Illinois Pension Officials Warn of Increasing Issues
Illinois pension officials warn that their issues may increase if the state does not work to address unfunded pension liabilities.
Committee Meetings Discuss Tier 2 Pensions
Illinois House Personnel and Pensions Committee members met for the fourth time Wednesday with state pension officials to discuss Tier 2 pensions, including those with 96 consecutive months of service out of the last ten years.
Tier 2 Employees Subsidizing Tier 1 Benefits
In 2011, the state created a new tier of employees with fewer retirement benefits for new hires. The issue is those in Tier 2 will have to increasingly subsidize Tier 1 employees’ pension benefits. That’s despite Illinois taxpayers paying around $10 billion annually for public employee pensions.
House Bill 4098 Proposed as a Solution
The committee has discussed House Bill 4098 as a solution. The bill, which has been the center of conversation during these hearings, would allow the Illinois Treasurer and Comptroller to transfer $500 million from the General Revenue Fund to the Pension Unfunded Liability Reduction Fund each fiscal year. Those funds would then be used to make payments into the state’s systems.
Warning of Growing Problems
Andrew Bodewes of the Teachers’ Retirement System told the committee that the problems will continue to grow if the debt is not addressed.
“Not only will everyone fail eventually, but the speed in which those groups start getting huge grows exponentially,” Bodewes said. “In year one, it’s one. In the second year, maybe it is five. In the third year, maybe it’s 50. In the fourth year, maybe it’s 500, 5,000, etcetera and so on.”
Legislators Determined to Find a Solution
State Rep. Steven Reick, R-Woodstock, said the days of picking a plan that does not work are over with.
“The easiest thing for us as legislators to do is for us to promise something that we know we will not be able to fulfill,” Reick said. “That’s just as dangerous as not giving enough because sooner or later, the taxpayers of Illinois are going to vote with their feet.”
Continued Efforts to Address the Issue
Legislators plan to continue to work on the measure.
Delaying the Solution Increases Costs
Pat Devaney, who represents the AFL-CIO, said the longer they wait, the more the problem grows.
“Every year that we wait to solve these issues, solve the legal problems, the moral issues that we have created and a benefit that does not provide employment security, it is going to cost taxpayers,” Devaney said.
Future Discussions and Bills
The committee’s chair, state Rep. Stephanie Kifotwit, D-Oswego, said during the last meeting that lawmakers will be discussing another measure when the time is right.
“This is a working group, and there will be another bill that we will work on because we are looking and researching and taking in a lot of information with regard to this subject and many other subjects,” Kifowit said during the hearing.
Unfunded Liability of at Least $140 Billion
The state manages five pension funds. The Teachers’ Retirement System covers retired teachers from across the state, except for Chicago. Combined with TRS, the State Universities Retirement System, the State Employees’ Retirement System, the Judges’ Retirement System, and the General Assembly Retirement System have an unfunded liability of at least $140 billion.
Pension Funding Ratio
Combined, they have a funding ratio of only 42%. The pension system for lawmakers is the worst-funded at approximately 19%.