Reaction to Pension Reform Vote

Pension reform passed the Illinois House and Senate today. Here are some reactions from politicians and policy institutes:

Bruce Rauner Statement on Pension Vote

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Bruce Rauner issued the following statement after the Illinois legislature passed the pension deal:

“Springfield politicians today voted to slap a small bandage on an open wound. While it may help them temporarily feel better, it does little to fix the real problems facing Illinois. The pension system remains broken and badly underfunded. State spending has never been higher, or less productive. Another tax hike is looming around the corner. State government is in desperate need of reform. Our economy continues to suffer, and far too many Illinoisans remain out of work. The fact is after decades of career politicians running things in Springfield, expectations of what Illinois can accomplish are far too low.  We can and must do better. I’ll shake things up in Springfield and deliver results that will truly bring back Illinois.”

ILLINOIS STATE TREASURER DAN RUTHERFORD REACTS TO PASSAGE OF PENSION REFORM LEGISLATION

Chicago-December 3, 2013- “The will of the General Assembly is the adoption of current pension reform legislation,” said State Treasurer Dan Rutherford.  “Litigation is inevitable, and I hope that the courts issue an expedited ruling as to the constitutionality of the legislation. The sooner the better, so we can move our great state forward.”

STATEMENT FROM MAYOR RAHM EMANUEL ON ILLINOIS PENSION REFORM PASSAGE

"Today, the Illinois General Assembly cleared a major hurdle by passing pension reform for the state's four retirement systems. Now state workers will have the certainty that pensions they paid into and are counting on will be there for them when they retire, and taxpayers can feel confident that they won’t have to shoulder the burden alone. However, the work is far from finished. The pension crisis is not truly solved until relief is brought to Chicago and all of the other local governments across our state that are standing on the brink of a fiscal cliff because of our pension liabilities.  Without providing the same relief to local governments, we know that taxpayers, employees, and the future of our state and local economies will remain at risk."

Heartland Institute Experts Comment on
Illinois Pension Reform Bill Vote

The following statements are from budget and pension experts at The Heartland Institute – a free-market think tank based in Chicago:

“Illinois’ faux pension reform bill is being heralded by many as real ‘fundamental reform’ but the minor changes being proposed are not significant or ‘extreme.’ The fundamental problem with the current pension system in Illinois is the unsustainable ‘defined-benefit’ pension plan system, which goes practically untouched by the proposal except for a few minor tweaks to retirement age and COLAs (cost of living adjustments).

“This could be the one opportunity for Illinois to get pension reform right, and this proposal gets it wrong. More than likely, this proposal will set back the true fundamental pension reform that is required to protect taxpayers from further tax hikes, give public employees more job flexibility, and put Illinois on a sustainable fiscal path.”

Civic Committee of the Commercial Club of Chicago on the passage of today's pension reform bill in Illinois:

Faced with the most pressing pension crisis in the nation, Illinois lawmakers returned to Springfield Tuesday to pass landmark legislation: a compromise bill to reform the state’s public employee pension systems.

“This bill isn’t perfect and it wasn’t without compromise, but it was undoubtedly the right thing to do for the state and its citizens,” said Ty Fahner, President of the Civic Committee. “Today, legislators put the people over politics and put the state on a viable path forward.”

SB1 is projected to reduce Illinois’ almost $100 billion unfunded pension liability by more than $21 billion and 30-year state contributions by $160 billion – funds that can be reinvested into state programs and used to pay down the state’s backlog of unpaid bills.

“This bill is for the betterment of Illinois taxpayers, as well as public employees and retirees,” said Ed Liddy, Chairman of the Civic Committee of the Commercial Club of Chicago. “With these reforms, Illinois has taken significant steps to secure the retirements of Illinois’ public employees while freeing funds for education, human services and other critical state programs.”

The legislation’s most notable elements include:

·     -  reducing annual cost-of-living-adjustments,

·      - phasing-in increases in retirement ages,

·      - instituting a pensionable salary cap,

·      - reducing employees’ contributions by one percentage point, and

·      - instituting a new funding schedule for the systems to be fully funded by 2044.

In 1995, Illinois dedicated just four percent of revenue to pension funding. Today, more than 20 percent of state operating funds go towards pension payments. Without reform, these payments would continue to grow and consume a greater and greater share of state revenues.

The Civic Committee released its first Facing Facts report, detailing Illinois’ path towards financial implosion and the urgent need for pension reform, back in 2006. In the seven years since, the state’s financial situation has significantly deteriorated.

“It’s about time,” said Jim Farrell, Chairman of the Civic Committee’s State Finance Task Force.  “This is an important step in bringing our state back to an economically viable and competitive Illinois.”

