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{{update|date=June 2022}}
The '''Illinois pension crisis''' refers to the rising gap between the pension benefits owed to eligible state employees and the amount of funding set aside by the state to make these future pension payments. The size of Illinois' pension obligation is $214B, the state's pension funds have only $85B available for payouts to retirees <ref name="illinois.gov">https://www2.illinois.gov/sites/budget/Documents/Budget%20Book/FY%202019/Fiscal-Year-2019-Operating-Budget-Book.pdf</ref>. Illinois has one of the highest unfunded pension ratios in country, ranked third after [[New Jersey]] and [[Kentucky]] <ref>{{cite web|url=https://www.bloomberg.com/graphics/2017-state-pension-funding-ratios/|title=State Pension Funding Worsens for 43 States|publisher=|accessdate=7 May 2018|via=www.bloomberg.com}}</ref>
The '''Illinois pension crisis''' refers to the rising gap between the pension benefits owed to eligible state employees and the amount of funding set aside by the state to make these future pension payments. As of 2020, the size of Illinois' pension obligation is $237B, but the state's pension funds have only $96B available for payouts to retirees.<ref>{{cite web|url=https://www2.illinois.gov/sites/budget/Documents/Budget%20Book/FY2022-Budget-Book/Fiscal-Year-2022-Operating-Budget.pdf|title = Illinois State Budget Fiscal Year 2022 |page = 167}}</ref>
<ref>{{cite web|url=https://www.reuters.com/article/us-usa-states-pensions/u-s-state-pension-funding-gap-rises-to-1-4-trillion-in-2016-pew-idUSKBN1HJ2DK|title=U.S. state pension funding gap rises to $1.4 trillion in 2016: Pew|first=Reuters|last=Editorial|publisher=|accessdate=7 May 2018}}</ref>. Illinois state budget contributions have fallen short of the increases in pension liabilities for 12 of the past 15 years, resulting in a three-fold increase in the funding gap.<ref name="ilga.gov">http://cgfa.ilga.gov/Upload/1117revenue_special_pension_briefing.pdf</ref>

Illinois has the second highest unfunded pension ratio, after [[New Jersey]]. Illinois state budget contributions have fallen short of the increases in pension liabilities for 12 of the past 15 years, resulting in a three-fold increase in the funding gap.<ref name="ilga.gov">[http://cgfa.ilga.gov/Upload/1117revenue_special_pension_briefing.pdf Special pension briefing] cgfa.ilga.go</ref>


