Ward Room
Covering Chicago's nine political influencers

Illinois Can't "Welch" on Pension Obligations

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    NEWSLETTERS

    As cities and states around the country struggle to pay the pensions of baby-boom retirees, the Associated Press reports that no pension fund is emptier than Illinois’s:

    A report released Monday shows Illinois has the nation’s worst record on supporting government retirement funds, setting aside only 51 cents for every dollar it has promised to pay out.

    Other states owed more to their retirement systems in raw dollars, but none matched Illinois in percentage terms, according to the Pew Center on the States…
    Experts often recommend states build up assets worth 80 percent of their future pension costs.

    Illinois state government has frequently failed to make its full contribution to retirement systems. In some years, it didn't make any contribution at all. At the same time, it continued promising more benefits to retirees…

    The New York Times published a story today about local governments seeking to reduce the pensions of existing employees. Detroit cut the rate at which its police sergeants and lieutenants earn pension benefits. But, the article noted, Michigan’s constitution has weak protections for public employee benefits.

    That’s not the case in Illinois. Here, reducing benefits to current employees, or forcing them to pay more into their retirement accounts is off the table. The Civic Committee of the Commercial Club of Chicago believes that the pension clause of the Illinois Constitution doesn’t freeze employees’ benefits, and hired the law firm Sidley & Austin to make that argument. However, Senate President John Cullerton asked his legal counsel, Eric Madiar, to research the issue. Madiar came back with a different answer.

    Can Illinois lawmakers break the pension promise with workers? What was the intent of the Constitution’s framers in 1970? What did the media at the time report about the issue? What have the courts said?

    Madiar’s 76-page analysis of this clause is comprehensive and concludes that welching on public pension promises is not an option for Illinois as some legal and civic commentators have suggested.

    This year’s income tax increase was motivated by the state’s pension crisis. Two-thirds of the money it’s expected to raise will go toward paying public employee pensions. That may get us off the top of the list of unfunded states. But will it be enough to get us out of the red altogether?

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