By Ted Dabrowski, Illinois Policy Institute -
When Rhode Island saw the writing on the wall late last year, its legislature did something no one thought it could do. It passed the boldest pension reforms in the nation.
A democrat-controlled state, with the second-worst funded pension system in the nation, passed a series of reforms that cut the state’s unfunded liabilities by almost 50 percent.
What triggered Rhode Island into action? The math.
A massive jump in the state’s pension debt, based on new and more realistic assumptions, sent legislators an unmistakable message. Without real pension reforms, the programs most dear to them were about to be cut dramatically to make room for ballooning pension payments.
In contrast, Illinois’ dire pension math has yet to trigger any serious reforms. And based on the only proposal being considered in Gov. Quinn’s special session on August 17, real action is still a long way away.
That proposal will cut only a pittance of the state’s total unfunded liabilities. At best, a little more than 3 percent of total retiree debt will be reduced. HB 1447’s “reforms” exclude both the teachers and universities pension systems, meaning that almost 75 percent of the state’s pension problems are off the negotiating table. Illinois legislators just haven’t grasped the severity of the math.
In Rhode Island, legislative leadership ordered a recalculation of the state’s total pension liabilities, requiring honest retirement age assumptions and more realistic investment expectations. When they received the new numbers, they found that the unfunded liability for pensions had jumped by nearly 50 percent.
Legislators moved quickly. They raised the retirement age for future pensioners. They suspended the automatic cost-of-living adjustments (COLAs). Most importantly, they ended their defined benefit structure in favor of a new one, heavily centered on 401(k)s. Bold leadership led to bold action.
Amazingly, only 17 lawmakers, out of 113 total, voted against the pension reform bill. This, in a union-dominated state that has been controlled by Democrats since WWII.
What’s it going to take to convince Illinois legislators to act?
They, too, must focus on the math. The numbers don’t lie. More HERE