A consensus is forming on state employee pension solutions

Illinois politicians won’t find the courage needed to honestly address the government employee pension mess they helped create until they admit that they are mostly clueless about how to address the larger political problem.

The more you study the pension problem the simpler the solution becomes. What they’ll have to do once they’re elected is apparent – even if the candidates don’t get into specifics during the campaign.

Adam Summers has a study posted on the Reason Foundation website about how to fix California’s public pension crisis – and the parallels with Illinois are abundant. What he writes about the Golden State’s problem could’ve easily been written about the Land of Lincoln:

“California’s $19 billion budget deficit seems to worsen by the day, but an even larger financial crisis is brewing in the state’s pension system. Over the last two decades, state lawmakers have bestowed massive pension and benefit increases upon government workers. Unfortunately, taxpayers are now getting the bills for these handouts.”

Summers’ solutions mirror those of Illinois pension expert Bill Zettler. Here are examples from the Reason Foundation study:

Recommendations

  • Perform an evaluation of wages and benefits offered in the private sector and adjust all future state employee compensation so that it is in line with this standard. Repeat such an evaluation every five years.
  • Adopt more conservative investment strategies and more conservative discount rate assumptions for current employees’ defined-benefit plans.
  • Eliminate “air-time” purchases to reduce pension spiking and discourage early retirement.
  • Require employees who have previously retired to forfeit their retirement checks while they are on the state’s payroll to avoid double-dipping, as over 5,000 former state employees are doing today.

Bill Zettler’s must-read articles on outlining the solutions for Illinois’ government employee pension mess are found here. In order to make it as simple as possible, Bill has described the problem with what he calls “The Four Rules of “Too”:

  1. Salaries are “Too” high.
  2. Employee contributions are “Too” low.
  3. Retirements are “Too” early.
  4. Pensions are “Too” high.

Bill Zettler points out that only 5 percent of taxpayers are government employees. That means 95 percent aren’t. Doesn’t it follow that it should be easy for our elected leaders to rally the 95 to out-vote the 5?

“Easy” is a relative term when you’re dealing with the kinds of people who run for public office. As talented as they might seem, they still mostly stumble when it comes to their most important job – which is moving public opinion.

©2010 John Francis Biver