worst in the U.S.).