Executive Director Reports

Pension crisis must be tackled head on

The drumbeat to reduce pension benefits of current public employees grows louder each day. Everyone from the frontrunner in the Chicago mayoral primary, Rahm Emanuel, to state House Speaker Mike Madigan and Minority Leader Tom Cross are on the warpath, railing about the supposed excessive retirement benefits earned by local government, university and state employees.

Politicians are performing the war dance, but the drums are being beaten by the corporate chieftains who are trying to enrage the taxpayers who supposedly foot the bill for pensions. Actually, it's only a portion of the cost that taxpayers underwrite directly.

A properly funded public pension plan will derive 80 percent of its revenue from the contributions made by members and the return on fund investments.

Of course, the key is "properly funded." Only one major Illinois public pension fund, the Illinois Municipal Retirement Fund, fills that bill. That's because under state law, the IMRF bills each local government yearly for what's needed to fund the benefits. If a local government fails to make the proper payment, the Municipal Fund, by law, has the power to collect it.

The state of Illinois places no such restriction on itself. The law stipulates what state and university employees pay, but the amount that the state has paid over many years bore no resemblance to what was actually required.

In effect, both the state and its biggest city were using revenues that should have been appropriated for pension benefits to pay for other programs.

You might wonder why, if the IMRF is on relatively sound footing, its beneficiaries are being attacked in the same manner as the other funds. After all, their benefits are relatively the same as the other plans. The answer is simple.

If the public knew that one plan was in relatively good shape, and being left alone, it might open their eyes to the fact that the pension crisis here in Illinois isn't the result of too-generous benefits, but of the failure of politicians to act responsibly.

In order to cover up their failures and deflect blame onto alleged excessive benefits, the same politicians responsible for the mess will attack all the plans.

They are dead serious about cutting our pension benefits, but fortunately they have serious obstacles to overcome.

First there is the Illinois Constitution and its Article XIII, Section 5 which states: "Membership in any (public) pension or retirement system...shall be an enforceable contractual relationship, the benefits of which shall not be diminished or impaired."

That language may be clear to constitutional scholars, and it might be clear to you and me, but it's not obvious to a lot of elected officials who are sworn to uphold the Illinois Constitution.

It's unclear to them, not because they're stupid or they can't read. Their minds are blurred by the staggering amounts of money it will take to pay for the underfunded liability.

For instance, the city of Chicago will collect a total of $700 million this year in property taxes. But it would have to put that much just into the pension funds annually for the next 50 years, to get to an adequate funding level.

The state's underfunding of its plans is equal to about three years of its total discretionary general revenue funds, which are used to pay for all state programs - public safety, human services, education and the gamut of other functions it underwrites.

Little wonder that some politicians, most notably former U.S. House Speaker Newt Gingrich, have proposed allowing states to declare bankruptcy, thereby allowing them to get out from under pension obligations.

Our union has been fighting this idea and will continue to press the Congress to reject it, but it is very much an option being considered.

You can believe that the same politicians who created this problem by irresponsibly neglecting to fund our pensions when the price tag was lower will try even harder to avoid their responsibility now that the cost has mushroomed.

While it's clear that the pension crisis is not born of extravagant benefits, it's not so obvious what the solution might be.

Obviously, abrogating the constitution or allowing bankruptcy judges to declare our retirement plans insolvent are not acceptable to us. Those are battles that we will wage vigorously in the courts and in the Congress to preserve the retirement benefits to which we are entitled. But we need to work just as vigorously in the legislature and the court of public opinion to make the case that our pensions are fair, and should not be wantonly slashed.

Let us be of a clear mind. The problem is not of our creation. But if we want to preserve our pension benefits, we will need to participate aggressively in the struggle for a solution.

We can't afford to stand on the sidelines and hope that the folks responsible for the mess will solve the problem of our retirement security.