By: Mark Glennon*
Illinois recently released its biggest, regular report on government pensions. Before getting to that, however, it’s fascinating to look back on what was widely agreed about pensions not long ago, and how all that was said is now forgotten.
2012, Gov. Pat Quinn rolled out his Squeezy the Pension Python character to call attention to a pension crisis he said was strangling the state. “I didn’t create the problem,” Quinn said, “but I’m here to solve it. I know that I was put on earth to get this done.”
In 2013, the U.S Securities & Exchange Commission found Illinois guilty of state-sponsored fraud. The state didn’t disclose the severity of its pension problems to bond purchasers, the SEC charged, and the state agreed to the order. One of the state’s own pension consultants had written in 2009 that the pension problem likely could never be fixed. Failing to disclose that was part of the state fraud, the SEC said.
So, as 2013 closed, Illinois passed what it called a “historic” bill to cut pension benefits known as SB1. It was expressly premised on the assumption that pension benefit reductions, not tax increases, were essential for ending the crisis.
Notably, that bill was passed with Democratic supermajorities in the legislature and was signed by Quinn, also a Democrat. “The General Assembly has determined that the fiscal problems facing the state and its retirement systems cannot be solved without making some changes to the structure of the retirement systems,” [Emphasis added] the bill itself said. Our current Attorney General, Democrat Kwame Raoul, was a co-sponsor.
However, pensioners sued, claiming the bill violated the state’s constitutional pension protection clause.
That forced Democratic Attorney General Lisa Madigan, daughter of the House speaker, to go to to court to make the General Assembly’s case. The pension problem and the fiscal crisis it caused were so severe, Madigan argued, that the very rarely used “police power” doctrine justified cutting pensions, overriding the state’s constitutional pension protection clause. Her court pleadings were based on extensive analyses completed by three economists she offered as expert witnesses.
But the court ruled in 2015 that the pension protection clause is ironclad, voiding the entire bill as unconstitutional.
What has the state done since then about the crisis it said was so severe that nothing would work besides benefit cuts?
Nothing.
Deny, delay, extend and pretend.
Gov. JB Pritzker says that even amending the state’s pension protection clause wouldn’t work because of federal constitutional obstacles. That’s false. Other states have done it and court challenges have failed or not even been tried.
That brings us to the new report on Illinois state and local pensions – all 676 of them. Our detailed report on it is here. It’s prepared every two years by the Illinois Department of Insurance and is current through 2022.
All totaled, Illinois taxpayers face an unfunded pension liability of $207 billion. By far the biggest portion of that is $142 billion for the state’s own five pensions. The remainder is for local pensions.
How does that compare to those years back when our leaders said the pension crisis was unsolvable without meaningful reform?
It’s worse now. Even adjusting for inflation, the problem has grown, particularly for the state’s own pensions. In 2013, the total unfunded liability was just $158 billion, of which $98 billion was for the state’s five own pensions.
In short, our elected officials now ignore what they said, less than ten years ago, was a crisis demanding extraoardinary emergency action.
Most of us don’t remember Quinn fondly and his Squeezy character got plenty of laughs. But give him credit for at least calling attention to a problem that indeed strangles the state budget, rendering the state uncompetitive in its tax burden and quality of services.
Time heals everything, it’s often said.
Not pensions.
*Mark Glennon is founder of Wirepoints.
This column was updated to add that Kwame Raoul was an SB1 co-sponsor.
Audio and summary 
If this bill passes, say goodbye to local control over all Illinois parks and expect to see open drug and alcohol use, needles, no sanitation and fire hazards, but no ordinary park users.
In Illinois…a Supreme Court Judge can retire with his working salary for life…Google it…Big conflict of interest! This is why challenges to the pension will never move forward.
More fuel…a retired mayor just retired with 3 pensions…totaling almost 500,000 dollars plus 3% cola for life…illegal?
