Illinois State Senate President Don Harmon, through the Illinois congressional delegation, recently requested a $10 billion public pension bailout from the federal government.
In the letter, Mr. Harmon suggests that Illinois is making progress on addressing its pension debt, but that the coronavirus pandemic is causing difficulty because of revenue losses to the state. He writes:
$10 billion in pension relief, directly for the state’s retirement systems:
Illinois largest liabilities are its unfunded pension liability at $138 billion and other post-employment benefits liability at $54 billion. Illinois law has put the state on a path to fund the pension liability in a manner that is actuarially sound, and the state has been following the payment plan set out in that law. In a normal year the size of those payments crowds out funding for services and programs. Clearly this will not be a normal year and that crowding out effect will be exacerbated by significant revenue losses.
I would ask that the federal government:
1. Provide direct cash assistance to the pension systems; or
2. Offer a low interest federal loan to aid Illinois in our efforts to restore and maintain retirement security for public sector workers, many of which are on the frontlines of this pandemic battle.
Clearly this request is addressing a public pension crisis that is not short-term in nature, but one that has been going on for decades. The state created this pension crisis and while it may be amplified by the coronavirus pandemic, it certainly was not caused by it.
While the efficacy of this funding request is likely to be debated from all corners of the political spectrum, let’s look at the request for what it is — a cry for help from a state that is drowning in pension debt.
The problems with Illinois’ public pension systems have been known for years and have caused service cuts, tax increases, benefit reductions for new state workers, and dramatic reductions in the state’s credit ratings. Despite a failed attempt at pension reform in the last decade that was overturned by the courts, Illinois been unable to revisit the issue and enact meaningful pension reforms that would address its public pension plans’ funding and create more efficient and effective plans for future hires.
Hopefully, Illinois’ request for a bailout from federal taxpayers is an indication that the state is finally ready to seriously address the devastating financial crisis of its own making.
Perhaps this cry for help reflects an acknowledgment that the state can no longer rely on tax increases, service cuts, prospective benefits reductions and workforce reductions to keep its failing pension systems on life support. Laying the burden on taxpayers, students, public employees and consumers of public services is untenable.
While the pension crisis is likely to be exacerbated by the COVID 19 pandemic and economic downturn, that’s the reality Illinois must now live in. Economic uncertainty, which is already rising, will be amplified and cause strains on state and local government budgets going forward. Illinois should use this time of enhanced candor to look for real solutions to its pension crisis, including the introduction of fresh pension plan design options for new hires that would both better meet employee needs and eliminate the risk of accruing future unfunded liabilities.
Despite Illinois’ persistent inability to rise above politics to solve its pension problem to date, effective solutions exist and help is available.
Two words for these corrupt Democrats but please
pardon my French. . “Screw You!!”
I hope Trump will not bail them out. They created their own mess let them solve it without taxpayers money.
I have suggested to all that would listen that the huge mistake made many years ago would bite the USA big time.. the decision to allow unions into government situations then opened Pandora’s box as politicians would pander to the unions for their vote by suggesting that their pensions would be inviolate and could only be increased.. soon the pension payments would easily exceed the active payroll of any city or state … it is now happening.. crapafornia and new dork up next..
I am from Illinois and I say let there pension system go Bankrupt the teachers and other government workers are payed a competitive wage and should finance any pension themselves like the majority of working Americans have to. Us tax payers can use the money we work for more than the privileged government employees.
I left Illinois 22 years ago, because of the taxes and them raising vehicle license fee’s every year its the same, and you can’t vote the Democrats out because the people keep voting them back in, and hoping for a different outcome, i guess you can’t fix stupid!
‘low cost federal loan aid…restore/maintain retirement security 4 public sector workers?’ These people R still working/still getting a pay check/the rest of us have lost livelihoods/savings/pensions/health benefits/businesses/standing in bread lines/etc…Not until the rest of us have been fully restored 2 pre-COVID conditions should public sector workers receive a dime.