Illinois' pension obligations are made up of five pension plans for public sector employees. The plans, and their respective size and funding level, include:
Illinois' pension obligations are made up of five pension plans for public sector employees. The plans, and their respective size and funding level, include:
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! State Pension Plan !! Total Membership !! Total Liability ($M)<ref name="ilga.gov"/> !! Funding ratio<ref name="ilga.gov"/>
! State Pension Plan !! Total Membership !! Total Liability ($M)<ref name="ilga.gov"/> !! Funding ratio<ref name="ilga.gov"/>
|-
|-
| Teachers' Retirement System (TRS) || 406,855<ref>https://www.trsil.org/sites/default/files/documents/CAFRfy16.pdf</ref> || $122,904 || 40%
| Teachers' Retirement System (TRS) || 406,855<ref>[https://www.trsil.org/sites/default/files/documents/CAFRfy16.pdf Teachers' Retirement System] trsil.org</ref> || $122,904 || 40%
|-
|-
| State Employees Retirement System (SERS) || 87,437<ref>https://www.srs.illinois.gov/PDFILES/oldAnnuals/SERS16.pdf</ref> || $46,701 || 36%
| State Employees Retirement System (SERS) || 87,437<ref>{{cite web|url=https://www.srs.illinois.gov/PDFILES/oldAnnuals/SERS16.pdf|title=State Retirement Systems of Illinois|access-date=2018-05-07|archive-date=2017-07-31|archive-url=https://web.archive.org/web/20170731152859/https://www.srs.illinois.gov/PDFILES/oldAnnuals/SERS16.pdf|url-status=dead}}</ref> || $46,701 || 36%
|-
|-
| State University Retirement System (SURS) || 230,364<ref>http://www.surs.com/sites/default/files/annual_report/SUMMARY2016.pdf</ref> || $41,853 || 44%
| State University Retirement System (SURS) || 230,364<ref>{{Cite web |url=http://www.surs.com/sites/default/files/annual_report/SUMMARY2016.pdf |title=Archived copy |access-date=2018-05-07 |archive-date=2018-05-07 |archive-url=https://web.archive.org/web/20180507155112/http://www.surs.com/sites/default/files/annual_report/SUMMARY2016.pdf |url-status=dead }}</ref> || $41,853 || 44%
|-
|-
| Judges' Retirement System (JRS) || 972<ref>https://www.srs.illinois.gov/PDFILES/oldAnnuals/JRS16.pdf</ref> || $2,649 || 36%
| Judges' Retirement System (JRS) || 972<ref>{{cite web|url=https://www.srs.illinois.gov/PDFILES/oldAnnuals/JRS16.pdf|title=State Retirement Systems of Illinois|access-date=2018-05-07|archive-date=2018-05-07|archive-url=https://web.archive.org/web/20180507221508/https://www.srs.illinois.gov/PDFILES/oldAnnuals/JRS16.pdf|url-status=dead}}</ref> || $2,649 || 36%
|-
|-
| General Assembly Retirement System (GARS) || 470<ref>https://www.srs.illinois.gov/PDFILES/oldAnnuals/GA16.pdf</ref> || $371 || 15%
| General Assembly Retirement System (GARS) || 470<ref>{{cite web|url=https://www.srs.illinois.gov/PDFILES/oldAnnuals/GA16.pdf|title=State Retirement Systems of Illinois|access-date=2018-05-07|archive-date=2018-05-07|archive-url=https://web.archive.org/web/20180507221612/https://www.srs.illinois.gov/PDFILES/oldAnnuals/GA16.pdf|url-status=dead}}</ref> || $371 || 15%
|}
|}



==History==
==History==
Dating as far back as 1917, reports by the [[Illinois legislature]] described the condition of the state and municipal pension systems as "one of insolvency" and "moving toward crisis"<ref name="nasra.org">https://www.nasra.org/Files/State-Specific/Illinois/IL%20pension%20history.pdf</ref>. Such findings continued in the 1940s to 1960s, when the state pension commission warned of the pension systems' impending insolvency and the growth of unfunded pension liabilities, noting the appropriations were "grossly insufficient" and "below mandatory statutory requirements." <ref name="nasra.org"/>.
Dating as far back as 1917, reports by the [[Illinois legislature]] described the condition of the state and municipal pension systems as "one of insolvency" and "moving toward crisis".<ref name="nasra.org">[https://www.nasra.org/Files/State-Specific/Illinois/IL%20pension%20history.pdf Pension history] nasra.org</ref> Such findings continued in the 1940s to 1960s, when the state pension commission warned of the pension systems' impending insolvency and the growth of unfunded pension liabilities, noting the appropriations were "grossly insufficient" and "below mandatory statutory requirements."<ref name="nasra.org"/>


Throughout the 1970s, the funding of the state's pension systems rose from roughly 35% to 50%. From the 1980s to the mid-1990s, pension funding levels fluctuated between 50% and 60%. <ref name="nasra.org"/> <ref name="chicagomag.com">{{cite web|url=http://www.chicagomag.com/Chicago-Magazine/The-312/March-2011/Illinois-Teacher-Pensions-Always-in-Distress-Mode/|title=Illinois Teacher Pensions: Always in Distress Mode|publisher=|accessdate=7 May 2018}}</ref>.
Throughout the 1970s, the funding of the state's pension systems rose from roughly 35% to 50%. From the 1980s to the mid-1990s, pension funding levels fluctuated between 50% and 60%.<ref name="nasra.org"/><ref name="chicagomag.com">{{cite web|url=http://www.chicagomag.com/Chicago-Magazine/The-312/March-2011/Illinois-Teacher-Pensions-Always-in-Distress-Mode/|title=Illinois Teacher Pensions: Always in Distress Mode|publisher=|accessdate=7 May 2018}}</ref>


