Posted Online: Jan. 04, 2013, 6:00 am
Editorial: Real pension reform?
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The Dispatch and The Rock Island Argus
As lame ducks and other lawmakers return to Springfield, pension reform is on their minds. Whether it will be on the agenda is up to legislative leaders.
But if a deal is struck that will plug Illinois' $95 billion pension black hole, it could be initiated, not directly by powerful Democrat leaders, but thanks to an ambitious plan promoted by rank and file members.
We salute those lawmakers, led by state Reps. Elaine Nekritz, D-Des Plaines, and Daniel Biss, D-Skokie, for putting together a plan that we hope will resurrect real reform talk. There are plenty of things worth celebrating in HB 6258. But there also are some provisions that need a closer look.
We're pleased that sponsors tackled head-on the issue of constitutionality. Opponents of reform, led by employee unions, argue that any changes in current retirement benefits are off limits thanks to the Illinois Constitution. Count us among those who disagree. But even the threat of a legal challenge has stymied past efforts. Rather than ignore a future court challenge, sponsors assumed it, proceeding on the notion that a fair plan can pass constitutional muster.
It's worth celebrating, too, if their conclusion is correct that the plan will immediately knock $28 billion off the state's unfunded pension liability and could fix the crisis in 30 years. It does it in part by reducing pension cost of living adjustments; raising the retirement age for employees under age 46; hiking employee contributions and capping the salary used to calculate retirement benefits.The plan also provides penalties to be imposed by the courts if the state fails to make required pension contributions.
Freeing up the huge sums of money for other pressing state needs that are now required to pay for our huge pension obligations should have everyone's support. But what worries folks like state Rep. Pat Verschoore, D-Milan, is that unions were not at the table when those provisions were drafted. Rep. Nekritz, chair of the House pensions committee, said union input was used in crafting the plan. Perhaps, but they have not signed onto the bill.
Missing, too, is support of the local school district leaders who are worried, not without reason, about the provision that gradually shifts the cost of downstate and suburban teacher pensions from the state to local districts.
Sponsors say that the local cost shift makes up only about 3 percent of the package. But they say the switch is needed to put responsibility for local employee pensions where it belongs, in local hands. The beauty of their plan, they say, is that it shifts such costs so gradually that, when coupled with huge savings from pension reforms, the impact to local taxpayers will be manageable.
We do not doubt their sincerity, but worry that their conclusion is based on variables that can, and probably will, change before a deal is done.
First, we find it hard to get our heads around the mere .52 percent increase in annual school payroll costs sponsors tout in promoting the cost shift. Rep. Biss said he was pleasantly surprised with the figure produced by actuarial analyses by the state's major pension system.
We admit that we lack the expertise to assess the accuracy of such complex calculations. But we can't help question such conclusions when they are based on an 8 percent -- or even 7 percent -- return on pension fund investments. If reality falls far short of expectations -- as it will if the recent past is any guide -- property taxpayers will bear the cost of contribution spikes.
Even presuming that those assumptions are right, that .52 percent figure assumes that all components of HB 6258, will be approved. We doubt very much that union leaders will agree to ALL of the proposed changes. We're not even certain that they'll sign onto most of them.
What impact will that have on the votes of lawmakers, particularly majority Democrats, who count on union support to win reelection? Are there enough lame ducks out there to push a package through? We wonder.
Of course a key variable is powerful Democrat House Speaker Mike Madigan's rumored retirement. Insiders say resolving the pension mess could be the defining moment in his long legacy. How much of his power he is willing to exercise to make it happen will affect the outcome.
Do WE support HB 6258? Well, if, and if, and if, and if ...
What we can say for certain is that this is a serious and careful effort to attack a problem of catastrophic proportions and provides a good starting point for a real compromise that spreads the pain evenly on its way to securing the state's financial future for your children and grandchildren.