“Let’s be honest about the unfunded liability,” said the veteran state Senator across the table from Glen and me. “It’s not missing for any reasons except we stole it from you all.”
“That’s refreshing,” I responded.
“That’s the truth,” he reminded us. (January 3, 2013, Springfield, Illinois)
Noun. When the legislative leadership in the General Assembly and the Illinois Governor determine that the Illinois fiscal system has failed to generate enough funds to pay the annual-required pension costs and maintain the same levels of public service, they can elect to take “a holiday” on pension spending. Such holidays have occurred despite the planned ramp-up to 90% funding by 2045. In fact, the General Assembly decided “not to make the scheduled contributions for Fiscal Years 2006 and 2007 under the Pension Ramp. This was accomplished through legislation that created a two-year, partial ‘Pension Holiday’ under P.A. 094-0004, Senate Bill 27” (Center for Tax and Budget Accountability, 2006).
In a sense, such legislative reneging is a holiday with the gift that keeps on giving from generation to generation. The bill that comes through in the form of an “unfunded liability” is an accumulation of debt that increases steadily at 8.5%. Let’s consider FY 2007 as an example. The State of Illinois owed $2.5 billion to the pension systems in FY 2007 but paid only $1.3 billion in order to balance its budget and maintain no changes in services or taxes. The shortfall of $1.33 billion and the 8% debt cost will come to $90 million in the first year. Each subsequent year of “holidays” (or shortfalls) add exponentially to the final bill in the future. Such shortages add up quickly, and when a state like Illinois has played this game for nearly a half century, the bill becomes astronomical. Governor Quinn (a.k.a. Squeezy) likes to remind us that not correcting the problem costs many more millions more each day. Of course, the Governor likes to suggest that the amount is due to excessive benefits, or at the very least, should be resolved by bleeding current and future benefits from all public sector workers. By constantly working with his legislators and media to define all of us as some part of the problem, Quinn, Nekritz, et.al. believe they can make the public sector ALL of the solution. In that sense, that cynical and duplicitous mantra, Quinn is no different than any or many of the Republican and Democratic governors who sacked the financial holdings of the public sector in order to make themselves popular and appear fiscally brilliant.
HOW LONG HAS THIS BEEN GOING ON?
Since the inception of the funding requirement, the State has inconsistently paid its share of the obligation. TRS has a past record of state contributions, but the actuarial amounts necessary for funding are unknown; nevertheless, “subsequent reports indicate that Illinois’ contributions have not met actuarial standards” (Farney, Kathleen, TRS Funding, 28 January 2011). After 1952, when actuarial revenue requirements became available, the under funding record in Illinois turned more accurate and more dismal, (e.g., dropping in years 1982 – 1988 to averages of 60% or less of required payments). Continued payments at lesser levels after that (1989 – 1995) brought funding ratios to below 30% (Farney, Kathleen).
AND WHAT SHOULD BE OUR MANTRA?
How about the words of one of the more popular governors who took the pension funding levels down to some of the lowest percentages on record? Governor “Big Jim” Thompson proudly crowed at his 1990 State of the State Message to the General Assembly, “And here, here is our proudest accomplishment. In the last 13 years, state government has delivered efficiently more services in more areas to more people than at any time in our history. Whole programs that didn’t even exist in 1977 thrive now. And yet, the share of dollars that we take from our people’s income in Illinois to do all that is lower, not higher than it was in 1977 ”— (Wheeler III, Charles N., Illinois Issues, 16 Dec. 1990).
Imagine the crowing if they can steal the rest of it?