===1994 pension reform===
===1994 pension reform===
In 1994, when unfunded pension liabilities hit a then-high of $17B, new legislation was passed under governor [[Jim Edgar]] to raise the funding ratio from 52% to 90% by 2045, referred to as the 'Edgar Ramp'. However, a later complaint by the [[Securities and Exchange Commission]] noted even at the levels proposed by the reform package, unfunded pension liabilities would continue to grow<ref>https://www.sec.gov/litigation/admin/2013/33-9389.pdf</ref>. While the state's pension funding ratio increased to 75% by 2000, the funding improvements were driven by $15B of favorable changes to actuarial assumptions and better-than-expected investment returns, and state contributions fell $6B short of required amounts. <ref name="chicagomag.com"/>
In 1994, when unfunded pension liabilities hit a then-high of $17B, new legislation was passed under governor [[Jim Edgar]] to raise the funding ratio from 52% to 90% by 2045, referred to as the 'Edgar Ramp'. However, a later complaint by the [[Securities and Exchange Commission]] noted even at the levels proposed by the reform package, unfunded pension liabilities would continue to grow.<ref>[https://www.sec.gov/litigation/admin/2013/33-9389.pdf Securities act] sec.gov</ref> While the state's pension funding ratio increased to 75% by 2000, the funding improvements were driven by $15B of favorable changes to actuarial assumptions and better-than-expected investment returns, and state contributions fell $6B short of required amounts.<ref name="chicagomag.com"/>


===2000–2001: the dot-com crash===
===2000–2001: the dot-com crash===
From 2001 to 2003, following the [[dot-com crash]], poor investment returns contributed to an increase in unfunded liabilities, representing $14B of the $27B rise <ref name="chicagomag.com"/>. By 2003, the unfunded liability reached $43.1B.<ref name="ilga.gov"/>. In 2003, the state sold $10 billion in pension obligation bonds used to reduce unfunded liabilities for fiscal year 2003 ($2.2B) and 2004 ($7.3B) <ref name="illinoiscomptroller.gov">http://illinoiscomptroller.gov/linkservid/5005F7CE-117D-4D76-B802513FFDBD8773/showMeta/0/</ref>.
From 2001 to 2003, following the [[dot-com crash]], poor investment returns contributed to an increase in unfunded liabilities, representing $14B of the $27B rise.<ref name="chicagomag.com"/> By 2003, the unfunded liability reached $43.1B.<ref name="ilga.gov"/> In 2003, the state sold $10 billion in pension obligation bonds used to reduce unfunded liabilities for fiscal year 2003 ($2.2B) and 2004 ($7.3B).<ref name="illinoiscomptroller.gov">{{Cite web |url=http://illinoiscomptroller.gov/linkservid/5005F7CE-117D-4D76-B802513FFDBD8773/showMeta/0/ |title=Illinois comptroller |access-date=2018-05-07 |archive-date=2018-05-07 |archive-url=https://web.archive.org/web/20180507154014/http://illinoiscomptroller.gov/linkservid/5005F7CE-117D-4D76-B802513FFDBD8773/showMeta/0/ |url-status=dead }}</ref>


===2005 reform amendment===
===2005 reform amendment===
In 2005, Senate Bill 27 allowed for reduced contributions in times of budgetary pressure, known as 'pension holidays'. In 2006 and 2007, contributions were roughly $1B lower than the amounts required under the 1995 legislation <ref name="illinoiscomptroller.gov"/> <ref>{{cite web|url=http://www.chicagobusiness.com/section/pensions-timeline#8|title=The history of Illinois' pension disaster|publisher=|accessdate=7 May 2018}}</ref>.
In 2005, Senate Bill 27 allowed for reduced contributions in times of budgetary pressure, known as 'pension holidays'. In 2006 and 2007, contributions were roughly $1B lower than the amounts required under the 1995 legislation.<ref name="illinoiscomptroller.gov"/><ref>{{cite web|url=http://www.chicagobusiness.com/section/pensions-timeline#8|title=The history of Illinois' pension disaster|publisher=|accessdate=7 May 2018}}</ref>