Top pensioner in Illinois gets about $650,000/yr and if he lives to be 85 will collect over $20,000,000. Initial contributions whether by him or the university where he was a professor (I believe oral surgery) was around $750K. Not bad return on investment.
Knowledge is powerful…continue to learn.
Here’s an article on Florida pensions.
https://www.yahoo.com/news/public-pensions-threaten-bankrupt-state-110005328.html
The combined normal cost – that is, the pension cost for the current year, excluding debt – for TRS in 2022 was 10.5%. What’s crazy is that normal cost was 14.5% for Tier 1. Tier 2 was negative.
In 2011, the year before Tier 2 was enacted, that normal cost was around 8.5%. So Tier 2 normal costs hare now consuming an extra 6% of total payroll cost for Tier 1 employees. Again, that excludes debt.
The rising cost of Tier 1 benefits today show how detrimental Tier 2 enhancements would be to state finances.
We need an updated version of Squeezy, with JB’s fat head on top of the body of the python. Perfect symbolism for what he is doing to Illinois!
PPF this is what will happen in Illinois thanks to the greed of the public sector unions. Rahul Sen Sharma, co-CEO and president of financial firm Indxx, shared why his company picked Miami over New York City. He said lower taxes, better weather, and more space all make Miami attractive compared to Manhattan. The exec is moving to Miami from NYC in early 2024, and said “probably nothing” could keep him from leaving. Same thing is happening in Illinois, PPF see if poor people can pay the increased taxes needed to fund the greed. The CME will be gone soon.… Read more »
Per capita income has increased not decreased. Income tax revenue has increased not decreased. We were around 38 billion 5 years ago to over 50 today. Plenty of money even though people claim everyone is leaving.
Simply due to most every tax and fees were raised including state income tax/license plate fees/gaming taxes/local sales tax/alcohol/cigarettes/cannabis (very high tax on pot)/property tax/cell phones/gasoline taxes doubled with built in increases every year/corporate/etc. Here is a list. Of course revenue is more but can you give me a list of reforms like property taxes? What is the property tax task force doing? Twiddling their thumbs most likely.
https://tax.illinois.gov/research/publications/listofalltaxes.html
Plus minimum wage increases means more taxes withheld but they will get most of that back when they file but it does mean more revenue for a while.
Always laugh at others trying to make you (PPF) the face of the pension problem. They don’t like the truth…that their taxes are simply going to go up and up to cover the debt. This can still go on for many years if only 1% leave annually.
Me too! I find it quite comical as well. I simply outline the truth as to what has happened as well as what will happen. People truly don’t want to hear the truth.
PPF – can you adjust tax revenue for inflation to make it more meaningful? And plenty of money given that pension debt according to some is actually twice what the state’s figures reflect. Even if the state’s figures are accurate, with that kind of debt it is difficult to assert there is plenty of money. Since the debt to GDP ratio is one of the worst in the nation, it is difficult to maintain there is plenty of money. I think what you mean that since pensions are a fixed and in changeable obligation, units of government will find a… Read more »
Anyone else feel that Squeezy should be blue in color?
When there’s no money, the Illinois courts can do nothing. They have no jurisdiction to say how the pensions should be funded. Pension checks will start to bounce soon, and there’s nothing the courts can do about that. They can’t command the Executive branch to do anything to fund the pensions.
Only then will people take the situation seriously.
Wrong. The courts have already commented on this issue. While pensioners have no right to a set level of funding the courts also made clear that pensioners were free to sue to demand payment if the funds were on the verge of bankruptcy. That’s the “enforceable” part of the constitutional clause.
If you don’t think the courts can demand payment then you must have been asleep during the Rauner budget standoff.
You should mention the Harvey case. The The court ordered an intercept from state funds to go to pensions.
Good point that municipalities can have their funds intercepted and sent to the pension funds. I was thinking of state pension funding when mentioning a lawsuit to demand payment. The state has nothing to intercept so pensioners would be eligible to demand payment if they can prove the funds are getting close to being insolvent.