In spite of the passage in 2010 of pension reforms for new employees, Illinois has racked up billions in unpaid bills, lays claim to the lowest credit rating in the country and boasts the nation’s second-highest unemployment rate. This despite a 67 percent income tax hike in 2011, deep cuts to nearly every discretionary program and significant cuts in the size of the state workforce.

“For far too long the pension crisis has tied our hands. While there is still much to be done to address the state’s fiscal woes, this bill will allow us to focus on investing in our communities and opening doors of opportunity for Illinois residents,” said Rick Waddell, chairman of the Commercial Club of Chicago.

Illinois Policy Institute

Today the Illinois General Assembly sent a pension bill to Gov. Pat Quinn. It is important to be clear about what this bill is and is not. 

Let's start with what this bill is not.

This bill is not the sweeping reform that Illinois has been waiting – fighting – for over the past few years. This bill does not fundamentally change the way pensions are calculated and paid out in Illinois. This bill does not set up a system that is fair to both taxpayers and government workers. 

The passage of this bill was not the moment in which the very same politicians who drove this system into the ground finally stood up, did the right thing and fixed it.

Here is what the bill does: delays addressing the problem head on. It buys time.

The conversation about pension reform became serious in 2011. At that time, Illinois had an unfunded liability of approximately $80 billion. 

Today, the official unfunded liability is $100 billion. The bill passed today would – at best – reduce the unfunded liability to $80 billion. It dials back the crisis just to 2011 levels. 

The bill passed today purportedly cuts the state's pension payment by $1 billion next year. Know where that gets us? To the same level payment as the state had for the fiscal year that ended on June 30, 2013. 

It's universally accepted that this bill does not represent a "solution" to Illinois' pension crisis. Many politicians who voted for this bill have said as much, and have defended their vote by saying, "This is not a solution; it is a first step."

A "first step" necessarily means there is a second step. Now the real reform begins; now we start working toward the next step. 

For examples of what that next step is, look around the country. There is something in common with states enacting pension reform and turning their fiscal houses back in order: Michigan, Alaska, Rhode Island. They're all moving away from pensions and to the defined contribution model. 

If Illinois is going to turn around, it will have to do the same. In February 2013, we proposed a landmark bill that would pay government workers everything they've earned so far in the pension system, and start a 401(k) system for all benefits going forward. It would immediately cut the unfunded liability in half, by $46 billion, and would save the state more than $221 billion over the next 30 years. The benefits would be so generous that it also would not require the state to participate in Social Security. 

The bill that passed today may get the governor's signature, but it does not mean the pension crisis is solved. We will continue working diligently to enact real pension reform to get Illinois back on the path to prosperity.

In liberty, 

John Tillman
CEO

Dillard votes against pension proposal

SPRINGFIELD, IL – Republican candidate for governor Kirk Dillard cast a "no" vote today on the pension reform proposal put before the Illinois General Assembly. Dillard cited lingering questions about the constitutionality of the proposal and concerns about the lack of public vetting of the legislation.

"I don’t believe this bill can survive a court challenge." Dillard said. "It just doesn't meet the constitutional standards for consideration that I believe it must have in order to hold up in court."

Dillard noted that many other lawmakers shared his concerns, especially in light of the limited time they had to review the 300+ page bill. "So what are we really doing here? We’re leaving a baby at the doorsteps, late at night, and hoping for the best," Dillard said.

The Senator also expressed concerns about how the reported $160 billion in savings achieved through the measure would be spent. "Will it be used to pay down old bills? I don’t think so."

Dillard pointed to the 67 percent state income tax increase passed in 2011, which many said would solve the state's fiscal problems. "We’re no better off after the tax increase than we were before, except that our business climate took a hit and more employers had to shut down or leave Illinois," Dillard said.
 
“Neither the House Speaker, Senate President, nor the Governor have demonstrated the budgetary discipline needed to reduce the state’s multi-billion dollar bill backlog, or limit spending in order to allow the tax increase to expire as they promised,” Dillard said.“Knowing this, without assurance that the savings will be used prudently, I hesitate to free-up billions of additional dollars that they can use to further expand entitlement programs or subsidize more pet projects at the expense of our retired teachers, state workers and law enforcement officers.”
 
Dillard had previously called for the Senate to convene a Committee of the Whole to publicly vet the legislation, including testimony from legal and actuarial experts able to explain the nuances of the legislation. He noted President Obama’s Affordable Care Act (“Obamacare”) was similarly rushed through Congress without a thorough review.
 
“Recently we saw a similar scenario play out in Washington when then House Speaker Nancy Pelosi forced through Obamacare saying ‘we need to vote for it, so we know what’s in it,’” Dillard noted. “There’s been quite a lot of ‘buyer’s remorse’ from that decision. It’s troubling that we might be making the same mistake by voting on legislation that most lawmakers have not had a chance to read.”
 

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