The State of Illinois created a flawed pension system that promised too much and collected too little. Who should pay to fix it?
State of Illinois pensions are determined by the salary in the final years of the contract. School districts have given big raises in the final years to teachers and administrators so they will be eligible for larger pensions. Forest Park schools give a 35% raise in the final two years. (The contract is due to be renegotiated this Spring.)
Governor Rod Blagojevich has criticized this practice, however his proposed solutions are self-serving.
Some say the solution should not be “punitive”, but the fact remains that the problem can’t be fixed without the money coming out of someone’s pocket.
The school districts inflated salaries so retired teachers and administrators could draw more from the state pension fund. Should these school districts be forced to pay?
The state created the system which encouraged school districts to abuse the system. The state also shortchanged its contributions to the pension fund. Should the state be forced to pay?
The unions negotiated contracts which caused retirees to get inflated pensions. They probably had their lobbyists at the table when the flawed system was created. And the unions backed politicians that shortchanged the pension fund. Should the unions be forced to pay?
And what about the individual retirees that got the “sweet” deal?
If you believe the school districts should pay, this will mean cutting teachers or raising property taxes.
If state should pay, this will mean raising university tuition, cutting public transportation, reducing the state contribution to education and raising taxes.
Maybe the unions should pay, but there’s no way to make them.
If you believe the formula for calculating the pensions should be adjusted, the problem is that legal barriers make this difficult.
Blagojevich has made some proposals.
He has said the state should not increase pensions based on pay increases beyond 3%. He has said school districts should pay pension increases beyond this level.
Since the school districts already have contracts in place, this would force school districts to pay significant money for pensions they haven’t planned for. Blagojevich’s proposal would effectively shift the financial burden for these pensions from the state (mostly income tax and sales tax) to the school districts (mostly property tax).
Another glaringly self-serving aspect of Blagojevich’s proposed pension fix is that he wants credit for future savings to the pension system in the current fiscal year. He wants to raid the pension fund for $820 million to cover the budget deficit.
The Blagojevich fixes save the state less than $100 million this year according to a Republican analysis.
In an article by Doug Finke dated February 25, 2005, the State Journal-Register quoted Jack Hacking, the director of the State University Retirement System about Blagojevich’s proposal: “We are spending the savings before it accrues,” Hacking told members of the General Assembly’s Commission on Government Forecasting and Accountability. “There is no room for error whatsoever. It is a very risky program.”
Hacking said the plan assumes there will be long-term savings the state can divert to other expenses immediately. But if some of the revisions change in the future – for example, if the courts strike down certain aspects – the pension systems could be worse off than they are now, he said.
Blagojevich’s pension fix is really just a scheme to borrow against the future so he can create a budget that doesn’t egregiously cut services while keeping his campaign pledge not to raise income or sales taxes.
If it’s up to Blagojevich, he’s not going to be the one to pay for the mistakes of the past.
Now it’s my turn to be self-serving. You can keep track of Blagojevich by visiting Blogging Blagojevich’s Blunders, http:// BlagosBlunders.blogspot.com, a website I created.
Also, I’ll be at the Beacon Pub, 101 Circle Ave., Forest Park tonight at 7 PM for anyone that wants to talk politics.