The State of IL is sovereign and can just pay what it wants or even noting at all, courts be dammed. The Federal Government can not force IL to do anything. At the end of the day the parasitical class is beholden to the whims of the State which is why the marxists, commies and union slobs fight so hard to keep power in Springfield. Buckle up butter cups your going to get a haircut, deservedly so. All the useless public sector parasites are going to get it and I’ll be laughing down in FL not paying anything to you… Read more »
Sure they can Marko. You keep telling yourself that and pensioners will keep caching them checks. They already tried that sovereign argument during the last attempted theft and the courts smacked it down. The contracts clause history in the US constitution begs to differ. The states don’t get do whatever they want and violate the US Constitution. Under your theory of sovereignty, the states could continue along with slavery. Good luck with that strategy. “The State protests that this conclusion is tantamount to holding that the State has surrendered its sovereign authority, something it may not do. The State is… Read more »
The people who can will continue to leave this
Sorry state. The result will be insufferable for those who stay and TRY to pay. As the taxes
Crush the people the cycle will renew itself.
A python crushes it victim until it is dead,
The victim, taxpayers, are very close to not breathing. A python does not relax its grip.
The result is a forgone conclusion.
As you exit Illinois be sure to give the one finger salute.
People who are retired cannot pay crushing property tax, let alone all the other high taxes like Pritzker’s fuel tax and now energy tax. People have to leave IL – its a matter of their survival.
Also insurance rates for property have increased a lot. Check your policy when it renews. Farmers bought out MetLife and now the rates have doubled for me. I hear State Farm is increasing rates also. I don’t know if it because of the hail storms we had here in Boone and Winnebago county in spring or nationwide.
It’s partially due to the rampant carjacking, car theft and catalytic converter theft.
Look at the debt…the interest we are paying on this debt…the penalties we pay on late payments…the debt on medical care…now ask yourself why the value of your REALESTATE has almost doubled…taxes…more taxes…your not going to afford to live in this state…LEAVE !
The only way the Dems continue to get away with this charade is that Illinois voters- and especially the Illinois press– are too lazy and uninformed to comprehend the seriousness of the situation. If there ever was any hope by insiders that the feds would step in to solve the problem, that is no longer possible given the sheer magnitude of the debt. That is especially true since the problem has gone on not just for years, but now for decades.
Re-Read the post that 70,000 more people in IL voted for Republican House candidates, but Democrats won the majority due to obscene gerrymandering. It’s rigged, and elections do not matter in IL.
Interesting that Pritzker won then
To show another wasteful government branch, ILDNR,
I’ve been an avid deer hunter in this state, Ogle county to be exact, our government hires sharpshooters, in excess of $17,000 per outing, to eradicate the deer herd, not just existing deer, but the next generation also, as does, the mamas, are carrying mostly twins.
While hunters, like myself, paid the state for the same thing, except the way we did it, vs dnr methods, were not as efficient, they hunt over bait, at night, using rifles, that we cant possess afield
As long as Cook County votes overwhelmingly democratic no D candidate will ever lose a statewide election. Pritzger won less than 10% of the state counties yet crushed the republican running against him.
He just happened to win the counties where 70% of the people live. If only dirt could vote. Then we would finally win.
This recent history lesson shows how far out of wack IL is when Governors like Quinn are viewed in a responsible light. Oh but for the ‘old time’ Democrats. I remember ‘Squeezy’ and he was a very effective graphic anyone could understand. Now we just have ‘Pork Pie’ to figuratively represent the public union bosses and Pritzker.
Just for the sake of argument, how well funded are pensions for IL elected officials?
If I recall properly, their pensions are FULLY funded – or darned close.
How did that happen? Hmmm … good for me, but not for thee?
