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December 31, 2012

Illinois dragging its feet on employee pension problem

CHICAGO — Illinois, a state with a reputation for political wheeling and dealing, backroom handshakes and 11th-hour bargains, is dragging its feet on the one deal needed to solve its biggest crisis in a generation.

Lawmakers will convene again the first week in January in hopes of fixing the nation’s worst case of underfunding state employees’ pensions, a problem approaching $100 billion and mounting by $17 million per day. On the table are solutions that other states adopted as long as five years ago.

California and New York — states that, like Illinois, lean Democratic and have strong state employee unions — already took unpopular, tough-love measures to pass pension reform.

So have Kansas and Rhode Island — which in recent years kept Illinois company by having set aside barely half the money needed to fund their pensions — and dozens of other states. Among the changes are higher retirement ages, asking workers to contribute more and switching to 401(k)-style plans.

Critics blame Illinois’ situation on procrastination, budgetary “gimmicks” and frequent raids on state-employee retirement funds to pay for other state expenses. Others blame an unwillingness to take on the unions, which help keep Democrats in power in President Barack Obama’s home state. But it’s a problem decades in the making, through nearly a dozen Republican and Democratic governors and through legislatures controlled by both parties, dating back to before Illinois changed its constitution in 1970 to prohibit reductions in state employee retirement plans.

“Nothing has changed in 40 years,” said Elaine Nekritz, a suburban Chicago Democrat and chairman of the House Pensions Committee, who called for an end to “excuses” when rolling out another proposal to solve the problem this month.

Getting a deal done will most likely require lawmakers to do things practically unheard of; Democrats would have to anger loyal union supporters, while Republicans would have to support a plan they think will lead to a tax hike. But without a fix, the payment the state has to make to its pension fund each year will continue to grow, leaving less money for things like education and health care that already have seen big cuts. By 2016, Illinois would be spending more on pension payments than on schools, the governor’s office estimates.

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