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Business group: State's pension problems now are 'unfixable'

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SPRINGFIELD-Illinois' $86 billion unfunded pension burden is so paralyzing, it has reached a point now where the problem can't be fully repaired by state lawmakers and Gov. Pat Quinn, a leading business group said Wednesday.

Quinn and House Minority Leader Tom Cross (R-Oswego), meanwhile, struck a conciliatory tone on pensions Wednesday, expressing support for reeling in annual retiree cost-of-living increases.

But the two still showed no signs of coming together on a plan to pass off state pension costs for teachers to downstate and suburban school systems, a Democratic push that Republicans have compared to a $20 billion property tax hike.

In a memo to its members, the Civic Committee of the Commercial Club of Chicago said last week's elections didn't bring in an influx of lawmakers willing to deal with the pension crisis but instead leaves taxpayers with "more legislators who aren't prepared, or willing, to make the tough decisions necessary to save our state."

"We are writing today to let you know that the pension crisis has grown so severe that it is now, unfixable," said the letter co-signed by Miles White, chairman of the Commercial Club; Jim Farrell, chairman of the Civic Committee; and Ty Fahner, president of the Civic Committee and Commercial Club.

White is an investor in Wrapports Inc., owner of the Chicago Sun-Times.

The Civic Committee warned that the state no longer has the capacity to "preserve all state pension benefits as currently structured." But it identified four steps that it said must occur when state lawmakers return to Springfield in November, December and January for their lame-duck session "to minimize the long-term damage" to state employees, retirees and taxpayers.

The group said: All cost-of-living increases need to be eliminated for retirees, who now get annual 3 percent pension boosts; a cap on salaries must be imposed upon which pensions can be based; the retirement age for full pension benefits needs to be raised to 67; and downstate and suburban school systems must be forced to take on pension payments from the state for educators over a 12-year phase-in.

"Unless each is addressed," the group wrote, "nothing else legislators say or do will matter."

The union representing the largest bloc of state government employees, AFSCME Council 31, condemned the new push by the business leaders.

"Millionaire CEOs want to slash the modest retirement savings earned by middle-class public servants like teachers, police, nurses and caregivers. Regrettably, that's not news," said AFSCME spokesman Anders Lindall in a prepared statement.

Lindall called The Civic Committee's position "disappinting" and "alarmingly fact-free." There was "no mention that the pension debt was mostly caused by politicians who skipped required payments even as public employees always paid their share. No mention that retirees rely on an average pension of just $32,000 a year, with nearly 80% not eligible for Social Security," he said.

In Chicago jointly to promote Diabetes Awareness Day, Quinn and Cross voiced optimism a pension deal can be struck before the current Legislature concludes its business in early January.

"I feel if we put our best efforts together in a bipartisan way between now and the 9th of January, which is the end of the legislative session, we can accomplish this important mission," the governor said.

Cross said he and the governor are in general agreement about ending the automatic 3-percent cost-of-living increases all state retirees get.

"I think we would agree the COLA is an area where we can save some significant amounts of money. That's probably one of the big, big areas where you can do that," Cross said. "You can impact when people retire, you can impact it through the amount of COLA, you can impact when people get it. So I think that's one of the areas to begin with.

"Actually for all the politics, just going through an election, I do think the governor and I have a lot of common interest on this and some areas where we agree. I think he and I probably could get it done if it was just the two of us, but it's not," Cross said.

As for what is commonly called the cost-shift, Quinn gave no sign that any agreement with Republicans was near.

"I don't think you should emphasize just one part of it," the governor told reporters when asked about the prospects of shifting education-related pension costs from the state to suburban and downstate school systems.

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2 Comments

Interesting, the Civic Club does not mention the only reasonable solution that does not involve expensive court battles. Illinois plainly can NOT afford a pension system. It needs to get out of the pension business, period. The only way to do that (without ridiculous court challenges) is to:
1) Starting June 30, 2013, eliminate the pension system for all future employees.
2) Honor all current obligations (meaning whatever employees accumulate by that date)
3) Initiate a 401 K pension.

Univ of Illinois professors have spelled out a way to do this over the course of a 20-year period. Since this represents a rational, well-reasoned approach to the problem, it does not get traction from those wielding the power.

Creditors are looking for a reasonable, long-term fix. Trying to fix the whole system with one piece of legislation is fool-hardy.

I wish the legislature and the the Civic Club titans would embrace a responsible way for Illinois to get out of the pension business that does not involve employees being forced to contribute to a system that has no guarantee of existing in the future. (The power brokers with the money to influence government will ultimately find a way to either repeal or side-step any Consitituional provisions protecting pensions.)

Your analysis sounds logical but the problem is the state is using the working employees retirement payments of today to pay for retires of yesterday. There are more full-time and part-time state employees paying into the system than retires collecting. The real problem was the gross mismanagement of this money over the past 25 years. Also, if you investigated the number of retires still working for the state and collecting two paychecks, you would be shocked. Retired should be retired, period.

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