Pension time bomb ready to explode
(MCT) — Like an action hero laboring over whether to cut the blue wire or the red wire and defuse the ticking bomb, lawmakers are again going to tackle the issue of pension reform.
Each daily tick on this counter adds $21 million to the $96 billion the state owes to the state employees’ pension system.
But lawmakers still can’t seem to cut the wire. They can debate over which color to clip or the damage that will be caused (or already has been in the appearance of lowered credit ratings), but do little more than toss the time bomb into the laps of taxpayers.
That’s because when funding falls short, whether because employee contributions don’t keep up or investments yield less than anticipated, taxpayers are obligated to make up the difference.
Last year, taxpayers put $1.1 billion more into the State Employees’ Retirement System than the employees contributed. The Illinois Policy Institute said that’s just the start. It expects taxpayer contributions to rise 164 percent by 2045 — meaning taxpayers would cough up $4.4 billion to supplement $535 million in payments by employees.
Taxpayers are already pumping 593 percent more into pension funds than 15 years ago; employee contributions have gone up 66 percent during the same period.
Part of the problem is not-so-simple math. Actuary science is the fancy name for it, and it involves using math and statistics to determine such things as future financial climates, life expectancy and payouts. They are basically highly educated guesses. Those guesses have been off by $3.7 billion since 1996 — a shortcoming, again, made up by taxpayers.
The roller-coaster market ride has not helped either. The Commission on Government Forecasting and Accountability says investments brought in $3.6 billion less than expected since 1996 — that’s right, another taxpayer issue.
The Legislature has been afraid to tackle the matter because of its potential for political suicide. State workers and their unions are a powerful force. As a result, lawmakers cower and continue to pawn the problem onto the shoulders of taxpayers by pretending nothing is wrong.
Someone needs to step forward, though, and be willing not just to say the system is broken — because it is — but to explain how it needs to change. It will alienate a lot of people to shatter the illusion that the existing system could ever be fixed, but it is a necessary first step.
The pension funds need to be taken out of the hands of politicians and benefits need to be examined and brought to sensible expectations. Taxpayers should not be penalized when investments aren’t what was expected, and state workers should be given the flexibility of making their own investments instead of having everything pooled by the state.
Correcting the decades of underfunding and political ambivalence that created this mess won’t be easy.
The change has to start somewhere, though, if we’re going to move beyond rhetoric and save the future for taxpayers and state workers alike.
This editorial first appeared in The Telegraph, Alton, Ill.
©2013 The Telegraph (Alton, Ill.)
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