For far too long politicians, afraid to lose their seast, have failed to act on pension reform. This inaction and financial negligence lead our state to become over $130 billion in debt. The burden, as always, falls on the taxpayer. Our pension system is broken and we can no longer accept inaction that will only lead to more debt.
The bond credit rating agencies of Moody’s and S&P currently rate the state's bond quality at just above junk status, the lowest possible investment-grade rating. Moody’s singled out Illinois in May of 2019 as one of two states least capable of coping with a moderate economic recession.
One solution to our state's pension problem is to reform benefit provisions and responsibly reduce liabilities. A start would be to replace the current fixed 3% annual benefit adjustment on employee’s entire retirement income, regardless of inflation, to a true CPI (Consumer Price Index) adjustment.
Another solution is to provide fully funded and fiscally-sustainable benefits to new employees. This is achievable through a defined contribution, 401(k)-equivalent plan. In a 401K plan, both the employer and the employee contribute directly to a retirement account owned and controlled by the employee. The amount an employee accumulates during their entire career becomes the funds they will have available for retirement. Once the employee retires, taxpayers have no future obligation to fund the worker’s retirement.
These are some proposals I am suggesting based on research conducted on the pension crisis facing this state. I don’t have all the answers on how to solve this problem and anyone telling you “they” have the answer is simply lying. Fixing the state's broken pension system will require real sacrifice and there are no slick accounting ticks available to escape this problem. It will require a group undertaking, with individuals from both sides of the aisle working together and coming up with the best possible solutions.