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McCaleb: Don’t worry about lawsuit, reform pensions

Published: Sunday, Jan. 13, 2013 9:23 a.m. CDT

Most people would rather not have to go to court ... not for any reason.

No one wants to get sued.

No one wants to be arrested.

Most people I know don’t even like the thought of jury duty. (Don’t ignore that notice if it comes in the mail, though. That’s certain to land you in front of a judge.)

Sometimes, however, you have to go to court to get matters settled properly, like it or not.

That’s exactly what’s going to have to happen if Illinois is going to fix its unsustainable public pension systems. Our elected officials in Springfield are just going to have to get comfortable with that fact.

It’s the threat of going to court that seems to be the biggest obstacle – or excuse, depending on whom you ask – to meaningful public pension reform in Illinois.

Illinois’ Constitution, revised in 1970, says this:

“Membership in any pension or retirement system of the state, any unit of local government or school district, or any agency or instrumentality thereof, shall be an enforceable contractual relationship, the benefits of which shall not be diminished or impaired.”

Those 40 words – particularly “diminished” and “impaired” – can’t be the reason that our pension systems become insolvent, leaving tens of thousands of current and future retirees with no benefits.

In the lame-duck session of the General Assembly that concluded last week, lawmakers again failed to pass public pension reform. Our five pension systems are underfunded by a worst-in-the-nation $96 billion and climbing.

There are a number of reasons for this:

• Governor after governor neglected to pay the state’s full share, year after year.

• Local school boards gave generous raises to educators in the final years before their retirement, artificially inflating their benefits.

• For years, government agencies allowed employees to retire early, taking their higher salaries out of operational budgets but placing them in the pension systems early.

• State government unreasonably promised over-the-top benefits, including compounded, 3 percent cost-of-living increases each year and free or reduced health care benefits.

The bottom line is that these benefits aren’t sustainable and haven’t been for a long time. As I see it, there are four options, two viable and two not.

• Public pensions will have to be significantly “diminished,” meaning COLAs will have to be drastically reduced, current employee contributions increased, etc.

• Public pensions will have to be converted to 401(k)-style, defined-contribution programs that the private sector converted to decades ago.

• Taxpayers will have to fork over billions of dollars in additional revenue each year to sustain the current systems.

• The status quo – no reform, no new revenue.

This last option would result in the systems running out of money, ruining the retirements of tens of thousands of employees as early as 2028, and paralyzing the state’s economy.

The third option – significant tax increases – would lead to a revolt by taxpayers and also would devastate Illinois’ economy.

The first two options are the only ones that have a chance of putting Illinois back on the road to fiscal solvency – though the Illinois Policy Institute, a conservative, nonprofit think tank that has done a lot of great research on state fiscal matters, argues that only the second solution is viable in the long term.

Regardless, either of the first two options would “diminish” public employee pension benefits, leading to a court challenge from unions.

“AFSCME will sue, no matter what,” said Diana Sroka, director of media relations for the Illinois Policy Institute and a former Northwest Herald reporter. “We can’t water down pension reform to avoid court, because you can’t avoid [court]. And there’s a moral reason for it, too. Bad reform won’t save the systems.”

It bewilders me that the public employee unions are fighting against meaningful reform, instead of for it. The math is pretty simple. Our pension systems are $96 billion in the hole. That hole continues to grow.

At some point, there will be no money to pay retirees. That means no benefits. A “diminished” retirement benefit is better than no retirement benefit, isn’t it?

The next session of the General Assembly is under way. There can be no more excuses on pension reform.

Get it done now, even if it means defending it in court later.

Nothing short of Illinois’ economic future is at stake.

• Dan McCaleb is group editor of Shaw Media and acting editor of the Northwest Herald. He can be reached at 815-526-4603 or by email at dmccaleb@NWHerald.com. Follow him on Twitter at @Dan_McCaleb.

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