The pension problem should not come as a surprise to anyone. This has been a problem that began in the early 90’s, but became a real issue starting after the 2003 election.

In 1995, realizing there was a problem, I sponsored legislation that would mandate the state to fully fund its pensions every year. That mandate was in effect from 1995 until 2003. When Blagojevich and Madigan took over the legislature one of their first actions was to negate that law mandating fully funded pension payments. From that point on they were using budget gimmicks and skipping pension payments which just compounded a system that was already actuarially unsound.

The bottom line is that the system is not sustainable and is collapsing. As I have mentioned for years, the system was built on a lot of faulty and misleading data compounded by irresponsible leaders not funding the program. End result: Illinois’ pension system is in the worst shape in the nation with unfunded liabilities over $100 Billion and growing.

The major reasons for the pension system’s instability and overall underfunding can be summed up in five areas:

1. Underfunding of the State’s obligation – This translates to about one-third of the systems underfunded liability. By itself it is not the cause of the crisis. It just moved the crisis date up. (As a reminder, I voted against every budget that did not fully fund the obligation)
2. Market returns lower than projected – The pension funds have, and are, performing at rates lower than projected in their models.
3. Actuarial projections – The good news is people are living longer; the bad news is the funds did not update systems to account for increased actuarial life spans.
4. Larger than expected end-of-career pay raises and overtime across systems – The system does not collect enough money or have to time-compound funds to recover from large end-of-career pay raises and overtime paid.
5. Pension enhancements – There were 16 pension enhancements added to the system since 1970. The most costly being the 1990 COLA compounding, including survivors. The increased contributions for adding that benefit was not close to covering the actuarial liability it added to the system.

It angers me that knowing that, if the legislative and union leaders had heeded our warning and concerns ten years ago, we would not be sitting here having to face these painful decisions.

The bottom line – We can blame a lot of people for this problem; I have and we all should. However that does not change the fact that the system is now unsustainable.

So what is next? Great question and the answer is – no one knows. I am disappointed that the Speaker and the Governor have not kept ALL parties involved in negotiating a real solution. As you know there are still many unanswered questions and concerns with the different proposals currently on the table. I hope that before any final vote is taken on any reform legislation all parties affected have the time to review proposals and give their input.

At this point nothing will be done unless the Governor calls a special session. Without a special session the soonest action would be taken is after the November election, when we go back into our late fall session. As more details become available, we will post information on our website.