By: Ted Dabrowski and John Klingner
There are plenty of reasons why Illinois politicians should give up their legislative pensions.
First on the list is their pension plan is the worst run of Illinois’ five state-run plans. At just 15 percent funded, the General Assembly Retirement System is broke. All lawmakers should be beyond embarrassed.
Second, lawmakers have taken the rest of the state’s public retirements down with them – creating the nation’s biggest pension crisis. Moody’s puts the state pension shortfall at $250 billion. Legislators have blown the retirements of 550,000 active and retired teachers, state workers, university employees and judges in Illinois.
Third, lawmakers have granted themselves extremely generous salary and pension benefits – beyond those of teachers and state workers and far beyond those of the private sector – for what is basically part-time work.
Fourth, they’ve done all the above while driving the state’s finances into the ground. Illinois politicians haven’t balanced the budget in nearly two decades. The state is just one notch from the embarrassment of a junk bond rating. No state has ever been rated junk before. And our pension systems are collapsing and threatening the solvency of the state.
For Illinois’ pension crisis to end, change has to start at the top. Lawmakers should close out their broken, bankrupt pension fund. Going forward, all current and new lawmakers should be moved into a defined contribution plan.
Moving all state politicians to a defined contribution plan tomorrow is entirely within lawmakers’ power. There is no union to oppose an end to benefits for current lawmakers. And any individual lawmakers who oppose the move should be thoroughly shamed by their colleagues and the media.
It’s time to end legislator pensions.
Pension fund fail
The General Assembly Retirement System (GARS) is effectively bankrupt. The fund has just $54 million in assets today to cover $316 million in total promised pension benefits – the plan’s accrued liabilities.
In all, lawmaker pensions are just 15 percent funded, the lowest of the five state-run pension plans.
GARS has so little money left that it would go broke in just 2.5 years if not for an annual taxpayer bailout.
The fund has to send out $26 million in pension checks to retired lawmakers every year, but it has less than $60 million on hand to make those payments. If the state stopped contributing money into the pension fund in 2019, the fund’s assets would run out halfway through 2021.
Because the pension fund is effectively broke, taxpayers are forced to pay the equivalent of three salaries for their legislators: once for their $10 million in salaries, then another $20 million in pension contributions just to keep the pension fund afloat.
Annual taxpayer contributions now equal more than 200 percent of lawmakers’ payroll. None of the other four state funds require taxpayer contributions even close to that.
If GARS was fully funded, annual taxpayer contributions would equal 26 percent of payroll. That’s still an outrageous cost, but it’s nothing compared to what taxpayers are on the hook for now.
Generous and broke
Illinoisans should be angry with lawmakers because they’re forced to bail out politicians’ pensions every year. They should be even angrier considering the generosity of the benefits being bailed out.
Generous benefits start with generous salaries. Illinois lawmakers pay themselves a base salary of $67,836. That’s the highest lawmaker base salary of any neighboring state and the fifth-highest in the nation, all for what is essentially a part-time position.
In addition to those high base salaries, lawmakers also award themselves stipends for taking on various legislative roles. For example, Mike Madigan gets an extra $27,477 a year just for being Speaker of the House. Leaders John Cullerton, Jim Durkin and Bill Brady get the same for their own roles.
Deputy leaders get a stipend of $18,066 to $20,649. And over 100 lawmakers get an extra $10,000 a year each just for serving as a chairman or a minority spokesman for committees that sometimes meet just two or three times a year – and sometimes not at all.
On top of that, state politicians have granted themselves arguably the most generous set of pension benefit rules in Illinois.
Under Tier 1 pension rules, lawmakers can receive up to 85 percent of the salary they earned on their last day of service as their starting pension benefit. In contrast, Illinois Tier 1 teachers can only receive a max of 75 percent of their last, highest four years of salaries.
And the GARS retirement formula makes it far easier for a lawmaker to reach that max 85 percent of salary. It takes just 20 years of service for a lawmaker to reach their max. Teachers have to work 34 years to reach their max of 75 percent.
Tier 1 legislators can also begin collecting retirement benefits as soon as age 55 with just 8 years of service.
Add a 3 percent compounding cost-of-living adjustment that doubles their pension benefit after just 25 years and it’s easy to see why lawmakers are eager to keep their benefits.
The average, recently retired career politician (retired after 12/31/2012 with 20 years of service or more) retired at the age of 63 and receives an annual pension of $85,000.
In all, average career lawmakers will collect over $2 million in pension benefits during their retirement; all for working at what is basically a part-time job.
But there are many lawmakers who will get far more than that. The total payout of the top retired lawmakers in GARS ranges anywhere from $3.8 to $5.4 million. The most notable member in that list is former Gov. Jim Edgar, the architect of the now infamous 1996 Edgar pension ramp. Edgar can expect a $4.6 million over the course of his retirement.
Things are a bit different for newer politicians. Lawmakers who became GARS members on or after January 1, 2011 receive Tier 2 benefits that are less generous than Tier 1.
However, lawmaker Tier 2 benefits are still generous compared to the Tier 2 benefits provided to teachers, state workers and university employees. For example, lawmakers and judges’ Tier 2 cost-of-living adjustments (COLAs) are still compounded annually. Teachers, state workers and university employees’ Tier 2 COLAs are not.
The General Assembly Retirement System is overly generous, horribly mismanaged and close to total insolvency.
And it’s just the smallest piece of Illinois’ massive retirement problem. Politicians’ failed leadership has created the nation’s biggest pension crisis.
Lawmakers have to enact real, comprehensive reforms to state pensions to end that crisis. But they can’t do that as long as they are beholden to the pension system. Accepting the lesser pension benefits of Tier 2 is not enough.
Lawmakers have to say no to a pension if real reforms are to happen.
Part 2 of this series will look at the conflict of interest that arises from politicians accepting pension benefits and how an increasing number of lawmakers and legislative candidates are setting the stage for real reform by refusing a legislative pension.
Read more about Illinois’ pension crisis: