“If 50 people say you’re drunk you probably ought to lie down.” – Jim Rockford, Rockford Files
The discussions going on in Springfield regarding pension reform still have not addressed the key concern: taxpayers must have a reasonable, fixed annual cost going forward. They cannot be on the hook for everything that can and will go wrong between now and 2062. Any increased pension costs beyond the agreed, affordable fixed taxpayer portion must either be paid for by other employees or result in automatic pension decreases.
Pension costs must be part of total compensation, not separate and apart.
The biggest single problem that needs to be addressed as part of any comprehensive pension reform in Illinois is the idea that taxpayers are responsible for every shortcoming of the current system whether it is investment returns,benefit increases or 8.5% interest charges on assets that do not exist. Currently this is accomplished by having the state pay pensions separate from the operating budgets of each government unit. Thus one party determines salaries, fringe benefits, vacations, sick leave etc. and the pensions are paid by the state regardless of the cost.
What needs to be done is to fix the taxpayer portion of the cost and assign all pension costs above that amount to the operating budgets of each government unit whether State Police, community colleges or K12 school districts. Total compensation paid to each public employee should include the costs of pensions and when that is not the case salaries automatically rise to fill the gap left by pension cost not being part of total compensation. This is exactly what happens in Illinois now because those who determine salaries and fringe benefits are not assigned pension cost responsibility. This results in Illinois taxpayers paying more both for salaries and pensions.
This pension proposal assigns pension costs to operating entities and shows how to pay for them. It fixes taxpayer pension cost at 15% of payroll and all pension cost in excess of that must come out of departmental budgets and employee compensation costs.
The goals of this pension reform proposal are as follows:
- Fix taxpayer pension costs at a reasonable figure similar to what would be paid in a Social Security/401K plan.
- Force managers to manage by assigning all compensation and health care costs to their budgets. Freeze those budgets for 5 years.
- Make employees understand that there are only so many dollars available and that pension contributions are part of their pay and if pensions go up then salary or fringe benefits must come down. A compensation dollar can only go towards one compensation element.
- Give employees some flexibility by allowing them to switch compensation elements around as long as the total does not exceed their assigned total compensation value. More insurance and less pension or less insurance and more salary for example.
- Give employees more cash-out options than they have now as long as it does not increase pension costs. This can be done by adjusting pension payouts down slightly and will make pensions more portable similar to 401K’s.
- Attempt to get reform buy-in from all groups by emphasizing the draconian cuts (including employment itself) that will and must be made if taxpayer pension costs are not reduced substantially.
- Quick resolution is mandatory and a legal resolution will take years to resolve. Amending the constitution will also take years unless we can round up 300,000 signatures.
We need to get Illinois Open for Business by solving the problem quickly and efficiently. As it stands now no business in their right mind would open shop here and many are leaving. We must be competitive or we will wither and die on the vine. We can either be the next Indiana or the next Michigan.
The bomb is ticking and time is running out.