===Financial crisis of 2007–2008===
===Financial crisis of 2007–2008===
From 2008 to 2010, poor investment returns caused by the financial crisis, combined with insufficient contributions, increased the unfunded liability from $42B in 2007 to $86B in 2010<ref name="ilga.gov"/>. In 2009, Governor [[Pat Quinn]] included pension reforms for newly-hired public employees, including a higher retirement age and capped cost-of-living adjustment rate, but the proposed changes were not enacted by lawmakers <ref>{{cite web|url=https://www.civicfed.org/iifs/blog/moody%E2%80%99s-highlights-illinois-pension-problems|title=Moody’s Highlights Illinois Pension Problems – The Civic Federation|website=www.civicfed.org|accessdate=7 May 2018}}</ref> <ref>{{cite web|url=https://www.youtube.com/watch?v=0Kbzbj3s7qI|title=First Meeting of the Pension Modernization Task Force|first=|last=GovernorQuinn|date=25 June 2009|publisher=|accessdate=7 May 2018|via=YouTube}}</ref>.
From 2008 to 2010, poor investment returns caused by the financial crisis, combined with insufficient contributions, increased the unfunded liability from $42B in 2007 to $86B in 2010.<ref name="ilga.gov"/> In 2009, Governor [[Pat Quinn (politician)|Pat Quinn]] included pension reforms for newly-hired public employees, including a higher retirement age and capped cost-of-living adjustment rate, but the proposed changes were not enacted by lawmakers.<ref>{{cite web|url=https://www.civicfed.org/iifs/blog/moody%E2%80%99s-highlights-illinois-pension-problems|title=Moody's Highlights Illinois Pension Problems – The Civic Federation|website=www.civicfed.org|accessdate=7 May 2018}}</ref><ref>{{cite web|url=https://www.youtube.com/watch?v=0Kbzbj3s7qI|title=First Meeting of the Pension Modernization Task Force|last=GovernorQuinn|date=25 June 2009|publisher=|accessdate=7 May 2018|via=YouTube}}</ref>


===2013 pension reform and supreme court repeal===
===2013 pension reform and supreme court repeal===
In 2013, Illinois passed a pension reform bill which reduced retiree cost of living increases, raised retirement ages, limited pensionable salary, lowered the amounts current employees contribute, set up voluntary [[401(k)]]s and guaranteed the state makes contributions on time <ref name="abc7chicago.com">{{cite web|url=http://abc7chicago.com/archive/9347683/|title=Illinois pension reform bill approved by legislature|publisher=|accessdate=7 May 2018}}</ref><ref>{{cite web|url=https://www.reuters.com/article/us-illinois-pensions-idUSKBN0NT1U220150508|title=Illinois' supreme court overturns state's 2013 pension reform law|first=Megan|last=Davies|publisher=|accessdate=7 May 2018}}</ref>. Legislators estimated the reform would save roughly $160 billion over three decades <ref name="abc7chicago.com"/>. In May 2015, the Illinois Supreme Court unanimously overturned the law on the grounds that it violated the benefit protection clause in the [[Illinois Constitution]] (Article XIII, Section V) which states
In 2013, Illinois passed a pension reform bill which reduced retiree cost of living increases, raised retirement ages, limited pensionable salary, lowered the amounts current employees contribute, set up voluntary [[401(k)]]s and guaranteed the state makes contributions on time.<ref name="abc7chicago.com">{{cite web|url=http://abc7chicago.com/archive/9347683/|title=Illinois pension reform bill approved by legislature|publisher=|accessdate=7 May 2018}}</ref><ref>{{cite news|url=https://www.reuters.com/article/us-illinois-pensions-idUSKBN0NT1U220150508|title=Illinois' supreme court overturns state's 2013 pension reform law|first=Megan|last=Davies|newspaper=Reuters|date=8 May 2015|publisher=|accessdate=7 May 2018}}</ref> Legislators estimated the reform would save roughly $160 billion over three decades.<ref name="abc7chicago.com"/> In May 2015, the Illinois Supreme Court unanimously overturned the law on the grounds that it violated the benefit protection clause in the [[Illinois Constitution]] (Article XIII, Section V) which states
"Membership in any pension or retirement system of the State, any unit of local government or school district, or any agency or instrumentality thereof, shall be an enforceable contractual relationship, the benefits of which shall not be diminished or impaired."<ref>{{cite web|url=https://chicago.suntimes.com/politics/illinois-supreme-court-finds-2013-pension-reform-law-unconstitutional/|title=Illinois Supreme Court finds 2013 pension reform law unconstitutional|publisher=|accessdate=7 May 2018}}</ref>
"Membership in any pension or retirement system of the State, any unit of local government or school district, or any agency or instrumentality thereof, shall be an enforceable contractual relationship, the benefits of which shall not be diminished or impaired."<ref>{{cite web|url=https://chicago.suntimes.com/politics/illinois-supreme-court-finds-2013-pension-reform-law-unconstitutional/|title=Illinois Supreme Court finds 2013 pension reform law unconstitutional|date=8 May 2015|publisher=|accessdate=7 May 2018}}</ref>


