Backward. That’s where we’ve gone on political will to address pensions. That was the topic in my monthly Crain’s Chicago Business article this week, and this election for governor shows it.
When Pat Quinn was Illinois Governor, at least we had Squeezy the Pension Python to laugh at. Squeezy was Quinn’s attempt to call attention to the pension crises.
From the article:
On the Democratic side, we’ve had the spectacle of Sen. Daniel Biss groveling in apology for having supported SB 1 [a meager attempt at pension reform from five years ago, that was doomed to failure in the courts] and J.B. Pritzker slamming Biss for that support. Pritzker says we just have to pay the pensions—no meaningful reforms. Biss emphasizes consolidating some pensions, which should have been done long ago, but that would do nothing to reduce unfunded liabilities, and savings would be marginal. Chris Kennedy supports only what unions will agree to, which we know means nothing. Each looks primarily to tax increases to solve the pension crisis, but none say how much that would be.
On the Republican side, Gov. Bruce Rauner clings to the “consideration” model and calls it “comprehensive pension reform.” By definition, it means an equal swap of one benefit for another, so it can’t truly save much. He has never documented its supposed saving of $900 million per year. Even if it did, that would only reduce the annual taxpayer contribution to where it was in 2017. Rauner does support state authorization for municipal bankruptcy and earlier made some noise about getting federal authorization of bankruptcy for states, but he has never really made the case for either.
His rival, Rep. Jeanne Ives, undoubtedly would take an ax to pension benefits any way she could. She supports both municipal bankruptcy authorization and a constitutional amendment to delete the pension protection clause, but little attention has focused on such things.
For those of us primarily interested in fiscal issues, it’s a shame this election has turned on other issues, especially when it comes to Ives. Love her or hate her, she’s as candid as any officeholder you’ll ever see, knows the numbers and she’s no denier. We lost a major educational opportunity by not having any other candidate seriously debate her, or any reporter do an in depth interview.
Did you know that, five years ago this month, the Securities & Exchange Commission issued an order finding Illinois guilty of state-sponsored fraud? The state didn’t disclose the severity of its pension problems to bond purchasers, the SEC concluded, and the state agreed to the order.
The most interesting item in the SEC’s order is that one of the state’s own pension consultants wrote in August 2009 that “the Illinois pension system is now so underfunded that the state likely (would) never be able to afford the level of contributions required to ever reach 90 percent funding.” Failure to disclose that was among the items expressly called out in the order as fraudulent.
And where have we come since then — since that the state’s own expert said the pension problem likely could never be fixed, and the SEC found that failing to say so was fraudulent?