Last week, the General Assembly met in special session to address legislation regarding the state pension systems.
Today, the unfunded pension liability in Illinois exceeds $100 billion. From last year to this year, our required pension payment increased by $936 million. We now spend more than 20% of General Revenue--more than $6 billion per year, or nearly as much as we spend on all K-12 education across the state--on the pension payment.
In order to meet our growing obligations, we've made cuts in other areas of state government. School funding was reduced to 89% of the formula level. State prisons, mental health hospitals, and developmental disability centers were closed. The Medicaid system was targeted for $2.7 billion in reforms. More than $6 billion in unpaid bills have piled up.
A prior General Assembly also sought new revenue by raising personal and corporate income taxes. While that tax hike brought in more money, it had a cost. A recent study by the University of Illinois showed that job creation slowed and our economy lagged after the tax increase.
Still, after spending cuts throughout the state and after asking taxpayers to contribute even more, the incredible cost of the state pension system still hobbled the state. Illinois still has the lowest credit rating of any state in the country.
This year, I have listened to constituents share different perspectives on pension reform. I held town halls, participated in forums, and met with groups of state employees and retirees. We did not always agree, but we each shared our thoughts in an open discussion.
A special conference committee set out to find a pension reform bill that would achieve meaningful savings and gain enough support to pass the legislature and be signed by the governor. The bill we passed was not perfect, and it’s not the last word in pension reform. But it was a reasonable compromise and a big step towards stability and solvency.
There are many misconceptions about what the bill does. After explaining the details to state employees and retirees, I have found many agree this is a reasonable step.
If you’re currently receiving a pension check in the mail, the bill won't reduce it by one penny. And you’ll still get an increase every year. We simply put a cap on the amount of an increase you can get in a single year.
The bill offers the most protection to those with modest pensions and those with the most years of service. Pensions up to $30,000 may see no change at all—and that cap will increase every year along with inflation.
Current employees may have to work a bit longer before retirement, but that affects only those who are 45 years old or younger and have time to adjust their retirement plans accordingly. The bill also puts a salary cap on pensions, but that only affects those who make more than $109,000 per year.
Current employees will keep an additional 1% of their paycheck now, as their required contribution has been lowered. This move was a compromise to provide something of value back to employees along with the other changes to the pension plan.
The bill also strengthens the requirement ensuring the State makes its pension payment every year, allowing for a lawsuit against the State if it fails to make a payment.
Additionally, the State will dedicate a portion of the savings from this bill to an add-on contribution to the pension system, above and beyond the regular yearly payment. Furthermore, beginning in a few years, the state will make another add-on payment of $1 billion annually above its regular payment. These additional investments will help ensure the pension systems stay afloat.
With changes made only to future payments, supplemental state payments, improved guarantees, a reduced employee contribution, I believe this bill is constitutional and reasonable.
While the pension systems are important, they are not the only obligation we have to manage. The 12.8 million people in Illinois have many different priorities, needs, and expectations. Many citizens are struggling with unemployment, underemployment, high taxes, and don't have a fraction of the retirement benefit accorded to public employees.
These decisions are not easy, but they’re necessary. Illinois is facing too many problems for us to avoid making tough decisions. We did not get in to this problem overnight, and it won’t be solved with a single bill.
I’ll keep working toward solutions, even when they are not easy. Even when we disagree, I’ll always explain my vote as clearly and as openly as I can.