Growing pension costs for Illinois judges are burdening state taxpayers

Judges’ contributions to the Judges’ Retirement System, or JRS, have gone up by 52 percent since 1998. During the same time period, taxpayer contributions to judges’ retirements increased by 306 percent. In 2012 alone, Illinois taxpayers contributed $47 million more to JRS than judges did. And the disparity between taxpayers and employee contributions is projected...

Judges’ contributions to the Judges’ Retirement System, or JRS, have gone up by 52 percent since 1998.

During the same time period, taxpayer contributions to judges’ retirements increased by 306 percent.

In 2012 alone, Illinois taxpayers contributed $47 million more to JRS than judges did.

And the disparity between taxpayers and employee contributions is projected to get worse. Between 2013 and 2045, taxpayers can expect their annual contribution to JRS to increase by 135 percent, to $208 million. Employee contributions, on the other hand, will rise only 84 percent, to $30 million. The increase in taxpayer contributions occurs because taxpayers, and not the employees, are required to pay for any shortfalls in the judges’ pension system.

These shortfalls are largely a function of the pension system’s defined benefit structure. Defined benefit systems are chronically underfunded due to poor investment returns, changed actuarial assumptions, overly generous benefits and structural underpayments.

For example, taxpayers have to make up the difference when the fund’s investment returns are lower than projected. From 1996 to 2012, missed investment targets added $158 million to the retirement system’s shortfall, according to the Commission on Government Forecasting and Accountability.

Similarly, changes in actuarial assumptions since 1996 mean taxpayers will have to cough up an additional $260 million.

Judges, however, continue to pay a constant percentage of their payroll to the pension system, regardless of shortfalls or growing liabilities. This situation creates the massive disparity between employee and taxpayer contributions.

Ultimately, politicians have proved they can’t manage defined benefit systems.

Illinois must move away from defined benefit plans and embrace 401(k)-style plans if it wants to avoid a fiscal disaster. A defined contribution plan, such as the ones found in House Bill 3303 and Senate Bill 2026, does just that.