This week, Whet Moser is Chicago’s Chief Budget Correspondent, reporting from Springfield as the Illinois legislature scrambles to pass its first budget in two years. Find out more about Budget Mayday.
As a new budget moves to the House, the Better Government Association’s Jared Rutecki is out with some sobering data about the state’s pension crisis—or something that might sober the debate, at least.
It’s an analysis of how it got to be as bad as it is (quantified by dollars per cause) and how much money reforms might have saved.
For instance: “if the size of all pensions could magically be capped at $100,000, the savings at those major funds would amount to $450 million this year.” That’s not a trivial amount of money; for instance (this is admittedly a big leap, but anyway) it’s enough to bail out Chicago Public Schools.
But it’s next to nothing in the context of our humongous pension debt. $450 million is only 2.6 percent of the $17.3 billion that’s being paid to retirees and other beneficiaries this year, and 0.35 percent of the $130 billion in unfunded liabilities.
Where does that huge shortfall come from?
The [Commission on Budget Forecasting and Accountability] attributed the largest share of that debt growth, $44.6 billion, to the shortfall in employer pension contributions from the state. Bookkeeping changes that lowered predictions of future investment returns accounted for another $31 billion in debt growth, while lackluster investment returns grew the debt by $14.7 billion.
Bad management, inevitability, and bad luck. Salary and benefit boosts accounted for less than $2 billion, about a third of the new revenues proposed in the Senate Democrats’ new bill.
Then there’s the politics of who gets the money. Here’s what it looks like this year.
By far the biggest recipient is teachers and school administrators, and in particular teachers from outside Chicago.
None of this is especially new—though it’s an especially clear look at the latest data. Six years ago (sigh) I wrote about how the Teachers’ Retirement System has been underfunded for longer than I have been alive
And, curiously enough, it’s not the hottest-button issue in Springfield, where instead the property-tax freeze is the stumbling block. There’s bipartisan support for pension reform, which there wasn’t a peep about on the Senate floor yesterday, and despite its unpopularity, Democrats have avoided fatal political fallout after years of pushing for it. So pension reform is possible, perhaps simply because people have become exhausted by talk of it. If only there were enough time for the property-tax freeze to wear down resistance, too.
6 days ago