How to eliminate Illinois’ pension debt without hurting retirees

Illinois lawmakers haven’t taken up pension legislation in nearly a decade. It’s time to give voters a chance to fix the problem driving state fiscal woes. A constitutional amendment can fix the unsustainable public pension systems.

Katie Vandenberg is a landlord in Peoria. The COVID-19 pandemic has been a struggle for her and her tenants, but Peoria’s finances have made it even harder.

“There are many things in the Peoria area that have been neglected for a long time, and the city hasn’t managed their pensions, so now they’re trying to make up for it through adding or raising rates and fees,” Vandenberg said.

Two-thirds of the city’s property taxes go to pensions, so little is left for essential services. Residents pay more in taxes and fees with no additional benefit. Municipalities around the state have their budgets crowded out by pensions.

Places such as Alton, Carbondale, Danville, DeKalb and others hold pension debt greater than 100% of their property tax levy.

“I tell my tenants every time there’s an election in Peoria, and I try really hard to educate my tenants on who’s running so that maybe they can try to vote to change policy on a local level,” Vandenberg said.

But it’s not something that can be fixed on a local level. The General Assembly passed bipartisan pension reform in 2013, but it was struck down in state court because structural pension reform is a constitutional matter. Only an amendment approved by voters can fix the pension crisis.

A “hold harmless” pension plan developed by the Illinois Policy Institute can save taxpayers nearly $2.4 billion in its first year and nearly $50 billion through 2045.
The plan is modeled off the 2013 legislation, and reduces future benefit growth for current workers and retirees.

It still treats benefits earned for work already performed as an inviolable contract. What changes is adjustments can be made going forward to ensure pensions are sustainable and affordable in the long term, with a goal of being 100% funded as opposed to the current state goal of 90%.

The plan would replace the 3% compounding post-retirement increase with a measure attached to inflation. This allows the state to fully fund employee pensions and keep its promise to young workers far from retirement.

Polling showed 61% of voters across party lines support the plan. Hold-harmless reform is the best chance at controlling Illinois’ growing pension debt.

It’s time to give voters an opportunity to fix public pensions with a constitutional amendment.