==Reform debate==
==Reform debate==
Line 45: Line 46:
Illinois' General Assembly, Governor, lobbyists and unions disagree over what combination of reforms should be made to reduce the existing funding gap. The debate has centered around two mechanisms:
Illinois' General Assembly, Governor, lobbyists and unions disagree over what combination of reforms should be made to reduce the existing funding gap. The debate has centered around two mechanisms:
* Increasing state budget contributions toward pension liabilities (such as tax increases, new state revenue streams, spending cuts); and/or
* Increasing state budget contributions toward pension liabilities (such as tax increases, new state revenue streams, spending cuts); and/or
* Changing benefit calculations and criteria (such as reducing 3% automatic annual cost-of-living increase in pension payments signed into law by James Thompson , limiting the impact of salary increases on benefit calculations, increasing the retirement age, increasing employee contributions)
* Changing benefit calculations and criteria (such as reducing 3% automatic annual cost-of-living increase in pension payments signed into law by James Thompson, limiting the impact of salary increases on benefit calculations, increasing the retirement age, increasing employee contributions)
A parallel debate exists on whether and how to restrict defined-benefit pension plans to new state employees to reduce future pension obligations.
A parallel debate exists on whether and how to restrict defined-benefit pension plans to new state employees to reduce future pension obligations.


A new model for reform referred to as the 'Consideration model', first advocated by Illinois Senate President [[John Cullerton]] in 2012, has been discussed in the General Assembly<ref>{{cite web|url=https://www.trsil.org/news-and-events/pension-issues/consideration|title=“Consideration” – Teachers' Retirement System of the State of Illinois|website=www.trsil.org|accessdate=7 May 2018}}</ref>. Based on the legal concept of [[consideration]], pension plan members would be offered options to choose from to opt-in to lesser benefits, and the new agreement would represent a modification to the original contract <ref>{{cite web|url=https://nprillinois.org/post/illinois-issues-great-pension-chasm |title=Illinois Issues: The Great Pension Chasm |publisher=NPR Illinois |date=2016-03-30 |accessdate=2018-05-07}}</ref><ref>{{cite web|url=https://nprillinois.org/post/rauner-laughs-cullerton-suggestion-pensions-afscme-contracts-are-tied |title=Rauner Laughs At Cullerton Suggestion That Pensions, AFSCME Contracts Are Tied |publisher=NPR Illinois |date=2014-06-26 |accessdate=2018-05-07}}</ref>. Governor [[Bruce Rauner]]'s 2019 budget included a proposed consideration model reform stated to bring $900M in savings<ref name="illinois.gov"/>.
A new model for reform referred to as the 'Consideration model', first advocated by Illinois Senate President [[John Cullerton]] in 2012, has been discussed in the General Assembly.<ref>{{cite web|url=https://www.trsil.org/news-and-events/pension-issues/consideration|title="Consideration" – Teachers' Retirement System of the State of Illinois|website=www.trsil.org|accessdate=7 May 2018}}</ref> Based on the legal concept of [[consideration]], pension plan members would be offered options to choose from to opt-in to lesser benefits, and the new agreement would represent a modification to the original contract.<ref>{{cite web|url=https://www.nprillinois.org/post/illinois-issues-great-pension-chasm |title=Illinois Issues: The Great Pension Chasm |publisher=NPR Illinois |date=2016-03-30 |accessdate=2018-05-07}}</ref><ref>{{cite web|url=https://www.nprillinois.org/post/rauner-laughs-cullerton-suggestion-pensions-afscme-contracts-are-tied |title=Rauner Laughs At Cullerton Suggestion That Pensions, AFSCME Contracts Are Tied |publisher=NPR Illinois |date=2014-06-26 |accessdate=2018-05-07}}</ref> Former Governor [[Bruce Rauner]]'s 2019 budget included a proposed consideration model reform stated to bring $900M in savings.<ref>{{cite web|url=https://www2.illinois.gov/sites/budget/Documents/Budget%20Book/FY%202019/Fiscal-Year-2019-Operating-Budget-Book.pdf|title = Illinois State Budget Fiscal Year 2019|page = 164}}</ref>


