TIME FOR AN END TO ILLINOIS PUBLIC EMPLOYEE PENSIONS?

Has the pension crisis made Illinois public employee pensions an endangered species, or is this just natural selection at work?

States cannot go bankrupt.  But they can be insolvent and effectively broke.  They can see their debt repeatedly downgraded.  They can be a punchline.  That’s Illinois.

Millionaires and regular folks have contributed to our two gubernatorial candidates, but perhaps the most important contribution came from the Illinois Supreme Court.  A few weeks ago, it ended uncertainty as to changes in Illinois retiree health care benefits.

Effectively, it said, “No way.”

That holding means General Assembly attempts to reform pensions, of which Springfield Democrats have blocked most, are stymied before they begin.  The court held our 1970 constitution treats those benefits as obligations that cannot be “diminished or impaired.”

If this reasoning ultimately applies to last December’s $32.7 billion reduction in pension obligations, then some $100 billion, according to Truth in Accounting, must fill Illinois’ unfunded pension gap.

The fact Illinois does not have that money fuels our out-migration, which United Van Lines says is second highest of all 50 states.  People believe Springfield politicians will simply take it from us, so they are voting with their feet to avoid the confiscation.

And since filling that hole will take years, one must ask why not support conversion for all new state employees to a 401(k)-style defined contribution plan.  Shifting new employees – who do not share the status of legacy workers, let alone retirees – is but one step to cut future costs.

The other?  Massive layoffs.  Massive.

How many?  Who knows?  Folks are running the numbers now.  None of them are pretty.  But, it is absolutely true that the best way to decrease employee benefits – is to not have the employee.  And under our constitution, as taught by the court, to have an employee is to have immutable obligations, made unaffordable by spendthrift Democrats, and their use of other people’s money.

Chris and I disagree about a great many things, but we certainly agree about the state of our state.  Illinois has quite a lot problems and its fiscal situation certainly is the greatest.  But before we demonize public sector workers in Illinois, a few facts are in order.

Contrary to Chris’ contention, the Illinois government workforce is among the lowest in the country.  Of all 50 states, we have the lowest ratio of state workers to private sector workers.  Yup – even lower than the sainted Scott Walker’s Wisconsin.  Our government workers rank below the U.S. average in compensation and benefits.  In short, let’s not scapegoat public sector workers for expediency’s sake.

Let’s also clarify this notion that the court was responsible for declaring that pensions cannot be diminished or impaired.  Unfortunately, that clause is in the 1970 constitution and it clearly states, “Membership in any pension or retirement system of the State . . shall be an enforceable contractual relationship, the benefits of which shall not be diminished or impaired.”

Frankly, I don’t understand why this provision was included in the constitution and I wish it wasn’t as it severely limits reform options.  There are several provisions of the 1970 constitution that I’ve always found to be real head scratchers, such as this and the prohibition on a progressive income tax. Nonetheless, in the constitution it is and therein lies the rub.

Based on the stated position of the Supreme Court, it’s hard to imagine them accepting a transition of new employees to a 401(k)-type system.  In the absence of a change of heart, a new court or a constitutional convention, it’s pretty much a non-starter.