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State Rep. Lou Lang, D-Skokie, announced his retirement days
before he was slated to start his 17th term in Springfield last week.
But he won’t be leaving the Statehouse. His new title is lobbyist.
That’s an unsavory pivot in the minds of many Illinoisans. But it’s nothing new.
And it’s certainly not unique to Illinois. Here’s one thing that might be,
though: an obscure, lawmakers-only sweetener means Lang is set to receive a
six-figure pension for life after just one year of retirement.
It’s another unfortunate example of rules carved in stone that have been the
undoing of the state’s balance sheets and core services. The Illinois
Constitution says pension benefits may not be “diminished or impaired,” even
when it’s politicians who are profiting handsomely on the public dime.
The story of this strange perk stretches back 30 years.
In 1989, Illinois lawmakers in the final days of legislative session passed a
set of changes to the state’s pension systems. Under the old law, public
retirees received a bump in their pension every year. But the bump was based on
simple interest – 3 percent of the first year’s pension payment.
Under the new law, the state swapped simple interest for compounding interest.
That meant the 3 percent bump would be based on last year’s payment, not the
original amount. This simple change has cost the state billions of dollars over
the years. And the Illinois Supreme Court has interpreted the state constitution
to mean these automatic raises throughout retirement can’t be touched for any
worker hired while they were on the books.
But that wasn’t the only change in 1989. Lawmakers gave themselves an extra
special benefit allowing them to hoard pension “spikes.” After serving 20 years
in office or turning age 55, whichever came later, they could bank an additional
3 percent boost to their eventual pensions each year.
Enter Lang.
His final salary was $87,600. And his first-year pension will be 85 percent of
that, or around $74,500. But then the spikes kick in.
Under the pension formula, Lang banked 3 percent boosts in his eventual pension
for 11 years in office. So when year two of retirement comes around, he won’t
just get a 3 percent raise like other retirees, he’ll also get a 33 percent bump
on top of that.
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Lang’s year-two pension? More than $101,000. Not
bad for a lobbyist who will be collecting a private salary as well.
Of course, Lang contributed to the system throughout his career. But
he will get back more than his entire contribution within three
years.
This special perk ended in 2003, but lawmakers elected before then
are still able to reap their reward. Lang isn’t alone. His is just
the latest case representing a larger problem. He’ll join 58 other
former Illinois state lawmakers from both sides of the aisle taking
home six-figure pensions, many of whom took full advantage of this
perk.
It’s true that payments to former lawmakers are a drop in the ocean
of Illinois’ pension liability. They’re a rounding error. But future
recipients of legislative pensions are also the ones responsible for
fixing the bigger problem.
There’s a lot of talk about renewed bipartisanship and a new day in
Springfield. Dozens of state lawmakers have already opted out of the
pension system. The General Assembly should take the lead and phase
out their own defined-benefit system and get to work on a
constitutional fix for the rest of Illinois’ pension mess.
Here’s a place to look: Michigan found a middle road to pension
reform – making a distinction between already-earned benefits and
yet-to-be-earned future benefits. A constitutional amendment making
the same distinction in Illinois would be transformative.
It would finally allow reforms to those automatic 3 percent benefit
increases, for example. But it would not allow for cutting a dime
out of checks to current retirees or benefits already accrued by
current workers.
In other words, it would finally allow for compromise in the face of
a crisis.
This is the only realistic path toward pulling the state’s head
above water. The alternative is an entire generation of severe tax
hikes and mounting debt.
The choices are clear. And the correct one becomes easier to make
when the people voting on changes don’t have six-figure checks
riding on the status quo.
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