Illinois taxpayers and government workers got proof in 2013 that politicians can’t be trusted to manage public-worker retirements. That’s when the Securities Exchange Commission charged Illinois with securities fraud.
Now, Kansas joins Illinois and New Jersey as one of three states to face SEC civil charges for misleading investors about the health of their pension systems. LeAnn Ghazil Gaunt, head of the SEC Municipal Securities and Pensions Unit, found that:
“Kansas failed to adequately disclose its multibillion-dollar pension liability in bond offering documents, leaving investors with an incomplete picture of the state’s finances and its ability to repay the bonds amid competing strains on the state budget,”
The Kansas case proves yet again that politicians should not be running government-worker pensions. But unfortunately, just like in Illinois’ case, there won’t be any real consequences for those responsible.
The state was not fined, because “the Commission considered Kansas’s significant remedial actions to mitigate these issues as well as the cooperation of state officials with SEC staff during the investigation.”
Illinois wasn’t fined, either. Nor did they have to admit wrongdoing.
Not surprisingly, the state has built little trust with investors and rating agencies since then. Both the state of Illinois and the city of Chicago have seen more credit downgrades in the absence of real pension reform and continued poor governance.
The only way to restore trust with investors, credit agencies and most importantly, with Illinoisans, is to remove control of retirement systems from the politicians who mismanage them. That goal can be reached by moving government employees to 401(k)-style retirement plans.
States across the country are already moving their workers toward self-managed plans, with Oklahoma being the most recent state to put its new workers into 401(k)-style plans.
Investors, government workers, and taxpayers all stand to gain from modernizing government worker retirements. We just need to get the politicians out of the way.
Ted Dabrowski is Vice President of Policy at Illinois Policy Institute.