==References==
==References==

Latest revision as of 20:19, 2 September 2024

The Illinois pension crisis refers to the rising gap between the pension benefits owed to eligible state employees and the amount of funding set aside by the state to make these future pension payments. As of 2020, the size of Illinois' pension obligation is $237B, but the state's pension funds have only $96B available for payouts to retirees.[1]

Illinois has the second highest unfunded pension ratio, after New Jersey. Illinois state budget contributions have fallen short of the increases in pension liabilities for 12 of the past 15 years, resulting in a three-fold increase in the funding gap.[2]

Illinois' pension obligations are made up of five pension plans for public sector employees. The plans, and their respective size and funding level, include:

State Pension Plan Total Membership Total Liability ($M)[2] Funding ratio[2]
Teachers' Retirement System (TRS) 406,855[3] $122,904 40%
State Employees Retirement System (SERS) 87,437[4] $46,701 36%
State University Retirement System (SURS) 230,364[5] $41,853 44%
Judges' Retirement System (JRS) 972[6] $2,649 36%
General Assembly Retirement System (GARS) 470[7] $371 15%

History

[edit]

Dating as far back as 1917, reports by the Illinois legislature described the condition of the state and municipal pension systems as "one of insolvency" and "moving toward crisis".[8] Such findings continued in the 1940s to 1960s, when the state pension commission warned of the pension systems' impending insolvency and the growth of unfunded pension liabilities, noting the appropriations were "grossly insufficient" and "below mandatory statutory requirements."[8]

Throughout the 1970s, the funding of the state's pension systems rose from roughly 35% to 50%. From the 1980s to the mid-1990s, pension funding levels fluctuated between 50% and 60%.[8][9]

1994 pension reform

[edit]

In 1994, when unfunded pension liabilities hit a then-high of $17B, new legislation was passed under governor Jim Edgar to raise the funding ratio from 52% to 90% by 2045, referred to as the 'Edgar Ramp'. However, a later complaint by the Securities and Exchange Commission noted even at the levels proposed by the reform package, unfunded pension liabilities would continue to grow.[10] While the state's pension funding ratio increased to 75% by 2000, the funding improvements were driven by $15B of favorable changes to actuarial assumptions and better-than-expected investment returns, and state contributions fell $6B short of required amounts.[9]

2000–2001: the dot-com crash

[edit]

From 2001 to 2003, following the dot-com crash, poor investment returns contributed to an increase in unfunded liabilities, representing $14B of the $27B rise.[9] By 2003, the unfunded liability reached $43.1B.[2] In 2003, the state sold $10 billion in pension obligation bonds used to reduce unfunded liabilities for fiscal year 2003 ($2.2B) and 2004 ($7.3B).[11]

2005 reform amendment

[edit]

In 2005, Senate Bill 27 allowed for reduced contributions in times of budgetary pressure, known as 'pension holidays'. In 2006 and 2007, contributions were roughly $1B lower than the amounts required under the 1995 legislation.[11][12]

Financial crisis of 2007–2008

[edit]

From 2008 to 2010, poor investment returns caused by the financial crisis, combined with insufficient contributions, increased the unfunded liability from $42B in 2007 to $86B in 2010.[2] In 2009, Governor Pat Quinn included pension reforms for newly-hired public employees, including a higher retirement age and capped cost-of-living adjustment rate, but the proposed changes were not enacted by lawmakers.[13][14]

2013 pension reform and supreme court repeal

[edit]

In 2013, Illinois passed a pension reform bill which reduced retiree cost of living increases, raised retirement ages, limited pensionable salary, lowered the amounts current employees contribute, set up voluntary 401(k)s and guaranteed the state makes contributions on time.[15][16] Legislators estimated the reform would save roughly $160 billion over three decades.[15] In May 2015, the Illinois Supreme Court unanimously overturned the law on the grounds that it violated the benefit protection clause in the Illinois Constitution (Article XIII, Section V) which states "Membership in any pension or retirement system of the State, any unit of local government or school district, or any agency or instrumentality thereof, shall be an enforceable contractual relationship, the benefits of which shall not be diminished or impaired."[17]

Reform debate

[edit]

Pension funding levels are determined by the contributions made in the state budget to fund pension liabilities, and the scale and formula of pension benefits offered to state employees. Additionally, actuarial assumptions used in the calculation of future pension payments and the financial performance of the pension fund asset investments affect the annual valuation of pension liabilities.

