Ten abuses of Illinois’ pensions systems go a long way to explaining how the state wound up in a $313-billion pension hole.

Roughly 1 in 10 Illinois adults is a member of an Illinois pension system. Their retirements are hurt by legal, but corrupt, rules and practices created by recently indicted former Illinois House Speaker Mike Madigan and other Illinois politicians.

Here are 10 examples of pension “rights” gone wrong.

No. 1: Madigan’s rules benefit Madigan’s pension

Madigan’s fingerprints on the pension crisis extend back even before he became an elected member of the Illinois General Assembly. As a delegate to the 1970 state constitutional convention, Madigan voted in favor of the pension clause. That clause was the basis for the Illinois Supreme Court’s 2015 ruling that meant no significant pension reform could take place – including those affecting only future benefit growth, such as altering cost-of-living adjustments – without a constitutional amendment.

Madigan directly benefited from some of the loopholes and rules he created. Perhaps the most egregious was a pension sweetener made available only to lawmakers that allowed him to “bank” 3% cost-of-living adjustments for 25 years. The special perk got him an extra $66,000 added to his pension after the first year of retirement, allowing his monthly payout to jump from $7,100 to $12,600. If Madigan collects his pension for 17 years, he will receive nearly $3 million in return for his $350,000 in contributions. That pension sweetener was eventually eliminated for lawmakers elected after 2002.

Because of the pension clause, no changes to Madigan’s benefits can occur absent a constitutional amendment.

No. 2: Gov. Edgar benefits from broken system he championed
 

Former Gov. Jim Edgar has also benefitted greatly from the pension system he helped create. Edgar championed “pension reform” that enabled the Edgar Ramp, which put the state on a 50-year repayment trajectory and deferred costs into the future. The policy has been a major reason why the state’s $15 billion pension deficit has exploded to over $313 billion, according to Moody’s Investors Service. Edgar and numerous lawmakers have become pension millionaires from the system they created at the expense of taxpayers.

The Edgar Ramp failed because of fundamental flaws in its design. The repayment schedule backloaded higher payments, keeping payments low during the first 15 years to ensure the budget for Edgar and his successor would not be restricted by high pension payments. The 50-year repayment cycle was much too long and did not result in the state discovering newfound money to make the higher payments as the cycle progressed. Its goal was to put just 90% of what would be needed into the pension systems, meaning even if the state kept up with the payment schedule it would still knowingly short its pension obligations by 10%.

No. 3: Chicago Mayor Daley maneuvers money to increase pension payout

Former Chicago Mayor Richard M. Daley took full advantage of the pension system to give himself a huge benefit boost and save himself hundreds of thousands in contributions. Daley rejoined his legislative pension plan for a single month in 1991 before returning to the Chicago Municipal Pension Fund, which made him eligible to receive 85% of his mayoral salary as a pension benefit. At the time, he was just 49 years old and had he retired at 55, his one-month maneuver would have pushed his pension payout from just over $20,000 to nearly $98,000.

Daley went on to be reelected five more times and when he ultimately retired, he did so with a pension worth about $50,000 more than it otherwise would have been, with an initial annual benefit of more than $183,000. Around the time he greased the skids for himself, Daley also manipulated the pension system to hand huge benefit boosts to Chicago aldermen. Chicago’s eight pension funds now have more debt than 45 states.
 

No. 4: Union lobbyist gets full teacher pension for working a single day

David Piccioli was a union lobbyist for the Illinois Federation of Teachers who exploited a loophole signed by former Gov. Rod Blagojevich to receive a full pension from the Teachers’ Retirement System. He worked a single day as a substitute teacher. Piccioli paid $198,000 into the pension system to cover contributions for his 10 years of working as lobbyist, but he stands to become another pension millionaire set to receive over $3 million over 20 years.

Piccioli also earns a pension from the State Employees Retirement System that was worth $33,780 in 2019. He received that pension for 10 years of service as a legislative aid.

In 2012, lawmakers closed the Piccioli loophole. Initially, courts stripped Piccioli of the portion of his pension that was for his time working as a lobbyist and returned his $198,000 contribution with interest. Piccioli sued to more than double his pension by including credit for his years of lobbying. The Illinois Supreme Court sided with him in 2019, citing the Illinois Constitution’s pension clause that prevents earned and unearned benefits from being “diminished or impaired.” The ruling highlights the need for a constitutional amendment to enable even the most commonsense pension reforms.

No. 5: Dennis Gannon’s public pension based on pay as a union official, not as a city worker

Former labor leader and Streets and Sanitation Department employee Dennis Gannon retired in 2004 at age 50 while being credited for 33 years of service with the city of Chicago. Except he didn’t spend 33 years working for the city. He spent more than one-third of that time working for private labor unions. Gannon is projected to collect around $5 million in total pension payments during his lifetime. As of 2020, Gannon was receiving a monthly payment of $18,255, nearly $220,000 annually.

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