August 23, 2013
An outline of ideas being considered by the 10-person Illinois pension committee circulated today. Links are here for Reuters and AP articles. The outlined ideas are not finalized but this does give us the best indication yet of what the committee is considering.
Kick the can. Kick it hard. Kick it out of the end zone. That’s the summary. Here are the specifics in the outline:
– Set COLAs at half the inflation rate instead of the current flat three percent.
– Reduce amounts employees contribute by one percent. (Yes, reduce; the rationale for the reduction being that chances of court approval supposedly would improve).
– Leave retirement ages alone. Make pensioners millionaires in their fifties? No worries.
– Base pensions on full career wages, not just end of career, though this point is vague.
– All totaled, cut just nine percent — $18 billion — off what is in fact a $200 billion unfunded liability for the state-guarantied pension funds.
Remember, today’s unfunded pension liabilities are tomorrow’s taxes, and there’s no escaping that unless benefits are cut. The outlined proposals reportedly would “save” Illinois $145 billion over thirty years, which sounds huge. That’s what the outline says and that’s how the few news sources who got it spun it. It’s not huge, really, because total pension obligations over that period are so massive — over $600 billion — and most of that savings is very distant. That’s why the unfunded liability is the number to focus on.
No word on “guaranty’ provisions that would force state cash into the pensions, which we’ve written about before, but they will surely be in any final proposal. Public union bosses must be laughing their asses off. They’ve set the false narrative that voters and the media have accepted, which is that the committee will present a “reform” proposal. In fact, the real import of the ultimate legislation will be those guaranties that essentially slap liens on the state’s cash to ensure pensions get priority over other state obligations. The value of those guaranties to the unions will far exceed anything union members will be giving up.