Illinois' General Assembly, Governor, lobbyists and unions disagree over what combination of reforms should be made to reduce the existing funding gap. The debate has centered around two mechanisms:

  • Increasing state budget contributions toward pension liabilities (such as tax increases, new state revenue streams, spending cuts); and/or
  • Changing benefit calculations and criteria (such as reducing 3% automatic annual cost-of-living increase in pension payments signed into law by James Thompson, limiting the impact of salary increases on benefit calculations, increasing the retirement age, increasing employee contributions)

A parallel debate exists on whether and how to restrict defined-benefit pension plans to new state employees to reduce future pension obligations.

A new model for reform referred to as the 'Consideration model', first advocated by Illinois Senate President John Cullerton in 2012, has been discussed in the General Assembly.[18] Based on the legal concept of consideration, pension plan members would be offered options to choose from to opt-in to lesser benefits, and the new agreement would represent a modification to the original contract.[19][20] Former Governor Bruce Rauner's 2019 budget included a proposed consideration model reform stated to bring $900M in savings.[21]

References

[edit]
  1. ^ "Illinois State Budget Fiscal Year 2022" (PDF). p. 167.
  2. ^ a b c d e Special pension briefing cgfa.ilga.go
  3. ^ Teachers' Retirement System trsil.org
  4. ^ "State Retirement Systems of Illinois" (PDF). Archived from the original (PDF) on 2017-07-31. Retrieved 2018-05-07.
  5. ^ "Archived copy" (PDF). Archived from the original (PDF) on 2018-05-07. Retrieved 2018-05-07.{{cite web}}: CS1 maint: archived copy as title (link)
  6. ^ "State Retirement Systems of Illinois" (PDF). Archived from the original (PDF) on 2018-05-07. Retrieved 2018-05-07.
  7. ^ "State Retirement Systems of Illinois" (PDF). Archived from the original (PDF) on 2018-05-07. Retrieved 2018-05-07.
  8. ^ a b c Pension history nasra.org
  9. ^ a b c "Illinois Teacher Pensions: Always in Distress Mode". Retrieved 7 May 2018.
  10. ^ Securities act sec.gov
  11. ^ a b "Illinois comptroller". Archived from the original on 2018-05-07. Retrieved 2018-05-07.
  12. ^ "The history of Illinois' pension disaster". Retrieved 7 May 2018.
  13. ^ "Moody's Highlights Illinois Pension Problems – The Civic Federation". www.civicfed.org. Retrieved 7 May 2018.
  14. ^ GovernorQuinn (25 June 2009). "First Meeting of the Pension Modernization Task Force". Retrieved 7 May 2018 – via YouTube.
  15. ^ a b "Illinois pension reform bill approved by legislature". Retrieved 7 May 2018.
  16. ^ Davies, Megan (8 May 2015). "Illinois' supreme court overturns state's 2013 pension reform law". Reuters. Retrieved 7 May 2018.
  17. ^ "Illinois Supreme Court finds 2013 pension reform law unconstitutional". 8 May 2015. Retrieved 7 May 2018.
  18. ^ ""Consideration" – Teachers' Retirement System of the State of Illinois". www.trsil.org. Retrieved 7 May 2018.
  19. ^ "Illinois Issues: The Great Pension Chasm". NPR Illinois. 2016-03-30. Retrieved 2018-05-07.
  20. ^ "Rauner Laughs At Cullerton Suggestion That Pensions, AFSCME Contracts Are Tied". NPR Illinois. 2014-06-26. Retrieved 2018-05-07.
  21. ^ "Illinois State Budget Fiscal Year 2019" (PDF). p. 164.