USA TODAY International Edition
Illinois pension problems: Coming to a state near you
Lawmakers in Illinois recently overrode Gov. Bruce Rauner’s veto, ended a government shutdown and passed their first actual budget in two years. So, things are looking up there, and for other states with financial problems, right?
Actually, not so much. The $ 5 billion in additional annual revenue brought about by the budget’s tax hikes will allow Illinois to pay off the $ 15 billion bill it has racked up from its recent budgetary games. But it won’t fix the much larger problem of uncontrolled spending on public employee pensions.
The state’s budget forecasters estimated last year that its pensions were just 37.6% funded. They were underfunded to the tune of $ 130 billion. That’s more than $ 10,000 for every person in the state. Private estimates put the shortfall at nearly twice that.
This sorry situation gives Illinois virtually no chance of avoiding some form of insolvency. As a state, it cannot declare bankruptcy as some cities have done. A default would take the state ( and the nation) into uncharted territory, with little certainty about how judges would rule. Another option would be for Congress to do for Illinois — or for all states — what it recently did for Puerto Rico: allow it to offload entities such as pension plans and let them go through bankruptcy.
In one sense, Illinois is in a unique situation. Its Supreme Court has rejected a good- faith, bipartisan effort at pension reform and made any future fixes all but impossible. Other states’ supreme courts have allowed more flexibility in reducing the rate at which workers accrue benefits for future work, changing retirement dates and adjusting cost- of- living increases.
But in many ways Illinois is simply the poster child for a wider problem. States are supposedly the providers of education, roads, parks, mass transit and public safety, among other services to residents. But they’ve been repurposed in many instances to appease public sector unions.
Public workers unions have managed to persuade state agencies to reward them with goldplated pension plans, and in some cases, retiree health care. These plans have been agreed to with little public input or understanding by bureaucrats and lawmakers who won’t be around when the bills come due.
The most generous states are Alaska, California, Colorado and Nevada, where average career workers pull in $ 60,000 annually and many take in six figures. Those in the worst fiscal shape are Illinois, Kentucky, Connecticut, Alaska and Kansas.
What is inexplicable about all of this is that progressive groups and voters continue to support public sector unions even as they make off with the family jewels.
The vast sums states are forced to throw into pension systems erode their ability to provide good public education, safe streets and livable communities — all goals deeply cherished by progressives.
Roughly a quarter of the entire Illinois budget in recent years has gone to funding pensions. And yet, this money has done is slow the rate of decline of its financial outlook.
It is time for Americans to recognize the troubling fiscal plight in many states. Perhaps when Illinois or similar states hit a fiscal wall, voters will wake up to the calamity that awaits them.