On Sunday, March 10, 2013, Illinois Governor Pat Quinn (photo right) spoke to about 90 North Shore residents at the Winnetka Community House. He covered a variety of topics including pensions, gun control, civil unions, casino gambling, high speed rail, and education funding. The event was sponsored by the New Trier Democratic Organization.
Perhaps the most interesting part was the Q & A after his 25 minute speech. My question was the first one asked, which was, "Governor, for new state employees, would you consider an IRA or 401k, in order to phase out government from the pension business?" The governor gave a long three minute answer without really addressing the question.
As a student of public policy, I have attended many events, lectures, and townhall meetings this year. I have asked the same question to a variety of public policy makers this year including Bill Daley, John Cullerton, Karen Lewis and Dan Rutherford. Bill Daley indicated the private sector has moved this way(IRA'S and 401Ks) but would not comment either way for public section employees. John Cullerton indicated that we need the new employees to fund the system more or less indicating is may be unsustainable. Karen Lewis said she wanted a "new stock transation tax" to fund education raising millions but could cost Illinois their financial industry. Dan Rutherford said he would consider all options and put everything on the table, even revenue. All in all, politicians do not want to get nailed down on this issue as it may cost them votes and elections.
The pensions in Illinois have been poorly managed for years and now have come to be a front burner issue since the credit rating in Illinois has gone down. Businesses in Illinois are leaving the state, partly due to huge tax burdens. Younger or newer employees have realized the system may collapse long before their retirement, so paying into the system has become another major issue.
Some experts have even suggested that all State of Illinois employees, including teachers in local school districts, be moved completely into the federal social security system (FICA) so there would be defined benefits, which would be much lower.
The idea is being floated by Illinois lawmakers to create a "cost shifting" that would take the current teacher pension costs away from the state, which is funded by State income tax. This would put the burden back on local school districts, which of course is funded by local property taxes. This could result in huge increases in property taxes and a huge decrease in property values in Illinois. Some tax payer groups have advocated some type of structured bankrupcy for current pensions which surely would be challenged in court.
It should be noted by my count, the governor used the word "investment" 18 times during his presention, the word "reform" 11 times, and the word "tax" zero times. "Investment" is another word for "spending" tax dollars. It is not just spending but the borrowing is a huge burden on current and future residents of Illinois.
The governor shook hands and took pictures after his speech and as usual was extremely charming, friendly, and cordial. Surely he will have his hands full with the pension mess, along with a challenge in 2014 from Democrats like Lisa Madigan and a slew of Republican hopefuls. There seemed be some consensus in the room that Illinois will have to get its finanical house in order.
I'm sure we will be hearing much from Governor Quinn on a variety of issues soon.