Illinois recently released its biggest, regular report on government pensions. Before getting to that, however, it’s fascinating to look back on what was widely agreed about pensions not long ago, and how all that was said is now forgotten.
2012, Gov. Pat Quinn rolled out his Squeezy the Pension Python character to call attention to a pension crisis he said was strangling the state. “I didn’t create the problem,” Quinn said, “but I’m here to solve it. I know that I was put on earth to get this done.”
In 2013, the U.S Securities & Exchange Commission found Illinois guilty of state-sponsored fraud. The state didn’t disclose the severity of its pension problems to bond purchasers, the SEC charged, and the state agreed to the order. One of the state’s own pension consultants had written in 2009 that the pension problem likely could never be fixed. Failing to disclose that was part of the state fraud, the SEC said.
So, as 2013 closed, Illinois passed what it called a “historic” bill to cut pension benefits known as SB1. It was expressly premised on the assumption that pension benefit reductions, not tax increases, were essential for ending the crisis.
Notably, that bill was passed with Democratic supermajorities in the legislature and was signed by Quinn, also a Democrat. “The General Assembly has determined that the fiscal problems facing the state and its retirement systems cannot be solved without making some changes to the structure of the retirement systems,” [Emphasis added] the bill itself said. Our current Attorney General, Democrat Kwame Raoul, was a co-sponsor.
However, pensioners sued, claiming the bill violated the state’s constitutional pension protection clause.
That forced Democratic Attorney General Lisa Madigan, daughter of the House speaker, to go to to court to make the General Assembly’s case. The pension problem and the fiscal crisis it caused were so severe, Madigan argued, that the very rarely used “police power” doctrine justified cutting pensions, overriding the state’s constitutional pension protection clause. Her court pleadings were based on extensive analyses completed by three economists she offered as expert witnesses.
But the court ruled in 2015 that the pension protection clause is ironclad, voiding the entire bill as unconstitutional.
What has the state done since then about the crisis it said was so severe that nothing would work besides benefit cuts?
Nothing.
Deny, delay, extend and pretend.
Gov. JB Pritzker says that even amending the state’s pension protection clause wouldn’t work because of federal constitutional obstacles. That’s false. Other states have done it and court challenges have failed or not even been tried.
That brings us to the new report on Illinois state and local pensions – all 676 of them. Our detailed report on it is here. It’s prepared every two years by the Illinois Department of Insurance and is current through 2022.
All totaled, Illinois taxpayers face an unfunded pension liability of $207 billion. By far the biggest portion of that is $142 billion for the state’s own five pensions. The remainder is for local pensions.
How does that compare to those years back when our leaders said the pension crisis was unsolvable without meaningful reform?
It’s worse now. Even adjusting for inflation, the problem has grown, particularly for the state’s own pensions. In 2013, the total unfunded liability was just $158 billion, of which $98 billion was for the state’s five own pensions.
In short, our elected officials now ignore what they said, less than ten years ago, was a crisis demanding extraoardinary emergency action.
Most of us don’t remember Quinn fondly and his Squeezy character got plenty of laughs. But give him credit for at least calling attention to a problem that indeed strangles the state budget, rendering the state uncompetitive in its tax burden and quality of services.
Time heals everything, it’s often said.
Not pensions.