Our view: Plan B for pension reform | Northwest Herald

19 Jan

The Illinois Supreme Court is scheduled in March to hear arguments on the constitutionality of 2013 pension reform legislation approved by state lawmakers but challenged in court by public employee unions.

Because Illinois’ financial future depends on a complete overhaul of the state’s public pension systems, Gov. Bruce Rauner and legislative leaders shouldn’t simply cross their fingers and hope the state’s highest court rules in their favor.

They should start working on Plan B immediately.

Most signs point to the Supreme Court overturning the 2013 reform legislation. It isn’t what Illinois needs, anyway. Even if the court OKs it, most of the savings are backloaded so they won’t be realized until 2035-2045.

Guess what? We have a pension crisis now.

The state’s pension systems are underfunded by at least $111 billion. That number grows by the millions daily, and doesn’t count the $56 billion of unfunded debt for retirees’ health benefits.

Current pension benefits are, frankly, unaffordable. Each year, more and more tax money the state collects goes to pay nonworking retirees as opposed to services. The only way the current system can be sustained is through significant – and by significant, we mean huge – tax increases. Any tax increase would only drive more jobs out of Illinois and break the backs of hardworking Illinoisans, many more of whom also would flee the state.

Maintaining the status quo has one – and only one – eventual outcome: State retirees and employees will lose all of their retirement benefits, creating an economic crisis so big that 2008-2009 would seem like boon years in comparison.

The biggest obstacle to meaningful pension reform is language in the state constitution that says public employee benefits “shall not be diminished.”

So what’s Plan B?

During his campaign for governor, Rauner discussed a defined contribution option, a 401(k)-type retirement plan similar to what most employers in the private sector offer. This is the way to go.

An optional defined contribution plan could be offered to all state employees almost immediately, without legal challenge, as more meaningful, longer-term pension reform is adopted. One of the state’s public pension systems, the State University Retirement System, already offers it on an optional basis, and more than 18,000 university employees have opted in. Why wouldn’t they when the pension systems are in danger of crashing?

The Illinois Policy Institute, a conservative policy think tank, also has recommended adopting legislation that would move all state workers into a defined contribution plan moving forward. More…

via Our view: Plan B for pension reform | Northwest Herald.

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