Response to Kay on state pension reform

By The Madison County Record | Feb 14, 2010

To the Editor:

To the Editor:

It would be great if candidates running for the Illinois General Assembly dropped ideological rhetoric and focused on the reality of the state's fiscal problems. The Feb. 7 letter to the editor by Dwight Kay, candidate for State Representative (R-112), was full of rhetoric but short on facts.

Let's do a substantive fact check. The state's fiscal troubles include an increasing unfunded pension liability, now approaching $80 billion, a backlog of $8.7 billion in unpaid bills for services already rendered by private providers and a revenue shortfall of $13 billion.

In his effort to sell voters on changes to Illinois' pension system he calls for reforms that would cost the state more to implement.

Kay blames the state's unfunded liability on legislators "inappropriate, risky and inadequate devices, coupled with the routine transfer of funds from the [Teachers Retirement System] to the General Fund." The problem is the state has never transferred a dollar from TRS to cover operating expenses in the General Fund. The real "inappropriate" state action is the decade's long practice of not making its full pension employer contributions while teachers, police officers, building service workers, and firefighters have consistently paid their employee contributions.

Illinois has diverted revenue to cover the cost of providing public services, instead of paying into the pension fund. The last I checked, education, public safety and human services (substance abuse centers, mental health facilities) were not pork projects.

While it is great that the Massachusetts pension overhaul commission made recommendations, perhaps Kay would be interested in the Illinois pension commissions' report from last fall. The Pension Modernization Task Force found pension benefits to be a low cost to taxpayers and cost less than the private sector. The report concluded that 78 percent of funds' beneficiaries do not receive Social Security benefits, and cuts to future benefits will not reduce the state's debt for past benefits already earned.

What Kay doesn't tell voters is that if all current participants in the five Illinois state pension systems would switch to defined contribution (401(k) plans it would cost taxpayers $275-$610 million per year (in administrative costs).

It is very clear that in an election year politicians don't want to make tough decisions. It is also very clear that candidates want to hide facts.

Bukola Bello
Director of the Illinois Retirement Security Initiative (IRSI)
Center for Tax and Budget Accountability

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