The Chicago Tribune’s April 18th editorial “Don’t run from a fight” is one of those fine and nice missives that falls short of the target. It opens with a quote from R. Eden Martin of the Commercial Club of Chicago’s Civic Committee:
Cost reductions in future decades are a step in the right direction. But Illinois faces fiscal implosion – right now. Our state’s pension system is unsustainable — right now.
The editorial leads with the old news of Governor Pat Quinn’s tepid non-reform of the state’s pension system that received national attention. Then the Trib’s wise men and women weigh in:
By offering less generous benefits to future public employees, this bill should prevent some problems many years from now. It doesn’t, though, solve — or even relieve — the current crisis: The state still has unfunded pension and retiree health obligations of some $130 billion, and its current annual pension costs don’t decline. Legislators need to cut those current costs before their session ends.
Bill Zettler and this column address the fallacy of the “two-tiered” system being the solution to anything in the following articles:
Pension Reform Law: Putting Lipstick on a Pig
Pension tinkering legislation moves on to Illinois’ Governor
I give the Trib credit for applauding any action on the part of our elected officials that stands up to the public employee unions. And the Trib jibes our political leaders:
‘Same old Illinois: Any excuse to delay.’
‘How convenient for the pols, for the unions — for everyone, that is, except taxpayers.’
But the bigger point that the Tribune misses is this — it to Bill Zettler to make it nice and clear in his article today:
We need an adult to stand up and say: “We cannot pay this bill.”
As bad as these numbers look it is even worse when you include the public employee health care liability (called OPEB) which will be at least $30 billion under the new GASB rules. Remember state employees including university employees pay nothing for health care while they are working or when they retire…
The problem is simple: Public employees’ wages are too high, fringe benefits are too high, pensions are too high and contributions to pensions and health-care are too low… The 95% of Illinois workers who are not part of the state system do not want to, and have no obligation to, pay this tab for the 5% who are.
Here’s a simple news flash for anyone paying attention to this underfunded state pension controversy: the beneficiaries of the system had an obligation to get the political job done of funding them. They failed. Because they failed, they now can’t expect future taxpayers to make up for their mistakes.
Let me repeat what I’ve stated previously: If it’s not funded in real time, it’s not a pension system but an intergenerational wealth transfer system.
By the way, Bill Zettler isn’t the only person facing reality. The following post is from the Kellogg School’s Finance Department blog:
Asking taxpayers to continue to subsidize state pension funds (along with the state) is absurd and will NOT work. How high can taxes go? All economic analysis shows that when states raise tax rates, the amount of revenues does not actually go up but will go down…its easy for the wealthy (who pay all state income taxes) to move to other states.
Other forms of taxes, like sales taxes and property taxes, are already at very scary levels that can not be raised. The only solution is for state pension holders to face the same economic realities as the private sector…when your employer suffers so do you. State employees make too much money, retire way too young, and receive benefits many times more than the contributions made over their working life. Its time for cuts to existing state employees as well as pension holders. Taxpayers do not want to continue paying for them!
This crisis, like so many of the problems we’re dealing with today, are solely the creation of government. The private sector sees pension systems go bankrupt all the time. The public sector needs to face similar sad music.