What Problem? The State and Cities and giving pay raises to most everyone and with that increased pension benefits. They must not think there is any problem, so why should anyone else. The numbers are so high and growing so fast it is clear that it will never be paid off. High income earners are fleeing in record numbers. Their replacements are poor immigrants that are not wanted by the Chitty. The numbers just do not add up, unless you were educated in the CPS. The Federal Government does not have the money to bail out Illinois, the Federal Courts… Read more »
Cant get blood out of a turnip. Paper promises are just that.
Perhaps the hundreds of millions being spent on our migrant guests could be used to help the pension mess. However using such money would deprive future democrat voters from enjoying the free ride they are getting now.
We need thousands of millions to fix this, not hundreds. Two thousand million to be precise
Every piece of real estate in Illinois secures those pensions meaning those homes you are sitting in have a pension mortgage on them. The populace chooses to ignore this focusing on things like sporting team statistics, assorted gossip and my favorite building local must have pickleball courts. Laugh away because tomorrow we will die is the Illinois motto but, as in musical chairs, eventually the music stops as it slowly does in Illinois. What a State as in “Only in Illinois.”
So if the state confiscates the property then what?
Who knows? Rents it out to section 8 renters maybe; there seems to be plenty of them in Illinois.
Then you are out of house and home!
History (Detroit) shows that if the city rents the property the tenants will default on rent. Then, if the tenants are evicted. property will become vacant and squatters will move in or vandals will steal everything that can be resold. The whole neighborhood will decline [this may take a while] and the city will then have to pay union scale to demolish the property. Then the property will stand vacant and the “unhoused” will move in or culturally deprived juveniles will appear and do unspeakable things to themselves and others. Various attempts at rehab will be proposed and the proposers… Read more »
Welcome to your future
The populace for the most part is not aware. Mass media (newspapers/TV) rarely speaks about a pension problem so other than this site and a few others there are not many places to get the info. No one in the inner city really cares and anyone receiving some sort of state aid does not think if they are aware that it affects them. Rising rents is thought of as just greedy landlords trying to make more money.
“But the court ruled in 2015 that the pension protection clause is ironclad, voiding the entire bill as unconstitutional.” “What has the state done since then about the crisis it said was so severe that nothing would work besides benefit cuts? Nothing.” Nothing has been done because as you’ve noted the IL Supreme Court ruled that benefits are iron clad. So yes, JB recognizes that you are not going to be able to cut pensions and you must fund them. “The General Assembly may find itself in crisis, but it is a crisis which other public pension systems managed to… Read more »
The ILSC will overrule itself ‘for equity’ within the next decade. You heard it here first. It’s inequitable for Black and Brown folx to pay the majority of their property taxes to fund White retirees’ lavish pensions in Florida. Heck, in the past 10 days, the ILSC twice just overruled itself and 50 years of precedent last week finding that insurance polices should cover negligence on construction projects; and with that other ruling about pedestrians being covered under uninsured motorist policies. Our court is going crazy right now with the progressive rulings overruling everything that was ‘ironclad’. And up north… Read more »
Agree, reality will sink in and taxpaying Illinoisans chumps will demand change when they realize the fed QE from 2008 thru 2021 has ended, Fed COVID/free stuff $trillion have dried up, inflation remains sticky around 3-4%, mortgages remain around 7-8%, home values decline, your 401K is not making 12% but maybe 5% if your lucky, your not getting 5% annual pay raises (like CTU/Brandon just gave to FOP)….All the fed stimulus starting in 2008 financial crises thru COVID has provided cover for Illinois pols to sell the public that there’s some narrative to equitably tax are way out of supposed… Read more »
Once State Media is told to frame this as an equity issue, they’ll do it enthusiastically. Then the game will be over.
