November 3, 2013, By: Mark Glennon
“We’re at the one yard line.” That’s how State Rep. Elaine Nekritz recently described progress by the special Illinois legislative conference committee towards presenting a proposal to fix state pensions. Wrong football metaphor.
No, it’s not that the committee will “punt” on pension reform. It’s worse than that.
The right metaphor is from Green Bay Packers defensive back Charles Woodson last year about Bears’ quarterback Jay Cutler. Woodson said the Packers will win because “Jay will just throw us the ball.” The pension committee appears ready to propose legislation that likewise gives the game away by tossing the ball to reform opponents. Here’s why:
Under the attractive label of a “guaranty,” the proposal will include provisions for automatically seizing tax dollars and forcing them into pension contributions, ahead of any other state obligations past or present except bonds, and with no further action by Springfield needed. Those who do insolvency work know the winners are those who first establish that kind of payment priority or lien, and that getting them requires concessions. But the pension committee, based on all indications of what they will propose, would give away that priority in exchange for minor concessions that barely dent the problem.
Specifically, automatic COLAs probably would be reduced, employee contributions would actually go down, and fifty-something retirement ages likely wouldn’t rise. Netting it all out, the unfunded liability would drop by less than 20%, which means the pension debacle would go on. Worst of all, those savings are mostly backloaded — they don’t kick in for another 25 years — making the reforms little more than a claim something will be done in the future.
Isn’t that at least a step in the right direction? No, because that guaranty provision would all but eliminate chances for meaningful reform later. It would be reversible only by legislation, meaning true reformers would have to win both houses and the governorship — not likely in union-controlled Illinois. We will need to see the exact language the pension committee proposes, but previous drafts have been extremely broad, forcing seizure of state cash in untold amounts needed to meet pension obligations.
A guaranty would be perfectly fair and sensible if accompanied by true reform that solved the crisis, but that’s not happening. Think of the impact if we elect a governor who tries genuine reform. As the law stands now he could threaten to stop funding the pensions, something he could probably do unilaterally. Remember that the Illinois Constitution does not require the state to put money into the pensions; it only prohibits reduction of outbound obligations owed to pensioners. Reform opponents know that obligations owed by empty pensions mean nothing, which is why they want a guaranty above all else.
“No real reform concessions? Then no pension contributions from the state.” That’s how a true reformist governor could get something serious done. He would demand major pension cuts but means-test them to protect reasonable pensions owed to those who need them, and take a chain saw to the spikers, double dippers and pensioners who simply get too much. Giving the guaranty away now, however, will preclude that approach because the governor alone then could not stop seizure of state cash to fund the pensions. Unions and reform opponents will have no reason to grant further concessions.
Illinois, don’t toss the game to opponents of real reform. Reject any partial reforms that include that “guaranty.”