Revelations Lead to Reform of Illinois Pensions

Revelations Lead to Reform of Illinois Pensions
December 5, 2011

Steve Stanek

Steve Stanek (sstanek@heartland.org) is a research fellow at The Heartland Institute and managing... (read full bio)

Illinois lawmakers have approved legislation to reform the state’s government pension system, the nation’s most poorly funded.

But having barely half the money needed to fund future pension obligations was not the reason for the reform. A string of embarrassing news articles describing how certain political insiders have been able to legally game the pension system to receive millions of dollars of potential benefits prompted the legislation.

For this reason, the reform, though a good step, is just a small one, said Ted Dabrowski, vice president of policy at the Illinois Policy Institute, which has been advocating for more fundamental reform.

Separate Issues

“There are really two different things going on,” Dabrowski said. “This reform deals more with the corruption side of how Illinois state government and the pensions are run. A separate issue is the overall pension underfunding and growing obligations. Gov. [Pat] Quinn (D) has not had a bill dealing with those issues sent to him.”

Illinois has the nation’s worst unfunded pension liability, conservatively estimated at $85 billion. The reform the state’s lawmakers approved at the end of November closes a provision that allows union leaders to draw pensions from both labor and government pension systems.

The measure had bipartisan support. Gov. Quinn has said he will sign the bill.

‘Obscene Loophole’

House Minority Leader Tom Cross (R-Oswego) said the provision allowing union officials to collect government pensions has been badly abused.

"We're talking in cases where there are individuals that are getting more than one pension, and it's hard to be sympathetic to a fellow who substitute teaches for a day and retires with a city pension and a union pension,” said Cross.

State Rep. Jack Franks (D-Woodstock) said, "With this legislation, we are closing an obscene loophole that harms Illinois' hardworking teachers. This type of all-too-familiar insider gamesmanship has contributed to the widespread demonization of our public sector employees and has put Illinois' retirement systems further into debt.”

Embarrassing Revelations

Cross and Frank were referring to a Chicago Tribune report detailing how two state teachers union lobbyists were allowed to work one day each as substitute teachers and potentially receive millions of dollars of future pension benefits from the Teachers Retirement System.

That report followed several others that gave examples of union officials receiving years of credit toward government pensions even though they were working for the unions during those years.

“Illinois in 2013 will spend more on pensions and retiree health benefits than on the actual operations of the higher education system,” Dabrowski said. “That’s the crowd-out effect we’re talking about, if lawmakers don’t do more to address retiree benefits. We will spend $2 billion on retiree benefits in higher education in 2013 and about $1.4 billion for operating funds. In about 20 years, all the money for higher education will be going to pensions and retirement unless things change.”

Steve Stanek

Steve Stanek (sstanek@heartland.org) is a research fellow at The Heartland Institute and managing... (read full bio)