Not having facts sure doesn’t stop the press from editorializing on pensions. The latest is from the State Journal-Register.
“We’re wondering why Rauner is pursuing a new avenue…instead of focusing his energy here on accomplishing change.” That’s the Journal-Register’s reaction to reports that Rauner is considering federal legislation that would override Illinois’ constitutional ban on cutting pensions.
“What the focus should be is working, in a bipartisan manner in the Statehouse, on a way to get it under control.
Oh, and what might that be?
Maybe the state should “essentially refinance the pension ramp to level annual payments, like a fixed-rate mortgage,” they say.
Did they tell us how much that annual payment would be? Do they have any idea? Of course not.
The fact is that we are contributing billions less than it would take just to keep the unfunded pension liability from growing and we still haven’t balanced the budget, even with the recent tax increase. It would take, ballpark, $13 billion per year at least to make that payment and to cover the annual normal cost, just for the state pensions. That would consume well over 1/3 of the budget. Would taxpayers and service recipients stand for that and for similar solutions that would be needed for most of the other 666 local pensions?
Or maybe just push the the cost back to local school districts for the teachers’ pension, says the editorial. No, you could push the normal cost along but there’s no legal way to release the state from its unfunded pension liability.
“There are other options too,” says the Journal-Register. There aren’t. Not meaningful ones.
It all comes down to four simple realities most editorial writers can’t seem to get:
- Unfunded pension liabilities have to be cut. That’s why nobody ever lays out a specific plan for dealing with them without cuts.
- The only legal ways to cut them are a state constitutional amendment deleting the pension protection clause or federal bankruptcy.
- The state amendment probably won’t work because of federal constitutional challenges and, in any event, it would take years to implement and litigate.
- That leaves only bankruptcy.
The federal legislation Rauner discussed is premised on the bankruptcy power that’s in the United States Constitution. That legislation is limited to cutting pensions but broader proposals are out there for the state, as we’ve written here before, and bankruptcy is already available for municipalities if Springfield authorized it.
–Mark Glennon is founder of Wirepoints. Opinions expressed are his own.