The Lemont Tea Party co-hosted along with Americans for Prosperity Illinois a pension problem townhall meeting where the Illinois Policy Institute gave a presentation. They said that Illinois has the worst state credit rating of all 50 states. The total state debt is $203 billion. What does this mean to you the taxpayer? Each household owes the state of Illinois $41,000 in order for this debt to be payed off.
According to the Illinois Policy Institue, teacher retirement is eating away at public school funding. In 2012, ⅓ of school funding is going to retirement. By 2029, ½ of school funding is going to retirement. In 2045, ¾ will be going to retirement funds and not to students. Given the most recent new education dollars, 71 cents has gone to retirements and only 29 cents had made it to the classroom. Police and fire pension funds are also in great trouble.
How did this happen?
Year after year, politicians have failed to fund pensions. Instead they have spent the money promised to public employees elsewhere.
- There is no state constitutional requirement for Illinois polititions to pay state pension funds. Hence, they under-fund it by millions of dollars without repercussions.
- Politicians have given overly generous benefits. Together, public unions and politicians have negotiated benefits in the dark without the taxpayer being at negotition table, or negotiations being open to the public.
- Pension funds have not met investment targets. Politicians calculate that pension investment funds will aways make 8.5% every year. However, in the real world, markets fluctuate. When investment funds miss targets, tax payers are forced to make up the difference. Meanwhile, the tax payer’s personal investment fuds too are not making 8.5% every year. Hence, tax payers are the ultimate losers.
Presently, whatever pension fund money that actually has been set aside exists in some black box controlled by politicians. It is not fully transparent to the tax payers that funded it, nor to the public employees for which the money is intended. Instead, what Illinois needs to do is start fully funding public employee pensions. The Illinois government should be depositing each public employee’s pension fund into their personal retirement account. This will prevent underfunding, missed investment targets, and undo the automatic 3% compounded cost of living (COLA) increase public employee pensions receive every year. This will make public worker funds more closely mimic the retirement funds of the majority of Illinois tax payers.
One lesson that Illinoisans should learn from Wisconsin is that leadership matters. Illinois politicians act out of political expediency instead of doing what is right and what is so obviously needed.