By: Ted Dabrowski and John Klingner
Illinoisans will want to pay attention to how Ohio recently responded to its state retirement debt crisis. There, the Ohio Public Employees Retirement System board (OPERS) voted to cut health-care benefits for its 500,000-plus members to ensure its retirement funds don’t collapse.
In Illinois, that’s not even an option due to the Illinois Supreme Court Kanerva decision that says retiree health is protected pension benefit. All reforms are blocked in a state where workers get free retiree health insurance after just 20 years of work. Illinois has amassed $68 billion in unfunded health benefits owed to state workers, teachers and college employees. That’s on top of Illinois’ official $137 billion pension shortfall.
According to the executive director of the fund, there simply isn’t enough money to pay for both pension and retiree healthcare benefits. “The basic problem is we have no money to fund health care,” OPERS Executive Director Karen Carraher said.
From the Columbus Dispatch:
The monthly allowance paid to retirees who are Medicare eligible will drop from between $225 and $405 per month to a range of $178 to $315 per month…
…The other major change was to eliminate the health care plan for retirees who aren’t Medicare eligible. Instead of paying 51% to 90% of their premiums, OPERS plans to give these retirees money to go buy insurance on the individual market.
These hits will be bigger. “Low service employees” will lose $329 per month on average, and everyone on the plan could see higher deductibles. The market average is about $1,100 more than what OPERS’ offers now.
In addition, Ohio will pour the state money that’s been going annually towards retiree healthcare into its pension fund instead. According to the state’s analysts, the health system has 11 years worth of funding stored up before it runs dry.
Illinois doesn’t have a financial buffer like that. The state pays for retiree health insurance on a pay-as-you-go basis, which means politicians haven’t set aside a single dime to pay for health benefits in the future.
And with more than three-quarters of state workers getting free retiree health insurance, some as early as age 55, the shortfall continues to spike. Unfunded health insurance promises in Illinois, which totaled $40 billion in 2007, have jumped by 70 percent since then.
These debts will continue to play a larger role in Illinois’ overall retirement crisis as the bill comes due. Pay-go costs of more than $1 billion today are expected to jump to nearly $6 billion statewide by 2045.
With a constitutional amendment to the pension protection clause, Illinois lawmakers could make changes like Ohio just did.
But Illinois lawmakers won’t, considering politicians like Gov. J.B. Pritzker continue to categorically reject an amendment.
So while other states begin to dig themselves out of their crises, Illinois continues to fall deeper into its hole.
To learn more about how retiree health benefits contribute to Illinois’ worst-in-nation retirement crisis, read:
- Illinois owes $68 billion in health benefits to government retirees. Politicians haven’t set aside a penny to pay for them
- Dismal 2019 numbers show why Illinois pensions will continue to fail
- Moody’s shows Illinois is nation’s extreme outlier when it comes to pension debts
- US stock markets up 200%, yet Illinois pension hole deepens 75%