Exactly. Dozens of sob stories about single mothers in Harvey, Calumet City, East St. Louis, etc, losing their homes because of taxes to pay the pensions, and intrepid reporters flying to P.G., Florida to find retired municipal employees living in $500,000 waterfront homes with boats in the backyard. That white, 75 healthy year old “Hank” or “George”, retired for 20 years former city manager, receiving his six figure pension, with 3% COLAs, is basically stealing food from the mouths of poor black and brown children in many suburbs. Dilapidated playgrounds and pot holes in the streets, and food banks with… Read more »
As much as I hate to say it, I think PPF is largely correct. Eventually math will win. However, before that 1) retry constitutional change for progressive tax rates now that Ken Griffin moved to Florida and my total guess is that he helped fund the ads to get that defeated last time 2) tax on services 3) some kind of tax on retirement income. And I think they will push those increases until they actually see it not working….which it will be hard to see the causation due to lag effects. Only after they’ve tried everything they can possibly… Read more »
The LAST THING NEEDED IS MORE TAXES!
Regarding item no. 3, for all types of retirement plans: SSA, 401’s, 403’s, 457’s, state taxes are paid as the money is earned. Any additional tax after retirement would amount to double taxation on the funds. This has been done with SSA federally but it is means tested to protect low wage earners. Considering that many state representatives and state senators collect checks from 1 or 2 other public jobs, think: township trustee, county Highway department, forestry department, mosquito abatement, library board. These double dipping scoundrels would be reluctant to alter the status quo. Many small pension checks equal a… Read more »
True with SSA. I don’t know about 403s or 457s. But for 401k’s, unless it is Roth, federal and state income taxes have not yet been paid….hence right now in Illinois, you need to pay federal income taxes on it to convert to Roth.
And I agree. I also predict they will have a generous exclusion to protect low income earners. However we will have to wait and see. Income generated in a Roth is not subject to income taxes.
I believe you are wrong about 401k’s the money is deducted from the pay after state tax has been assessed to the gross. They are protected from federal tax until the money is rec’d as ordinary income in retirement. But I’ll double check.
That would be cool if true. I never noticed that on my W2’s. It is why I decided to contribute to regular 401k and convert to Roth in retirement…to avoid the state tax.
401k contributions are deducted from you federal adjusted gross income and is carried over to your state taxes. People are not paying state income tax on their contributions to their 401k.
Apologies, you are correct regarding 401k $$. They seem to avoid state taxation in Illinois At contribution and at distribution.
The Supreme Court said NOTHING to stop the pension members from paying more for their pension club.
The IL Supreme Court as well as other Illinois courts have been clear that pensioners have a contract. That contract can be no less generous than the members first date of employment. You can’t change their contribution rate the same way a bank can’t change people’s low fixed rate mortgage to a higher rate. Making pensioners pay more in contributions for the same benefit would be a diminishment of their contract. This is not even up for debate. During the 1970 con con this very concept was discussed and shot down. The courts have used the notes from that con… Read more »
PPF, the answer, as you well know, is a constitutional amendment to change the pension protection clause. That’s an option that you, like Pritzker, falsely and repeatedly claim cannot be done for federal constitutional reasons.
I know that you falsely believe that Mark. The Illinois Supreme Court has defended pensions on both the actual clause as well as the contracts clause. You somehow magically believe that IL SC will sit it out. You are wrong.
You know full well that IL Supreme Court decisions are appealable to SCOTUS, and that they would be applying federal law if the amendment is properly worded.
You know full well that SCOTUS doesn’t have to take the case. You’re hoping but they are not obligated in any way. Hope is not a plan Mark. Also, the IL Supreme Court applied federal contract law when they heard the case. According to their interpretation of federal law it also isn’t allowed. Now SCOTUS may interpret that differently but you have nothing that supports that belief and instead point to states like Rhode Island and Arizona. “In addition, because the state’s self-interest is at stake whenever it seeks to modify its own financial obligations, the United States Supreme Court… Read more »
The flaw is in the IL court’s mis- interpretation of the contract clause. Presumably the US Sup CT would defer to that interpretation but a future IL court could overrule it as was done with Roe v Wade. Or a bankruptcy court could impose pension haircuts.
Your characterization as a fantasy expresses your hope that public unions will continue to control Illinois as the Woke control Biden, but those hopes are increasingly forlorn as voters begin to understand economic reality.
