Illinois Public Pension Reform: A Beneficial Move for All By Tim Weber & Dan Murray

What is the problem? The Illinois & Chicago public pension systems are some of the worst funded public pension systems in the nation For fiscal year 2013 the state of Illinois liability has reached $97.46 billion, an increase from 96.8 billion at the end of 2012 Comes out to $ 7,767 for every citizen of Illinois, or $21,00 per household

Illinois can currently fund about 24% of pension obligations Illinois will spend $8 billion on pensions in the next state budget, nearly 1/6 dollars in Illinois goes to pensions Underfunded liabilities grows at $17.1 million a day The city of Chicago is currently at $27 billion shortfall at the end of Detroit is at $3.5 billion Subject of political neglect for decades, Chicagomag claims the issue was brought up as early as 1945

Why does this matter? On July 18 th, 2013 Detroit became largest U.S. city to file for municipal bankruptcy Financial experts point to one of the cities biggest fiscal problems: underfunded pensions 1/6 of cities’ total debt Underfunded public pensions are issues in many states: New York, California, Pennsylvania, Michigan

Why does this matter? The state now has to draw funds from other municipal/state funded agencies The state’s credit rating is severely affected by this; now the worst in the nation. Costing the taxpayers millions, creating a fiscal hurricane. Interest payments alone are at $318 million on unpaid bills Affects the state’s already abysmal unemployment rating, second highest in nation Fiscal problems only continues to grow in the future

CST Principles The following CST issues are being violated: The common Good & Subsidiarity The Common Good Those social, economic, and political conditions that allow for entire communities and all those persons within them to develop and flourish as fully as possible Subsidiarity Government shares the responsibility to work for the common good and human dignity with a flourishing civil society, one whose institutions must be respected and supported, and no higher/larger level or organization should perform tasks better done by lower/smaller levels closer to the issues at hand

The Common Good Significant tax increases will be necessary to prevent bankruptcy Communities won’t develop and flourish because of the financial strain being put on them Unfavorable business climates will lead to higher unemployment

Subsidiarity The government is not working for the common good of society they are working for the common good of politicians Politicians desire for union votes becomes more important than the financial stability of the state and well being of its citizens

Solutions 52% of Illinois voters support radical pension reform 401(K)/Defined Contribution plan style retirement strategy for new hires in public sector. Capital contributions from both employees and employers Will have to make it adaptive for public sector workers: Proper retiring age for police, firemen, etc. Let employees keep earnings before switching 401(k)s require more attention to, subject to market changes

Public Sector Success The private sector recognized pensions as a major financial liability decades ago From : Defined Benefit Plans fell from 62% to 7% In the same time, Defined Contribution Plans increased from 16%-69%

Wisconsin Success Wisconsin Governor Scott Walker decided to force public employees to pay more for their own pension This was met with Walker being faced with recall from voters in 2012 Walker survived the recall, and went ahead with his vision The State of Wisconsin now has budget surpluses instead of major deficits

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