Lawmaker suggests different approach to payoff Illinois' pension debts

[September 20, 2023]  By Andrew Hensel | The Center Square

(The Center Square) – A member of the Illinois House Personnel and Pensions Committee is suggesting lawmakers may need to look at other options if they hope to solve the state's pension crisis.

Illinois currently spends more than $10 billion a year on public pensions, and the state's five systems have an unfunded liability of at least $140 billion.

House Bill 4098, which has been the center of conversation during the House Personnel and Pensions Committee hearings over the past few months, would allow the Illinois Treasurer and Comptroller to transfer $500 million from the General Revenue Fund to the Pension Unfunded Liability Reduction Fund each fiscal year. Those funds would then be used to make payments into the state's pension systems.
 

The committee's chair, state Rep. Stephanie Kifowit, D-Oswego, said this is the right way to fix the pension crisis.

"This is the first time ever we have had a bill that discusses Tier 2 to this depth," Kifowit told The Center Square in July. "This truly is momentum going in the right direction."

Tier 2 pensions are for state employees hired after 2011. Stakeholders say the fewer benefits compared to Tier 1 are problematic and could run afoul of Social Security rules.

New to the House committee, state Rep. Martin McLaughlin, R-Barrington Hills, believes HB4098 goes after the taxpayers instead of addressing the unfunded liabilities.

Illinois state Rep. Martin McLaughlin, R-Barrington Hills - Greg Bishop / The Center Square

"Twenty-eight percent of our budget now goes to pensions when most states are at 8%," McLaughlin told The Center Square. "What is our solution? Move Tier 2 to Tier 1 and give them even more. So our solution is to go after the taxpayers' wallet."

Private pensions restructured their pensions years ago, an approach McLaughlin said legislators should consider but won't.

"They restructured their pensions 10 or 15 years ago. They restructured them because they knew they were going to make sure they were going to get paid is to keep underlying business solvent," McLaughlin said. "The public pension plans have never, and they will not allow that negotiation to take place. Their job [pension fund stakeholders] is to make sure we can stay solvent, and the only way they believe they can solve it is to constantly tax us. That is a recipe for disaster, which is why everyone is leaving the state."

The state manages five pension funds. The Teachers' Retirement System covers retired teachers from across the state, except for Chicago.

Combined with TRS, the State Universities Retirement System, the State Employees' Retirement System, the Judges' Retirement System, and the General Assembly Retirement System have an unfunded liability of at least $140 billion. They are funded at only about 42% of what is needed. The pension system for lawmakers is the worst-funded at approximately 19%.