Your scenarios sound more realistic Jerry. Bankruptcy or a different ruling at the ILSC level sounds more realistic than hoping SCOTUS somehow magically steps in to determine how state government spends its own money. Still a massive long shot but at least seems more realistic.
Are those the same voters that put the constitutional right to join a union and collectively bargain for more than just wages? Did those voters not realize that would increase the costs of government services?
Illinois judges are bias because they get a Illinois pension.
So, the Federal courts will rule and rule fairly.
Those voters who were public employees likely realized it. Most other voters were likely clueless and those who weren’t had little impact due to gerrymandering. The clueless are beginning to wake up to the Woke, however. Dread the dawn. The clueless will continue to vote and are beginning to understand open borders and inflation and public employee unions and covid lockdowns. Pension jargon and actuary-speak cover-up a lot of economic reality but vanishing urban populations and confiscatory taxes are hard to hide. Sunshine is the best disinfectant. Even on the Gulf Coast.
If you are so confident that a constitutional amendment would never work, why do you spend so much time trying to claim that? I think it’s because you know it can work and you don’t want it tried.
You’re wrong on your assumption Mark. I find it comical that you just posted an article about the last “pension fix” and how it was unconstitutional and now the state is even further in the hole. Yet here you are offering up another unconstitutional fix for the mere hope of maybe slightly reducing pensions. It seems like another colossal waste of time that only offers false hope and larger debt down the road. Of course this doesn’t even touch on the moral decision to not want to steal from retirees. This debt is owed by all taxpayers and yet you… Read more »
If it was just North Shore folks who had the unholy alliance with government like public pensioners have, I’d be all for it. PPF, you are committed to a view of pensions that permanently chains a huge rock to the state’s neck, ensuring the state will fall further behind each year with ever higher taxes and poorer quality of services, in a self-reinforcing cycle of doom.
Pensioners didn’t do that; the IL politicians did. If you want to claim that it’s due to the influence of cash given to such elections I might well agree. But, it’s not illegal to do so, and it’s done all over this country to include federal elections as well. Some people prefer Pepsi, but it’s the Kochs that get the sway politically and not because of altruism. If elections were financed by taxes rather than voluntary contributions from the “haves” it likely would greatly alter such political influence.
The left has been trouncing the right on fundraising in recent years. I don’t have citations handy but they are easy to find. And, respecting public unions, yes, it’s mostly legal and, yes they should have a right to participate, but their power and influence in IL is extreme — far beyond what should be permissible.
There isn’t an unholy alliance. Before that teacher took that job they weren’t even in a union. They were required to join the pension system well before they were ever able to vote in a union election. So your pretzel logic thinks it’s ok to steal from them because of your hatred for unions. It’s pathetic. Mark, you are committed to the view that taxpayers and politicians should be let off the hook for a legal contract that they agreed to simply because you don’t want taxes to go up. The pensioners didn’t put the state in a bind and… Read more »
Here is my glass-half-empty perspective: Many (perhaps including PPF and union executives) understand that legislation and plebiscites and court appeals take time while realizing that pension trust funds will have assets for “long enough” to enable them to get theirs. (I assume that PPF no longer has to work given the time he must spend on Wirepoints.) So, at the current ages of the shot-callers and their advocates, another decade of kicking the can will work for them. If I speculate correctly, there is every reason (in economics and basic fairness) for municipalities to file for bankruptcy. The state legislature… Read more »
Excellent commentary Mark. I don’t remember this bill by Quinn, but thanks for posting this. It is much appreciated.
SB1 came out of the legislature with bipartisan support. Quinn stood aside as it was drafted and should get no specific credit for it, other than calling general attention to the pension problem.
Our current AG was a co-sponsor.
https://www.ilga.gov/legislation/BillStatus.asp?GAID=12&GA=98&DocNum=001&DocTypeID=SB&SessionID=87&LegID=68366&SpecSess=1&Session=0
Ooh, good one I overlooked. I will add it.