By Bill Zettler
If the pension rules in effect when the Constitutional guarantee was made were in effect now there would be no deficit.
It is interesting to note that with all of the clamor and posturing by various union and political types about the “sacredness” of the Constitutional Pension guarantee no one has taken the time to see what pension rules were in place at the Constitutional Convention of 1970.
That is up until now. If pension rules were the same now as when we guaranteed pensions during the 1970 Constitutional Convention there would currently be a pension surplus not a pension deficit.
That means the current $44 billion TRS (Teachers Retirement System) deficit and the future $100 billion deficit is entirely due to pension benefit enhancements passed by Springfield politicians over the ensuing years. As politicians grubbily grabbed all the teacher union dollars they could get, the retirees inexorably became pension millionaires via evermore goodies added to the so-called “guarantee”
Interestingly the original pension rules look very similar to the pension reform passed recently by the legislature for new hires beginning Jan 1, 2011.
Pension age 60 = 60%
COLA = 1.5% Not compounded
Versus current rules:
Pension age 54.5 = 75%
COLA 3% Compounded
If the rules in effect in 1970 when the pension guarantee was approved were still in effect we would have approximately a $10 billion surplus in the TRS fund.
The pension-pillaging of the taxpayer accelerated after the Constitution was approved on Dec. 15, 1970.
Before 1970 there were few substantive changes to the pension rights granted to retirees. Afterwards the teacher unions worked their legislative magic and got increased benefit after increased benefit passed starting immediately in 1971. It was like Custer at the Little Big Horn – except the taxpayers didn’t know about the slaughter until 40 years later.
Here is a list of just some of the pension enhancements passed by a compliant legislature at the expense of every Illinois taxpayer:
1971 – Pension maximum raised to 75% from 60%. That didn’t take long.
Annual COLA raised to 2% from 1.5%
No pension reduction if younger than 60 with 35 years service.
1972 – 85 sick days (1/2 year service) allowed for early retirement.
1973 – Survivor benefits paid at age 50 instead of 55.
1978 – Annual COLA raised to 3% from 2% (not compounded)
1979 – ERO (Early Retirement Option) allowed.
1980 – Retiree health insurance program established.
1982 – Employer pick-up of employee contributions allowed.
1983 – Unmarried children over 18 eligible for health insurance coverage.
1984 – Sick leave credit upped to 170 days from 85 days.
1990 – 3% COLA compounded.
1990 – Survivors get COLA.
1990 – Disability and pensions added for part-time and substitute teachers.
1991 – Retiree health care premiums 75% subsidy.
1998 – Waive Early Retirement cost – 34 work-years becomes 35 years for pension.
Every one of those items added to taxpayer cost, $100’s of billions over the decades. The COLA going from 1.5% not compounded to 3% compounded increases the pension payout by 30% over a 30 year retirement life expectancy.
Constitutional provisions cannot be reversed but legislative ones can be.
The problem with constitutional amendments is that they can only be revoked (maybe) by another constitutional amendment. However, legislative public acts are reversed or revoked all the time.
If the legislature passed legislation that increased benefits over and above what was approved in 1970 why can’t they pass new legislation revoking all those increases?
What the next governor should do.
Initiate legislation reversing most or all of the above with the goal of returning to the pension rules that were in effect when the constitutional pension clause was approved on Dec. 15, 1970. The 95% of Illinois workers paying for, but not benefitting from, the State Pension System demand it.
Contracts are abrogated all the time. Why should a pension contract be any different especially in the face of the de facto bankruptcy of the State of Illinois?