Title: Politicians Caused Illinois' Pension Debt
""In his commentary ("Get to work on pension reform in Illinois," June 28), Illinois Gov. Pat Quinn left out some pertinent facts.
The pension debt in Illinois was caused by the state's politicians. Over the last 40 years, they have not made the state's full share of payments as required by law and have, on two occasions, swept funds from the pension systems.
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| Pictured here is Former Rep. Jack McGuire (D-IL D86 Joliet) who helped contribute to the Illinois Pension Mess and his 40-year friend of the family and new House Rep. Larry Walsh Jr.(D-IL D86 Elwood)... These photos were added to this article by the A4FNetwork and is not a part of the original letter to the editor. Learn even more at http://savejolietiyc.blogspot.com |
This action by the General Assembly has resulted in the current debt. Several current members of the General Assembly, especially the speaker of the House, have been in office throughout the process.
According to several financial analysts, this is not a crisis as it has been named by the governor and other politicians. This is due to the fact the the debt will not come due all at once. Not every worker will retire on the same day; rather, retirements will be spread out over many years. The word "crisis" is used so the politicians can cover their tracks and cut benefits in violation of the Illinois Constitution.
This disregard for the constitution is evident in the state's neglect in paying its fair share to the pensions systems over decades.
The Senate bill was constructed through the Senate president's meeting with union members and hammering out an agreement. The House bill was developed by unilateral action with cuts to the pension benefits, including cuts to workers who are already retired.
All of these actions contribute to Illinois politics being a running joke nationwide. This is why, when we travel out of Illinois, we identify ourselves as being from St. Louis. Even entertainers in Branson have a raft of bad jokes about Illinois.
John Denton • Troy, Ill.""
From Bloomberg News (7-10-13):
Illinois Governor Pat Quinn said he will suspend state lawmakers’ pay because they’ve failed to address the nation’s worst-funded pensions, escalating his feud with fellow Democrats in a state plagued by political gridlock.
“This is an emergency,” he told reporters today in Chicago, adding that such a “drastic measure” is needed to spur legislators. “The best way to do that is to hit them in the wallet.”
The amount to be withheld equals $13.8 million, said Brooke Anderson, Quinn’s communications director. The average state lawmaker is paid about $67,800 a year, she said.
Lawmakers rebuffed Quinn by failing to act yesterday during the latest special session he called to address almost $100 billion in unfunded liabilities -- the third time in the past 11 months they’ve done so. The governor said he’s using his line-item veto power in a budget bill to block the salaries.
The inability to agree on a fix for the five systems resulted in Fitch Ratings cutting Illinois on June 3 to A-, the fourth-lowest investment grade.
Moody’s Investors Service on June 6 dropped it to A3, equivalent to Fitch’s rank. Illinois and its localities pay the most to borrow relative to top-rated AAAs among 19 states tracked by Bloomberg.
The state has the worst-funded government-employee plans based on a Moody’s formula released last month. Its net pension liabilities represent 241 percent of governmental revenue, according to the New York-based ratings company.
Illinois issuers [of general obligation bonds] still pay the most to borrow among the 19 states tracked by Bloomberg. Illinois’s most recent $1.3 billion bond sale included a portion maturing in July 2038.
In the few hours [on July 9th] that lawmakers were in session, there was barely a mention of pensions. When there was, the talk was accompanied by finger-pointing.
[Bill Daley], the son and brother of two former Chicago mayors [and 2014 challenger for Governor], Daley said today that Quinn failed on the pension issue.
“This governor is long on press conferences and short on results,” he said in a news release. “This media sideshow doesn’t get things done.”
More About Illinois Pensions
- "The pension crisis beleaguering elected officials across America is particularly acute in Illinois, where "funded ratios (43%) were the lowest among states last year*." Put another way, if 100 public workers retired today, each qualifying for identical annual pensions and retirement benefits, 57 out of 100 would be sent away empty handed. There is not enough money to go around because past Governors and Springfield power brokers diverted it to pet projects."
- "In 2009, the General Assembly changed the law dictating how the state calculates liabilities and assets. The new formula bases the pension payments off the average return on investments over the past five years. Previously, it was based on financial market conditions at the time. The idea was the state would be able to dodge markedly larger pension payments as a result of failing investments by using the average of those investments’ values over the previous five years, which is what happened. The state shaved $100 million off of its pension payments for the State Employees’ Retirement Systems in 2009, but those savings aren't real. Rather, the move just delays the inevitable, according to the report. “This strategy only defers contributions when plan assets experience a loss, as they did in fiscal year 2009. Future contributions will be higher than they would have been previously once the fiscal year 2009 market losses are fully recognized,” the report says."
- "Complicating the problem is the $14.4 billion the state has borrowed since 2002 to make its pension payments. “Bonds approved by the General Assembly were issued twice under (Gov. Pat) Quinn to make the required payment due to the fact that there was not an appetite in the General Assembly to make the cuts needed to make the required payments,” Kelly Kraft, Quinn’s budget spokeswoman, said in an email. The state will be making payments on those bonds and ones issued by former Gov. Rod Blagojevich through 2033. Between the current fiscal year and 2033, the state will have to cough up $25.8 billion for those loans, $9.5 billion of which will be interest alone."
- Americans for Prosperity Illinois states: "In Illinois, retirement-related debt makes up over 80% of the total liabilities of the State and its pension funds. These liabilities and the State’s budget gap put Illinois in a league of its own. In order to keep the pension funds from running out of money, the State will have to make massive contributions into the funds in future years. By 2020, these contributions will consume around 30% of the State’s “Big Three” tax revenues – corporate income taxes, personal income taxes, and sales taxes. By 2045, pension payments will eat up close to 50% of these revenues – crowding out dollars for education, public safety, health care for the poor, and other critical social services. Generous pension benefits that the State cannot afford are at the root of this problem. While the state took a step in the right direction last year by reforming benefits for NEW government workers, CURRENT government workers continue to participate in the State’s traditional and costly plans. They can retire at age 55 or 60 and receive generous cost-of-living adjustments each year. These lifetime benefits can be worth more than $1 MILLION for a full-career employee who retires at 55 or 60. They are completely out-of-line with the benefits offered to taxpayers working in the private sector. Yet the 95% of Illinois taxpayers who do not receive such generous benefits will pay higher taxes to pay for the 5% of State residents who do."
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