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When will the whining end and the reforming begin?
     |     January 08, 2013     |      Pensions
 
 

When will the whining end and the reforming begin?

That’s what kept running through my mind this past week as I listened to politicians, union leaders and government employees talk about the state’s pension woes.

None of the plans Illinois lawmakers are considering will go anywhere near solving the state’s long-term pension crisis.

And yet even the most modest proposals have government workers angry.

For example, I read this in a central Illinois newspaper the other day:

 ‘’’My wife and I planned carefully for retirement and left a sensible cushion,” said retiree John Kilgore, who taught English literature at Eastern Illinois University from 1978 to 2010. His wife, Dollie, was a nurse at the student health center, and both receive pension benefits through the state’s university retirement system. Kilgore said any pension reform adjustments to medical insurance or the pension’s COLA provisions ‘is more than our budget can stand.’”

A pensioner facing poverty?

Hardly.

Kilgore collects an annual pension of $91,692.

He retired two years ago at age 58.

He’s making more retired than most Illinoisans can ever expect to make working.

And those working Illinoisans are the ones being asked to pay for his pension.

In 2011, the Illinois Legislature jacked up income taxes by 67 percent – and nearly every dime of it went to cover pensions. That’s the equivalent of an extra week of pay being taken away from every working Illinoisan.

Taxpayers are finding it hard to save for their own retirements because they are busy paying for someone else’s.

It’s time for the state to get out of the pension business altogether. Eighty-five percent of us in the private sector have 401k-style retirement plans, after all.

Why not government workers, too?

I have a whole lot more confidence in individual workers making smart investment decisions for themselves than I do in politicians making decisions for them.

The transition from defined benefit to defined contribution plans has happened in industry after industry. Tragedy did not follow.

Pensions are based on the idea that workers can be guaranteed a certain benefit in retirement.

But that is a fundamentally flawed idea because no one has crystal ball to predict life expectancy, future investment returns, possible inflation rates and a host of other factors.

And in the case of state government, the biggest variable is the politicians themselves – no one can predict what retirement benefits future politicians will promise government employee unions as they seek votes and campaign dollars.

A 401k-style plan is superior because it gets the state out of the business of predicting the future.

It also empowers workers to make investment decisions for themselves.

Pensions are a vestige of a paternalistic culture where the boss knows best – not only for your work hours but for your golden years.

As Illinois has clung to its outdated pension system, the state has sunk deeper and deeper into debt.

Illinois has the largest unfunded pension liability in the nation and Moody’s Investors Service gave Illinois the worst bond rating of any state in the country.

It time for the state to step away from pensions altogether.

 
 
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Scott Reeder serves as Journalist in Residence for the Illinois Policy Institute. Scott joined the Institute as a journalist after more than 25 years of covering local and state government. He made a national name for himself investigating teacher tenure in Illinois and the lack of accountability in the teacher certification process.

Scott previously served as a national managing editor for the Franklin Center for Government and Public Integrity, where he worked to establish a national network of statehouse bureaus. Prior to his time with Franklin, he ran an Illinois statehouse bureau for 10 years providing customized statehouse coverage for newspapers in five Illinois communities.

Among the journalism awards he has captured are the Investigative Reporters and Editors Freedom of the Information Award, the Clark Mollenhoff Award for Excellence in Investigative Reporting and the John Aubuchon Freedom of Information Award, which is the highest honor of Capitolbeat, a national association of statehouse journalists.

He received his bachelor’s in journalism from Iowa State University and holds a master’s degree in public affairs reporting from the University of Illinois at Springfield. He and his wife, Joan, reside near Springfield and have three daughters: Grace, Anna and Caitlin.

 
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