The ongoing public employee pension crisis is a huge barrier to restoring confidence and trust in our government and our state’s future prosperity. Employers, business owners, investors and financial decision-makers tell me their frustrations with the state’s inability to adequately deal with fiscal challenges continue to influence their investment and hiring decisions. Restoring the state’s fiscal integrity is the single most important issue before the 98th General Assembly. Fixing the pension crisis is at the center of the problem, perhaps the biggest challenge ever to confront an Illinois General Assembly.
Some business leaders liken the state’s financial situation to a bankruptcy workout plan. In essence, the task before the members of this legislature is to come up with a workout plan for the state. Sadly, those who served in the last General Assembly failed to fix the broken public employee pension liabilities that have grown over decades to become the largest in the country. Like it or not, every Illinois resident now looks to the 98th General Assembly to solve this problem and assure their children a brighter future.
Business leaders tell me what they must see to continue to invest in our state is a well-defined, multi-year financial plan that guarantees resolution and certainty that Illinois is on a course to solvency. Without that, some say they are reluctant to make business plans that include Illinois. Private-sector employers expect Illinois’ legislature to implement a rational, fiscally responsible solution to the public employee pension problems.
Indeed, some employers are dumbfounded by government’s inability to directly address the state’s financial obligations. This is especially confounding to them because those unaddressed financial obligations are suppressing the very economic activity that would generate greater tax revenues for the state. The vicious cycle of deficit spending and poor credit ratings must be broken.
The Illinois Chamber applauds the bipartisan effort organized by Sen. Dan Biss and Rep. Elaine Nekritz that sets a reduction target in excess of $30 billion. Our desire is to see the General Assembly approve legislation that is similar in scope. Undoubtedly, this requires more than a token gesture. Legislators must make hard choices that will be painful for recipients to bear and almost universally unpopular. However, such changes are not unprecedented. It would be worse to adopt an inadequate solution that proves insufficient and forces us to revisit these monumental problems again and again.
There are those who would plant doubt in legislators’ minds by suggesting any substantial and bold solutions enacted would be ruled unconstitutional by the Illinois Supreme Court. I urge the General Assembly to keep in mind that naysayers who prefer inaction thwart true leadership by those who honor their pledge to the public interest. Second-guessing the justices is irrelevant to Illinois’ fiduciary responsibility to assure the state’s financial solvency. Any pension law changes will undoubtedly land before the Supreme Court for resolution; yet the Supreme Court cannot rule until the General Assembly acts. The General Assembly must venture a thoughtful and justifiable approach to restoring the state’s fiscal health.
Nobody thinks this will be easy, and most everyone agrees that the consequences of solving this crisis will adversely affect tens of thousands of individuals. There is never a good time to inform employees and retirees that their benefits will be reduced or that their contributions will increase. However, not acting will only make matters exponentially worse for everyone. Private-sector employers have confronted and addressed similar pension issues for decades, because accounting standards have made it abundantly clear that yesterday’s retirement plans are unsustainable. It’s been a rough road, but private-sector employers and their employee unions have restructured pension and healthcare plans to ensure survival and have moved on. Legislators are equipped to adopt a path to fund solvency, balance budgets and make payments in a timely manner. The key elements to pension cost reduction are well known, but they must find the political will to create a majority.
Certainly, members of the 98th General Assembly would prefer to be remembered as the legislature that solved the seemingly unsolvable, rather than be saddled with the legacy of past lawmakers, who have accumulated the largest unfunded pension obligations of any state. I urge the legislature to demonstrate the courage to reverse our state’s dire circumstances, which include:
- A pension debt load of almost $100 billion, growing by nearly $2 million each day
- Retiree funds that may well reach insolvency without changes
- A pension funding ratio of only 45 percent, the lowest among the states and woefully short of the recommended 80 percent
- A magnitude of pension claims, approaching 20 percent of the budget, that limits the state’s ability to support other fundamental responsibilities, such as education
- The fact that the annual growth to satisfy the actuarial requirement for pension funding alone exceeds the estimated annual growth in tax receipts
- An Illinois bond rating that has been downgraded 11 times since 2003, and is the lowest among all 50 states
- Increasingly higher interest rates on debt due to poor bond ratings, which diminishes funds for basic needs, like human services.
With such a situation, how does one seriously dispute that unprecedented measures are not required? The Illinois General Assembly must be fearless in undertaking dramatic changes that undoubtedly will fire the emotions and generate the ire of constituents. Even so, all legislators must be undaunted in fulfilling their duty as stewards of the state. We trust they are up to the task, and thank the legislature in advance for their courage and perseverance, which we all know is necessary to reverse our fortunes. iBi
Douglas L. Whitley is president and CEO of the Illinois Chamber of Commerce.