By: Mark Glennon*
When asked last month to document his claim that Illinois’ pension buyout program would save the state as much as $25 billion Gov. J.B. Pritzker said, “the numbers on savings, and there are several different estimates, but the numbers on savings were actually given by an outside consulting firm that was brought in to one of our agencies….”
We immediately filed a Freedom of Information Act request for any data or report produced by that outside consulting firm.
Nothing. As usual on this matter, we are getting jacked around. So far Pritzker’s office has sent us four extensions for answering our FOIA request.
Get off it. You either have something or you don’t.
Pritzker is hardly alone. For two years now, Democrats and Republicans alike have been claiming grandiose savings from the buyout program while refusing to produce evidence, despite extreme skepticism from pension experts.
Offenders include former Gov. Bruce Rauner and most of the General Assembly. They even banked over $400 million in savings from the buyout for the 2019 budget. That budget sailed through the legislature in 2018 with bipartisan support, as reported by the Associated Press and others at the time, which Rauner then signed. “The plan was not vetted in public hearings or evaluated by pension actuaries,” the Civic Federation has noted, before it was stuck in the budget as a fake savings measure.
Actual results from that budget year? A lousy $13 million, about three percent of what was claimed.
We’ve asked repeatedly over the past couple years for something – anything – showing how the supposed savings were calculated. We asked the Rauner Administration and any number of legislators but we were ignored.
More recently, Pritzker is floating still bigger claims — $25 billion – over some unknown time period. “Mostly false,” Politifact wrote about that claim.
One legislator who at least returns our calls on this topic is Rep. Mark Batinick (R-Plainfield), a leading proponent of the buyout program. When I spoke to him last week to ask for the study Pritzker referenced or anything else documenting savings, he suggested I check directly with the pension plans themselves.
That’s unacceptable. Any legislator or governor supporting the program should at least know where to find an analysis and be prepared to back up claimed savings. Furthermore, we have talked to pension officials. We were told on background not to expect any material savings from buyouts.
Batinick also brought up the uncertainty about take-up rates, where evidence is still coming in. That is, how many pensioners are accepting the buyout offers? How many will, eventually?
We accept that take-up rates are an inherently unpredictable aspect of the program, but that’s no excuse for having no analysis. At a minimum, the state should have savings calculations based on a range of possible take-up rates. Those calculations should include all costs and benefits associated with the program.
Those costs, by the way, include interest on money borrowed to pay for the buyouts. Taxpayers are on the hook for $300 million of bonds already sold to pay for buyouts, with more to come. As of last summer, almost all the proceeds from bonds sold were sitting unused, costing taxpayers 5.74% per year thereon.
Finally, Illinois reporters need to do their job. Aside from the question from Jeff Berkowitz linked at the top of this article, I recall no other reporter challenging Illinois politicians who brag about the buyout program. Says who? That should be their question. The national press, in contrast, has been skeptical about Illinois’ program from the start, as you can see in some of the articles linked below.
Says who? That’s what you should ask next time you hear any politician making claims about fixing our pensions through buyouts, even if reporters don’t.
There’s one place where the state makes an effort to be more truthful. That’s its bond offering disclosure statements where unfounded claims can result in a securities fraud case. Here’s what the state said in its most recent bond offering statement in November 2019: “The State is unable to quantify the amount or timing of any [reduction in pension liabilities] at this time.”
That’s no doubt true. They have no idea.
*Mark Glennon is founder of Wirepoints.
For further background on Illinois’ pension buyout program see these earlier stories we’ve written or linked to:
Pritzker’s Latest Pension Flimflam And Contradictions With Illinois Bond Documents – Wirepoints, November 2019