One and only solution to unfunded pension liability
To the editor:
The Illinois Policy Institution, headed by CEO Jim Tillman, should be applauded for offering a groundbreaking solution to the whopping $83 billion in unfunded pension liabilities in our state. Theirs is the one and only detailed plan to actually fund Illinois pension liability while protecting taxpayers and not breaking the bank.
The IPI Pension Funding and Fairness Act has been criticized in that it proposes a brief period of borrowing -- a 10-year loan amounting to $11 billion. Noteworthy are these two provisions:
The first provision institutes a three year budget freeze at FY 2010 levels. After three years, spending growth would be limited to population growth plus inflation, which would be constitutionally protected and could not be changed without voter approval.
The second provision calls for borrowing the difference between the budget surplus and the unfunded pension liability contribution. This borrowing is strictly short-term and is not intended to be used for "risk arbitrage."
How does the IPI plan differ from business as usual in Illinois?
Recent borrowing by Governor Quinn can be likened to running up debt on a credit card. Money must be borrowed to pay for overspending in Illinois. This practice has resulted in borrowing more money to pay off previous Illinois debt, which, in turn, has led to even more borrowing to feed the ever growing beast that is Illinois government.
This practice has left tax hikes and the selling of assets as the only ways left for Governor Quinn to pay the whopping $83 billion unfunded pension liability. As such, Quinn's way out of the unfunded pension crisis in Illinois is to focus on tax hikes rather than to control spending.
The Illinois Policy Institute's plan, despite borrowing $11 billion initially, would pay down the unfunded pension liability through its proposed spending freeze. This would result in a decrease in the amount of borrowing each successive year. By FY 2017 it is estimated that the budget surplus will exceed unfunded liability contributions, annual pension payments will have been met, and the Illinois pension system will be on track, as required by law, to become 90 percent funded by FY 2045.
Unfortunately, the Illinois pension system has been treated like a neglected child. Politicians are inclined to defer payment into the pension fund because any consequences of not doing happen years down the road, definitely not after the next election.
A Pew Center report ranked Illinois dead-last natiionally in the percentage of necessary money it has set aside to pay public employees' pensions.
Illinois can't continue on the same path. Doing business as usual will only put the state in deeper debt and in a more precarious financial condition. Raising taxes is also not feasible at a time when the economy remains shaky and the future is uncertain.